Karl Marx

Capital
A Critique of Political Economy
Volume III
The Process of Capitalist Production as a
Whole
Edited by Friedrich Engels
Written: Karl Marx, 1863-1883, edited by Friedrick Engels and completed by im 11 years a!ter
Marx"s deat#
$o%rce: &nstit%te o! Marxism-'eninism, ($$), 1*+*#
,%bliser: &nternational ,%blisers, -., /n0d01
First ,%blised: 18*2#
3n-'ine 4ersion: Marx0org 1**6, Marxists0org 1***#
5ranscribed: in 1**6 by 6inric K%ls, 7a8e Walters and 9odiac, and by 5im 7elaney and M0 :ri!!in
in 1***#65M' Mark%p: 9odiac 1**6, 5im 7elaney and M0 :ri!!in in 1***#
,roo!ed and ;orrected: by ;ris ;layton <==6->, Mark 6arris <=1=0
Table of Contents
Preface (Engels, 1894)................................................................................................................... 5
Part I. The Conversion of Surlus!"alue into Profit an# of the $ate of Surlus!"alue into
the $ate of Profit.........................................................................................................................19
;apter 10 ;ost-,rice and ,ro!it000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000001*
;apter <0 5e )ate o! ,ro!it0000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000<>
;apter 30 5e )elation o! te )ate o! ,ro!it to te )ate o! $%rpl%s-4al%e0000000000000000000000000000003<
;apter 20 5e E!!ect o! te 5%rno8er on te )ate o! ,ro!it0000000000000000000000000000000000000000000000000000002+
;apter +0 Economy in te Employment o! ;onstant ;apital0000000000000000000000000000000000000000000000000002*
&0 &n :eneral00000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000 2*
&&0 $a8ings &n 'abo%r ;onditions ?t 5e Expense 3! 5e 'abo%rers00000000000000000000000000000000000++
&&&0 Economy &n 5e :eneration ?nd 5ransmission 3! ,o@er, ?nd &n A%ildings0000000000000000062
&40 (tilisation 3! 5e Excretions 3! ,rod%ction0000000000000000000000000000000000000000000000000000000000000000000>=
40 Economy 5ro%g &n8entions0000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000>3
;apter 60 5e E!!ect o! ,rice Fl%ct%ation00000000000000000000000000000000000000000000000000000000000000000000000000000000>+
&0 Fl%ct%ations in te ,rice o! )a@ Materials, and teir 7irect E!!ects on te )ate o! ,ro!it >+
&&0 ?ppreciation, 7epreciation, )elease ?nd 5ie-(p 3! ;apital00000000000000000000000000000000000000000000>8
&&&0 :eneral &ll%stration0 5e ;otton ;risis 3! 1861-6+000000000000000000000000000000000000000000000000000000008>
Experiments in corpore 8ili000000000000000000000000000000000000000000000000000000000000000000000000000000000000000001=3
;apter >0 $%pplementary )emarks00000000000000000000000000000000000000000000000000000000000000000000000000000000000000001=6
Part II. Conversion of Profit into %verage Profit....................................................................1&8
;apter 80 7i!!erent ;ompositions o! ;apitals in 7i!!erent Arances o! ,rod%ction and
)es%lting 7i!!erences in )ates o! ,ro!it00000000000000000000000000000000000000000000000000000000000000000000000000000000001=8
;apter *0 Formation o! a :eneral )ate o! ,ro!it B?8erage )ate o! ,ro!itC and 5rans!ormation
o! te 4al%es o! ;ommodities into ,rices o! ,rod%ction00000000000000000000000000000000000000000000000000000000011+
;apter 1=0 ED%alisation o! te :eneral )ate o! ,ro!it 5ro%g ;ompetition0
Market-,rices and Market-4al%es0 $%rpl%s-,ro!it00000000000000000000000000000000000000000000000000000000000000000001<>
;apter 110 E!!ects o! :eneral Wage Fl%ct%ations on ,rices o! ,rod%ction000000000000000000000000000012<
;apter 1<0 $%pplementary )emarks0000000000000000000000000000000000000000000000000000000000000000000000000000000000000012+
&0 ;a%ses &mplying a ;ange in te ,rice o! ,rod%ction0000000000000000000000000000000000000000000000000000012+
&&0 ,rice o! ,rod%ction o! ;ommodities o! ?8erage ;omposition000000000000000000000000000000000000000126
&&&0 5e ;apitalist"s :ro%nds !or ;ompensating000000000000000000000000000000000000000000000000000000000000000000126
Part III. The 'a( of the Ten#enc) of the $ate of Profit to *all.............................................149
;apter 130 5e 'a@ ?s $%c000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000012*
;apter 120 ;o%nteracting &n!l%ences0000000000000000000000000000000000000000000000000000000000000000000000000000000000000161
&0 &ncreasing &ntensity 3! Exploitation00000000000000000000000000000000000000000000000000000000000000000000000000000000161
&&0 7epression 3! Wages Aelo@ 5e 4al%e 3! 'abo%r-,o@er000000000000000000000000000000000000000000000163
&&&0 ;eapening 3! Elements 3! ;onstant ;apital00000000000000000000000000000000000000000000000000000000000000163
&40 )elati8e 38er-,op%lation0000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000163
40 Foreign 5rade000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000162
4&0 5e &ncrease 3! $tock ;apital0000000000000000000000000000000000000000000000000000000000000000000000000000000000000016+
;apter 1+0 Exposition o! te &nternal ;ontradictions o! te 'a@00000000000000000000000000000000000000000016>
&0 :eneral00000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000016>
&&0 ;on!lict Aet@een Expansion 3! ,rod%ction ?nd ,rod%ction 3! $%rpl%s-4al%e00000000000001>=
&&&0 Excess ;apital ?nd Excess ,op%lation00000000000000000000000000000000000000000000000000000000000000000000000001><
&40 $%pplementary )emarks0000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000001>8
Part I". Conversion of Co++o#it)!Caital an# ,one)!Caital into Co++ercial Caital
an# ,one)!-ealing Caital (,erchant.s Caital).................................................................18/
;apter 160 ;ommercial ;apital000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000183
;apter 1>0 ;ommercial ,ro!it000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000001*1
;apter 180 5e 5%rno8er o! Mercant"s ;apital0 ,rices000000000000000000000000000000000000000000000000000000000<=3
;apter 1*0 Money-7ealing ;apital0000000000000000000000000000000000000000000000000000000000000000000000000000000000000000<11
;apter <=0 6istorical Facts abo%t Mercant"s ;apital000000000000000000000000000000000000000000000000000000000000<1+
Part ". -ivision of Profit into Interest an# Profit of Enterrise. Interest!0earing Caital. 11/
;apter <10 &nterest-Aearing ;apital000000000000000000000000000000000000000000000000000000000000000000000000000000000000000<<3
;apter <<0 7i8ision o! ,ro!it0 )ate o! &nterest0 -at%ral )ate o! &nterest00000000000000000000000000000000<3+
;apter <30 &nterest and ,ro!it o! Enterprise000000000000000000000000000000000000000000000000000000000000000000000000000<2<
;apter <20 ExternaliEation o! te )elations o! ;apital in te Form o! &nterest-Aearing ;apital
000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000 <+6
;apter <+0 ;redit and Fictitio%s ;apital00000000000000000000000000000000000000000000000000000000000000000000000000000000<63
;apter <60 ?cc%m%lation o! Money-;apital0 &ts &n!l%ence on te &nterest )ate00000000000000000000<8<
;apter <>0 5e )ole o! ;redit in ;apitalist ,rod%ction0000000000000000000000000000000000000000000000000000000003=2
;apter <80 Medi%m o! ;irc%lation and ;apital# 4ie@s o! 5ooke and F%llarton0000000000000000000003=8
;apter <*0 ;omponent ,arts o! Aank ;apital0000000000000000000000000000000000000000000000000000000000000000000000003<=
;apter 3=0 Money-;apital and )eal ;apital0
&00000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000 3<*
;apter 310 Money ;apital and )eal ;apital0
&&000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000 321
5rans!ormation 3! Money &nto 'oan ;apital0000000000000000000000000000000000000000000000000000000000000000000000321
<0 5rans!ormation 3! ;apital 3r )e8en%e &nto Money 5at &s 5rans!ormed &nto 'oan
;apital000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000 328
;apter 3<0 Money ;apital and )eal ;apital0
&&&00000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000 3+=
;apter 330 5e Medi%m o! ;irc%lation in te ;redit $ystem00000000000000000000000000000000000000000000000036=
;apter 320 5e ;%rrency ,rinciple and te Englis Aank 'egislation o! 182200000000000000000000038+
;apter 3+0 ,recio%s Metal and )ate o! Excange000000000000000000000000000000000000000000000000000000000000000002=2
&0 Mo8ement 3! 5e :old )eser8e00000000000000000000000000000000000000000000000000000000000000000000000000000000000002=2
&&0 5e )ate 3! Excange000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000021=
)ate 3! Excange Wit ?sia0000000000000000000000000000000000000000000000000000000000000000000000000000000000000021<
England"s Aalance 3! 5rade00000000000000000000000000000000000000000000000000000000000000000000000000000000000000002<3
;apter 360 ,re-;apitalist )elationsips0000000000000000000000000000000000000000000000000000000000000000000000000000000002<6
&nterest &n 5e Middle ?ges00000000000000000000000000000000000000000000000000000000000000000000000000000000000000023>
?d8antages 7eri8ed Ay 5e ;%rc From 5e ,roibition 3! &nterest00000000000000000000022=
Part "I. Transfor+ation of Surlus!Profit into 2roun#!$ent..............................................441
;apter 3>0 &ntrod%ction00000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000022<
;apter 380 7i!!erential )ent: :eneral )emarks0000000000000000000000000000000000000000000000000000000000000000000002+*
;apter 3*0 First Form o! 7i!!erential )ent B7i!!erential )ent &C0000000000000000000000000000000000000000000026+
;apter 2=0 $econd Form o! 7i!!erential )ent B7i!!erential )ent &&C00000000000000000000000000000000000000281
;apter 210 7i!!erential )ent &&0
First ;ase: ;onstant ,rice o! ,rod%ction000000000000000000000000000000000000000000000000000000000000000000000000000000000288
;apter 2<0 7i!!erential )ent &&0
$econd ;ase: Falling ,rice o! ,rod%ction00000000000000000000000000000000000000000000000000000000000000000000000000000002*3
&0 ,rod%cti8ity o! te additional in8estment o! capital remains te same00000000000000000000000000002*3
&&0 7ecreasing rate o! prod%cti8ity o! te additional capital0000000000000000000000000000000000000000000000002*8
&&&0 )ising rate o! prod%cti8ity o! te additional capital0000000000000000000000000000000000000000000000000000002**
;apter 230 7i!!erential )ent &&0
5ird ;ase: )ising ,rice o! ,rod%ction00000000000000000000000000000000000000000000000000000000000000000000000000000000000+=2
;apter 220 7i!!erential )ent ?lso on te Worst ;%lti8ated $oil00000000000000000000000000000000000000000000+<6
;apter 2+0 ?bsol%te :ro%nd-)ent00000000000000000000000000000000000000000000000000000000000000000000000000000000000000000+3<
;apter 260 A%ilding $ite )ent0 )ent in Mining0 ,rice o! 'and0000000000000000000000000000000000000000000000+2>
;apter 2>0 :enesis o! ;apitalist :ro%nd-)ent0000000000000000000000000000000000000000000000000000000000000000000000++3
&0 &ntrod%ctory )emarks00000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000++3
&&0 'abo%r rent000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000++>
&&&0 )ent &n Kind000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000++*
&40 Money-)ent0000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000 +61
40 MFtayage ?nd ,easant ,roprietorsip 3! 'and ,arcels00000000000000000000000000000000000000000000000000+62
Part "II. $evenues an# their Sources.....................................................................................531
;apter 280 5e 5rinity Form%la000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000+>1
& 00000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000 +>1
&&00000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000 +><
&&&0000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000 +>3
;apter 2*0 ;oncerning te ?nalysis o! te ,rocess o! ,rod%ction00000000000000000000000000000000000000000+8<
;apter +=0 &ll%sions ;reated Ay ;ompetition000000000000000000000000000000000000000000000000000000000000000000000000+*3
;apter +10 7istrib%tion )elations and ,rod%ction )elations00000000000000000000000000000000000000000000000006=8
;apter +<0 ;lasses00000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000 613
Sule+ent
4) *re#eric5 Engels..................................................................................................................614
&ntrod%ction0000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000 612
'a@ o! 4al%e and )ate o! ,ro!it000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000612
5e $tock Excange0000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000006<2
Preface (Engels, 1894)
?t last & a8e te pri8ilege o! making p%blic tis tird book o! MarxGs main @ork, te concl%sion
o! te teoretical part0 Wen & p%blised te second 8ol%me, in 188+, & to%gt tat except !or a
!e@, certainly 8ery important, sections te tird 8ol%me @o%ld probably o!!er only tecnical
di!!ic%lties0 5is @as indeed te case0 A%t & ad no idea at te time tat tese sections, te most
important parts o! te entire @ork, @o%ld gi8e me as m%c tro%ble as tey did, H%st as & did not
anticipate te oter obstacles, @ic @ere to retard completion o! te @ork to s%c an extent0
-ext and most important o! all, it @as my eye @eakness @ic !or years restricted my @riting
time to a minim%m, and @ic, e8en no@, permits me to @rite by arti!icial ligt only in
exceptional cases0 F%rtermore, tere @ere oter pressing labo%rs @ic co%ld not be t%rned
do@n, s%c as ne@ editions and translations o! MarxGs and my o@n earlier @orks, ence re8ie@s,
pre!aces, and s%pplements, o!ten impossible @ito%t !res st%dy, etc0 ?bo8e all, tere @as te
Englis edition o! te !irst 8ol%me o! tis @ork, !or @ose text & am %ltimately responsible and
@ic conseD%ently cons%med m%c o! my time0 Woe8er as in any @ay !ollo@ed te colossal
gro@t o! international socialist literat%re d%ring te last ten years, partic%larly te great n%mber
o! translations o! MarxGs and my o@n earlier @orks, @ill agree @it me tat & a8e been l%cky
tat te n%mber o! lang%ages in @ic & co%ld be o! elp to te translators, and tere!ore co%ld
not re!%se in all conscience to re8ie@ teir @ork, is 8ery limited0 A%t te gro@t o! literat%re @as
merely indicati8e o! a corresponding gro@t o! te international @orking-class mo8ement itsel!0
?nd tis imposed ne@ obligations %pon me0 From te !irst days o! o%r p%blic acti8ity it @as Marx
and & @o so%ldered te main b%rden o! te @ork as go-bet@eens !or te national mo8ements o!
$ocialists and @orkers in te 8ario%s co%ntries0 5is @ork expanded in proportion to te
expansion o! te mo8ement as a @ole0 (p to te time o! is deat, Marx ad borne te br%nt o!
te b%rden in tis as @ell0 A%t a!ter is deat te e8er-increasing b%lk o! @ork ad to be done by
mysel! alone0 $ince ten it as become te r%le !or te 8ario%s national @orkersG parties to
establis direct contacts, and tis is !ort%nately e8er more te case0 .et reD%ests !or my assistance
are still !ar more !reD%ent tan & @o%ld @is in 8ie@ o! my teoretical @ork0 A%t i! a man as
been acti8e in te mo8ement !or more tan !i!ty years, as & a8e been, e regards te @ork
connected @it it as a bo%nden d%ty tat brooks no delay0 &n o%r e8ent!%l time, H%st as in te 16t
cent%ry, p%re teorists on social a!!airs are !o%nd only on te side o! reaction and !or tis reason
tey are not e8en teorists in te !%ll sense o! te @ord, b%t simply apologists o! reaction0
&n 8ie@ o! te !act tat & li8e in 'ondon my party contacts are limited to correspondence in
@inter, @ile in s%mmer tey are largely personal0 5is !act, and te necessity o! !ollo@ing te
mo8ement in a steadily gro@ing n%mber o! co%ntries and a still more rapidly gro@ing n%mber o!
press organs, a8e compelled me to reser8e matters @ic permit no interr%ption !or completion
d%ring te @inter monts, and primarily te !irst tree monts o! te year0 Wen a man is past
se8enty is MeynertGs association !ibres o! te brain !%nction @it annoying pr%dence0 6e no
longer s%rmo%nts interr%ptions in di!!ic%lt teoretical problems as easily and D%ickly as be!ore0 &t
came abo%t tere!ore tat te @ork o! one @inter, i! it @as not completed, ad to be largely beg%n
ane@ te !ollo@ing @inter0 5is @as te case @it te most di!!ic%lt !i!t part0
?s te reader @ill obser8e !rom te !ollo@ing, te @ork o! editing te tird 8ol%me @as
essentially di!!erent !rom tat o! editing te second0 &n te case o! te tird 8ol%me tere @as
noting to go by o%tside a !irst extremely incomplete dra!t0 5e beginnings o! te 8ario%s parts
@ere, as a r%le, pretty care!%lly done and e8en stylistically polised0 A%t te !arter one @ent, te
more sketcy and incomplete @as te man%script, te more exc%rsions it contained into arising
side-iss%es @ose proper place in te arg%ment @as le!t !or later decision, and te longer and
more complex te sentences, in @ic to%gts @ere recorded in statu nascendi. &n some places
and@riting and presentation betrayed all too clearly te o%tbreak and grad%al progress o! te
attacks o! ill ealt, ca%sed by o8er@ork, @ic at te o%tset rendered te a%torGs @ork
increasingly di!!ic%lt and !inally compelled im periodically to stop @ork altogeter0 ?nd no
@onder0 Aet@een 1863 and 186>, Marx not only completed te !irst dra!t o! te t@o last 8ol%mes
o! Capital and prepared te !irst 8ol%me !or te printer, b%t also per!ormed te enormo%s @ork
connected @it te !o%nding and expansion o! te &nternational WorkingmenGs ?ssociation0 ?s a
res%lt, already in 1862 and 186+ omino%s signs o! ill ealt appeared @ic pre8ented Marx !rom
personally p%tting te !inising to%ces to te second and tird 8ol%mes0
& began my @ork by dictating into readable copy te entire man%script, @ic @as o!ten ard to
deciper e8en !or me0 5is alone reD%ired considerable time0 &t @as only ten tat & co%ld start on
te act%al editing0 & limited tis to te essential0 & tried my best to preser8e te caracter o! te
!irst dra!t @ere8er it @as s%!!iciently clear0 & did not e8en eliminate repetitions, @ere8er tey, as
@as MarxGs c%stom, 8ie@ed te s%bHect !rom anoter standpoint or at least expressed te same
to%gt in di!!erent @ords0 Were8er my alterations or additions exceeded te bo%nds o! editing,
or @ere & ad to apply MarxGs !act%al material to independent concl%sions o! my o@n, i! e8en as
!ait!%l as possible to te spirit o! Marx, & a8e enclosed te entire passage in brackets and
a!!ixed my initials0 $ome o! my !ootnotes are not enclosed in brackets# b%t @ere8er & a8e
initialled tem & am responsible !or te entire note0
?s is only to be expected in a !irst dra!t, tere are n%mero%s all%sions in te man%script to points
@ic @ere to a8e been expanded %pon later, @ito%t tese promises al@ays a8ing been kept0 &
a8e le!t tem, beca%se tey re8eal te a%torGs intentions relati8e to !%t%re elaboration0
-o@ as to details0
?s regards te !irst part, te main man%script @as ser8iceable only @it s%bstantial limitations0
5e entire matematical calc%lation o! te relation bet@een te rate o! s%rpl%s-8al%e and te rate
o! pro!it B@ic makes %p o%r ;apter &&&C is introd%ced in te 8ery beginning, @ile te s%bHect
treated in o%r ;apter & is considered later and as te occasion arises0 5@o attempts at re8ising,
eac o! tem eigt pages in folio, @ere %se!%l ere0 A%t e8en tese did not possess te desired
contin%ity tro%go%t0 5ey !%rnised te s%bstance !or @at is no@ ;apter &0 ;apter && is
taken !rom te main man%script0 5ere @as a series o! %ncompleted matematical calc%lations !or
;apter &&&, as @ell as a @ole, almost complete, note-book dating !rom te se8enties, @ic
presents te relation o! te rate o! s%rpl%s-8al%e to te rate o! pro!it in te !orm o! eD%ations0 My
!riend $am%el Moore, @o as also translated te greater portion o! te !irst 8ol%me into Englis,
%ndertook to edit tis notebook !or me, a @ork !or @ic e @as !ar better eD%ipped, being an old
;ambridge matematician0 &t @as !rom is s%mmary, @it occasional %se o! te main man%script,
tat & ten compiled ;apter &&&0 -oting b%t te title @as a8ailable !or ;apter &40 A%t since its
s%bHect-matter, te in!l%ence o! t%rno8er on te rate o! pro!it, is o! 8ital importance, & a8e @ritten
it mysel!, !or @ic reason te @ole capter as been placed in brackets0 &t de8eloped in te
co%rse o! tis @ork tat te !orm%la !or te rate o! pro!it gi8en in ;apter &&& reD%ired
modi!ication to be generally 8alid0 Aeginning @it ;apter 4, te main man%script is te sole
so%rce !or te remainder o! te part, alto%g many transpositions and s%pplements @ere also
essential0
?s !or te !ollo@ing tree parts, aside !rom stylistic editing & @as able to !ollo@ te original
man%script almost tro%go%t0 ? !e@ passages dealing mostly @it te in!l%ence o! t%rno8er ad
to be bro%gt into agreement @it ;apter &4, @ic & ad inserted, and are like@ise placed in
brackets and !ollo@ed by my initials0
5e greatest di!!ic%lty @as presented by ,art 4 @ic dealt @it te most complicated s%bHect in
te entire 8ol%me0 ?nd it @as H%st at tis point tat Marx @as o8ertaken by one o! te abo8e-
mentioned serio%s attacks o! illness0 6ere, ten, @as no !inised dra!t, not e8en a sceme @ose
o%tlines migt a8e been !illed o%t, b%t only te beginning o! an elaboration I o!ten H%st a
disorderly mass o! notes, comments and extracts0 & tried at !irst to complete tis part, as & ad
done to a certain extent @it te !irst one, by !illing in te gaps and expanding %pon passages tat
@ere only indicated, so tat it @o%ld at least approximately contain e8eryting te a%tor ad
intended0 & tried tis no less tan tree times, b%t !ailed in e8ery attempt, and te time lost in tis
is one o! te cie! ca%ses tat eld %p tis 8ol%me0 ?t last & realised tat & @as on te @rong track0
& so%ld a8e ad to go tro%g te entire 8ol%mino%s literat%re in tis !ield, and @o%ld in te end
a8e prod%ced someting tat @o%ld ne8erteless not a8e been a book by Marx0 & ad no oter
coice b%t to more or less c%t te :ordian knot by con!ining mysel! to as orderly an arrangement
o! a8ailable matter as possible, and to making only te most indispensable additions0 ?nd so it
@as tat & s%cceeded in completing te principal labo%rs !or tis part in te spring o! 18*30
?s !or te 8ario%s capters, ;apters JJ& to JJ&4 @ere, in te main, complete0 ;apters JJ4
and JJ4& reD%ired a si!ting o! te re!erences and an interpolation o! material !o%nd else@ere0
;apters JJ4&& and JJ&J co%ld be taken almost completely !rom te original man%script, b%t
;apter JJ4&&& ad to be re-arranged in places0 5e real di!!ic%lty, o@e8er, began @it ;apter
JJJ0 From ere on it @as not only a matter o! properly arranging te re!erences, b%t o! p%tting
te train o! to%gt into proper order, interr%pted as it @as at e8ery point by inter8ening cla%ses
and de8iations, etc0, and res%med else@ere, o!ten H%st cas%ally0 5%s, ;apter JJJ @as p%t
togeter by means o! transpositions and excisions @ic @ere %tilised, o@e8er, in oter places0
;apter JJJ&, again, possessed greater contin%ity0 A%t ten !ollo@s a long section in te
man%script, entitled K5e ;on!%sionL, containing noting b%t extracts !rom parliamentary reports
on te crises o! 1828 and 18+>, in @ic are compiled statements o! t@enty-tree b%sinessmen
and economists, largely on money and capital, gold drain, o8er-spec%lation, etc0, and s%pplied
ere and tere @it sort !acetio%s comments0 ,ractically all te ten c%rrent 8ie@s concerning
te relation o! money to capital are represented terein, eiter in te ans@ers or in te D%estions,
and it @as te Kcon!%sionL re8ealed in identi!ying money and capital in te money-market tat
Marx meant to treat @it criticism and sarcasm0 ?!ter many attempts & con8inced mysel! tat tis
capter co%ld not be p%t into sape0 &ts material, partic%larly tat s%pplied @it MarxGs comments,
@as %sed @ere8er & !o%nd an opport%ne place !or it0
-ext, in tolerable order, comes @at & placed in ;apter JJJ&&0 A%t tis is immediately !ollo@ed
by a ne@ batc o! extracts !rom parliamentary reports on e8ery concei8able ting pertinent to tis
part, intermingled @it te a%torGs comments0 5o@ard te end tese extracts and comments are
!oc%ssed more and more on te mo8ement o! monetary metals and on excange rates, and close
@it all kinds o! miscellaneo%s remarks0 3n te oter and, te K,recapitalistL capter B;ap0
JJJ4&C @as D%ite complete0
3! all tis material beginning @it te K;on!%sionL, sa8e tat @ic ad been pre8io%sly
inserted, & made %p ;apters JJJ&&& to JJJ40 5is co%ld not, o! co%rse, be done @ito%t
considerable interpolations on my part !or te sake o! contin%ity0 (nless tey are merely !ormal in
nat%re, te interpolations are expressly indicated as belonging to me0 &n tis @ay & a8e !inally
s%cceeded in @orking into te text all te a%torGs rele8ant statements0 -oting as been le!t o%t
b%t a small portion o! te extracts, @ic eiter repeated @at ad already been said, or to%ced
on points @ic te man%script did not treat any !%rter0
5e part on gro%nd-rent @as m%c more !%lly treated, alto%g by no means properly arranged, i!
only !or te !act tat Marx !o%nd it necessary to recapit%late te plan o! te entire part in ;apter
J'&&& Bte last portion o! te part on rent in te man%scriptC0 5is @as all te more desirable,
since te man%script opens @it ;apter JJJ4&&, !ollo@ed by ;apters J'4 to J'4&&, and only
terea!ter ;apters JJJ4&&& to J'&40 5e titles !or te di!!erential rent && in8ol8ed te greatest
amo%nt o! @ork and so did te disco8ery tat te tird case o! tis class o! rent ad not at all been
analysed in ;apter J'&&&, @ere it belonged0
&n te se8enties Marx engaged in entirely ne@ special st%dies !or tis part on gro%nd-rent0 For
years e ad st%died te )%ssian originals o! statistical reports ine8itable a!ter te Kre!ormL o!
1861 in )%ssia and oter p%blications on lando@nersip, ad taken extracts !rom tese originals,
placed at is disposal in admirably complete !orm by is )%ssian !riends, and ad intended to %se
tem !or a ne@ 8ersion o! tis part0 3@ing to te 8ariety o! !orms bot o! lando@nersip and o!
exploitation o! agric%lt%ral prod%cers in )%ssia, tis co%ntry @as to play te same role in te part
dealing @it gro%nd-rent tat England played in Aook & in connection @it ind%strial @age-
labo%r0 6e @as %n!ort%nately denied te opport%nity o! carrying o%t tis plan0
'astly, te se8ent part @as a8ailable complete, b%t only as a !irst dra!t, @ose endlessly in8ol8ed
periods ad !irst to be dissected to be made printable0 5ere exists only te beginning o! te !inal
capter0 &t @as to treat o! te tree maHor classes o! de8eloped capitalist society I te lando@ners,
capitalists and @age-labo%rers I corresponding to te tree great !orms o! re8en%e, gro%nd-rent,
pro!it and @ages, and te class str%ggle, an ine8itable concomitant o! teir existence, as te act%al
conseD%ence o! te capitalist period0 Marx %sed to lea8e s%c concl%ding s%mmaries %ntil te
!inal editing, H%st be!ore going to press, @en te latest istorical de8elopments !%rnised im
@it %n!ailing reg%larity @it proo!s o! te most la%dable timeliness !or is teoretical
propositions0
;itations and proo!s ill%strating is statements are, as in te second 8ol%me, considerably less
n%mero%s tan in te !irst0 M%otations !rom Aook & re!er to pages in te <nd and 3rd editions0
Were8er te man%script re!ers to teoretical statements o! earlier economists, te name alone is
gi8en as a r%le, and te D%otations @ere to be added d%ring te !inal editing0 3! co%rse, & ad to
lea8e tis as it @as0 5ere are only !o%r parliamentary reports, b%t tese are ab%ndantly %sed0
5ey are te !ollo@ing:
1C )eports !rom ;ommittees Bo! te 'o@er 6o%seC, 4ol%me 4&&&, ;ommercial 7istress, 4ol%me
&&, ,art &0 182>-280 Min%tes o! E8idence0 I M%oted as ;ommercial 7istress 182>-280
<C $ecret ;ommittee o! te 6o%se o! 'ords on ;ommercial 7istress 182>0 )eport printed in
18280 E8idence printed in 18+> Bbeca%se considered too compromising in 1828C0 I M%oted as ;0
70 1828N+>0
3C )eport: Aank ?cts, 18+>0 I 7itto, 18+80 I )eports o! te ;ommittee o! te 'o@er 6o%se on
te E!!ect o! te Aank ?cts o! 1822 and 182+0 Wit e8idence0 I M%oted as: A0 ?0 Balso as A0 ;0C
18+> or 18+80
& am going to start on te !o%rt 8ol%me-te istory o! te teory o! s%rpl%s-8al%e I as soon as it
is in any @ay possible0
&n te pre!ace to te second 8ol%me o! Capital & ad to sD%are acco%nts @it te gentlemen @o
raised a %e and cry at te time beca%se tey !ancied to a8e disco8ered Kin )odbert%s te secret
so%rce and s%perior predecessor o! MarxL0 & o!!ered tem an opport%nity to so@ K@at te
economics o! a )odbert%s can accomplisL# & de!ied tem to so@ Kin @ic @ay an eD%al
a8erage rate o! pro!it can and m%st come abo%t, not only @ito%t a 8iolation o! te la@ o! 8al%e,
b%t on te 8ery basis o! itL0 5ese same gentlemen @o !or eiter s%bHecti8e or obHecti8e, b%t as a
r%le anyting b%t scienti!ic reasons @ere ten lionising te bra8e )odbert%s as an economic star
o! te !irst magnit%de, a8e @ito%t exception !ailed to !%rnis an ans@er0 6o@e8er, oter people
a8e to%gt it @ort teir @ile to occ%py temsel8es @it te problem0
&n is critiD%e o! te second 8ol%me BConrads Jahrbcher, J&, 188+, $0 2+<-6+C, ,ro!essor 'exis
took %p te D%estion, alto%g e did not care to o!!er a direct sol%tion0 6e says:
K5e sol%tion o! te contradictionL Bbet@een te
)icardo-Marxian la@ o! 8al%e and an eD%al a8erage
rate o! pro!itC Kis impossible i! te 8ario%s classes o!
commodities are considered individually and i! teir
8al%e is to be eD%al to teir excange-8al%e, and te
latter eD%al or proportional to teir price0L
?ccording to im, te sol%tion is only possible i!
K@e cease meas%ring te 8al%e o! indi8id%al
commodities according to labo%r, and consider only
te prod%ction o! commodities as a whole and teir
distrib%tion among te aggregate classes o! capitalists
and @orkers0000 5e @orking class recei8es b%t a
certain portion o! te total prod%ct,000 te oter
portion, @ic !alls to te sare o! te capitalist class,
represents te s%rpl%s-prod%ct in te Marxian sense,
and accordingly 000 te s%rpl%s-8al%e0 5en te
members o! te capitalist class di8ide tis total
s%rpl%s-8al%e among temsel8esnot in accordance
@it te n%mber o! @orkers employed by tem, b%t in
proportion to te capital in8ested by eac, te land
also being acco%nted !or as capital-8al%e0L
5e Marxian ideal 8al%es determined by %nits o! labo%r incorporated in te commodities do not
correspond to prices b%t may be
Kregarded as points o! depart%re o! a si!t @ic leads
to te act%al prices0 5e latter depend on te !act tat
eD%al s%ms o! capital demand eD%al pro!its0L
For tis reason some capitalists @ill sec%re prices iger tan te ideal 8al%es !or teir
commodities, and oters @ill sec%re lo@er prices0
KA%t since te losses and gains o! s%rpl%s-8al%e
balance one anoter @itin te capitalist class, te
total amo%nt o! te s%rpl%s-8al%e is te same as it
@o%ld be i! all prices @ere proportional to te ideal
8al%es0L
&t is e8ident tat te problem as not in any @ay been sol8ed ere, b%t as, to%g some@at
loosely and sallo@ly, been on te @ole correctlyformulated. ?nd tis is, indeed, more tan @e
co%ld a8e expected !rom a man @o, like te abo8e a%tor, takes a certain pride in being a
K8%lgar economistL0 &t is really s%rprising @en compared @it te andi@ork o! oter 8%lgar
economists, @ic @e sall later disc%ss0 'exisGs 8%lgar economy is, anyo@, in a class o! its
o@n0 6e says tat capital gains might, at any rate, be deri8ed in te @ay indicated by Marx, b%t
tat noting compels one to accept tis 8ie@0 3n te contrary0 4%lgar economy, e says, as at
least a more pla%sible explanation, namely:
K5e capitalist sellers, s%c as te prod%cer o! ra@
materials, te man%!act%rer, te @olesale dealer, and
te retail dealer, all make a gain on teir transactions
by selling at a price iger tan te p%rcase price,
t%s adding a certain percentage to te price tey
temsel8es pay !or te commodity0 5e @orker alone
is %nable to obtain a similar additional 8al%e !or is
commodity# e is compelled by reason o! is
%n!a8o%rable condition 8is-O-8is te capitalist to sell
is labo%r at te price it costs im, tat is to say, !or
te essential means o! is s%bsistence0000 5%s, tese
additions to prices retain teir !%ll impact @it regard
to te b%ying @orker, and ca%se te trans!er o! a part
o! te 8al%e o! te total prod%ct to te capitalist
class0L
3ne need not strain is tinking po@ers to see tat tis explanation !or te pro!its o! capital, as
ad8anced by K8%lgar economy,L amo%nts in practice to te same ting as te Marxian teory o!
s%rpl%s-8al%e# tat te @orkers are in H%st te same K%n!a8o%rable conditionL according to 'exis
as according to Marx# tat tey are H%st as m%c te 8ictims o! s@indle beca%se e8ery non-@orker
can sell commodities abo8e price, @ile te @orker cannot do so# and tat it is H%st as easy to
b%ild %p an at least eD%ally pla%sible 8%lgar socialism on te basis o! tis teory, as tat b%ilt in
England on te !o%ndation o! Pe8onsGs and MengerGs teory o! %se-8al%e and marginal %tility0 &
e8en s%spect tat i! Mr0 :eorge Aernard $a@ ad been !amiliar @it tis teory o! pro!it, e
@o%ld a8e likely !allen to @it bot ands, discarding Pe8ons and Karl Menger, to b%ild ane@
te Fabian c%rc o! te !%t%re %pon tis rock0
&n reality, o@e8er, tis teory is merely a paraprase o! te Marxian0 Wat de!rays all te price
additionsQ &t is te @orkersG Ktotal prod%ctL0 ?nd tis is d%e to te !act tat te commodity
Klabo%rL, or, as Marx as it, labo%r-po@er, as to be sold belo@ its price0 For i! it is a common
property o! all commodities to be sold at a price iger tan teir cost o! prod%ction, @it labo%r
being te sole exception since it is al@ays sold at te cost o! prod%ction, ten labo%r is simply
sold belo@ te price tat r%les in tis @orld o! 8%lgar economy0 6ence te res%ltant extra pro!it
accr%ing to te capitalist, or capitalist class, arises, and can only arise, in te last analysis, !rom
te !act tat te @orker, a!ter reprod%cing te eD%i8alent !or te price o! is labo%r-po@er, m%st
prod%ce an additional prod%ct !or @ic e is not paid I i0e0, a s%rpl%s-prod%ct, a prod%ct o!
%npaid labo%r, or s%rpl%s-8al%e0 'exis is an extremely ca%tio%s man in te coice o! is terms0 6e
does not say any@ere o%trigt tat te abo8e is is o@n conception0 A%t i! it is, it is plain as day
tat @e are not dealing @it one o! tose ordinary 8%lgar economists, o! @om e says imsel!
tat e8ery one o! tem is Kat best only a opeless idiotL in MarxGs eyes, b%t @it a Marxist
disg%ised as a 8%lgar economist0 Weter tis disg%ise as occ%rred conscio%sly or %nconscio%sly
is a psycological D%estion @ic does not interest %s at tis point0 Woe8er @o%ld care to
in8estigate tis, migt also probe o@ a man as sre@d as 'exis %ndo%btedly is, co%ld at one time
de!end s%c nonsense as bimetallism0
5e !irst to really attempt an ans@er to te D%estion @as 7r0 Conrad Schmidt in is pamplet
entitled Die Durchsdinittsprofitrate auf Grundlage des Mar!schen "erthgeset#es, $t%ttgart,
7ietE, 188*0 $cmidt seeks to reconcile te details o! te !ormation o! market-prices @it bot
te la@ o! 8al%e and @it te a8erage rate o! pro!it0 5e ind%strial capitalist recei8es in is
prod%ct, !irst, an eD%i8alent o! te capital e as ad8anced, and, second, a s%rpl%s-prod%ct !or
@ic e as paid noting0 A%t to obtain a s%rpl%s-prod%ct e m%st ad8ance capital to prod%ction0
5at is, e m%st apply a certain D%antity o! materialised labo%r to be able to appropriate tis
s%rpl%s-prod%ct0 For te capitalist, tere!ore, te capital e ad8ances represents te D%antity o!
materialised labo%r socially necessary !or im to obtain tis s%rpl%s-prod%ct0 5is applies to e8ery
ind%strial capitalist0 -o@, since commodities are m%t%ally excanged, according to te la@ o!
8al%e, in proportion to te labo%r socially necessary !or teir prod%ction and since, as !ar as te
capitalist is concerned, te labo%r necessary !or te man%!act%re o! te s%rpl%s-prod%ct appens
to be past labo%r acc%m%lated in is capital, it !ollo@s tat s%rpl%s-prod%cts are excanged in
proportion to te s%ms o! capital reD%ired !or teir prod%ction, and not in proportion to te labo%r
actually incorporated in tem0 6ence te sare o! eac %nit o! capital is eD%al to te s%m o! all
prod%ced s%rpl%s-8al%es di8ided by te s%m o! te capitals expended in prod%ction0 ?ccordingly,
eD%al s%ms o! capital yield eD%al pro!its in eD%al time spans, and tis is accomplised by adding
te cost-price o! te s%rpl%s-prod%ct so calc%lated, i0e0, te a8erage pro!it, to te cost-price o! te
paid prod%ct and by selling bot te paid and %npaid prod%ct at tis increased price0 5e a8erage
rate o! pro!it takes sape in spite o! a8erage commodity-prices being determined, as $cmidt
olds, by te la@ o! 8al%e0
5e constr%ction is extremely ingenio%s0 &t is completely patterned a!ter te 6egelian model, b%t
like te maHority o! 6egelian constr%ctions it is not correct0 $%rpl%s-prod%ct or paid prod%ct,
makes no di!!erence0 &! te la@ o! 8al%e is also to be directly 8alid !or te a8erage prices, bot o!
tem m%st be sold at prices proportionate to te socially necessary labo%r reD%ired and expended
in prod%cing tem0 5e la@ o! 8al%e is aimed !rom te !irst against te idea deri8ed !rom te
capitalist mode o! to%gt tat acc%m%lated labo%r o! te past, @ic comprises capital, is not
merely a certain s%m o! !inised 8al%e, b%t tat, beca%se a !actor in prod%ction and te !ormation
o! pro!it, it also prod%ces 8al%e and is ence a so%rce o! more 8al%e tan it as itsel!# it
establises tat li8ing labo%r alone possesses tis !ac%lty0 &t is @ell kno@n tat capitalists expect
eD%al pro!its proportionate to teir capitals and regard teir ad8ances o! capital as a sort o! cost-
price o! teir pro!its0 A%t i! $cmidt %tilises tis conception as a means o! reconciling prices
based on te a8erage rate o! pro!it @it te la@ o! 8al%e, e rep%diates te la@ o! 8al%e itsel! by
attrib%ting to it as one o! its co-determinati8e !actors a conception @it @ic te la@ is @olly at
8ariance0
Eiter acc%m%lated labo%r creates 8al%e te same as li8ing labo%r0 &n tat case te la@ o! 8al%e
does not apply0
3r, it does not create 8al%e0 &n tat case $cmidtGs demonstration is incompatible @it te la@ o!
8al%e0
$cmidt strayed into tis bypat @en D%ite close to te sol%tion, beca%se e belie8ed tat e
needed noting sort o! a matematical !orm%la to demonstrate te con!ormance o! te a8erage
price o! e8ery indi8id%al commodity @it te la@ o! 8al%e0 A%t @ile on te @rong track in tis
instance, in te immediate proximity o! te goal, te rest o! is booklet is e8idence o! te
%nderstanding @it @ic e dre@ !%rter concl%sions !rom te !irst t@o 8ol%mes o!Capital. 6is
is te ono%r o! independently !inding te correct explanation de8eloped by Marx in te tird part
o! te tird 8ol%me !or te iterto inexplicable sinking tendency o! te rate o! pro!it, and,
similarly, o! explaining te deri8ation o! commercial pro!it o%t o! ind%strial s%rpl%s-8al%e, and o!
making a great n%mber o! obser8ations concerning interest and gro%nd-rent, in @ic e
anticipates ideas de8eloped by Marx in te !o%rt and !i!t parts o! te tird 8ol%me0
&n a s%bseD%ent article B$eue %eit, 18*<-*3, -os0 3 and 2C, $cmidt takes a di!!erent tack in is
e!!ort to sol8e te problem0 6e contends tat it is competition @ic prod%ces te a8erage rate o!
pro!it by ca%sing te trans!er o! capital !rom brances o! prod%ction @it %nder-a8erage pro!it to
brances @it abo8e-a8erage pro!it0 &t is not a re8elation tat competition is te great eD%aliser o!
pro!its0 A%t no@ $cmidt tries to pro8e tat tis le8elling o! pro!its is identical @it a red%ction o!
te selling price o! commodities in excess s%pply to a magnit%de o! 8al%e @ic society can pay
!or tem according to te la@ o! 8al%e0 MarxGs analyses in te book itsel! are ample e8idence @y
tis @ay, too, co%ld not lead to te goal0
?!ter $cmidt &. 'ireman tackled te problem BConrads Jahrbcher, dritte Folge, &&&, $0 >*3C0 &
sall not go into is remarks on oter aspects o! te Marxian analysis0 5ey rest %pon te !alse
ass%mption tat Marx @ises to de!ine @ere e only in8estigates, and tat in general one migt
expect !ixed, c%t-to-meas%re, once and !or all applicable de!initions in MarxGs @orks0 &t is sel!-
e8ident tat @ere tings and teir interrelations are concei8ed, not as !ixed, b%t as canging,
teir mental images, te ideas, are like@ise s%bHect to cange and trans!ormation# and tey are not
encaps%lated in rigid de!initions, b%t are de8eloped in teir istorical or logical process o!
!ormation0 5is makes clear, o! co%rse, @y in te beginning o! is !irst book Marx proceeds
!rom te simple prod%ction o! commodities as te istorical premise, %ltimately to arri8e !rom
tis basis to capital I @y e proceeds !rom te simple commodity instead o! a logically and
istorically secondary !orm I !rom an already capitalistically modi!ied commodity0 5o be s%re,
Fireman positi8ely !ails to see tis0 5ese and oter side-iss%es, @ic co%ld gi8e rise to still
oter di8erse obHections, are better le!t by te @ayside, @ile @e go on !ort@it to te gist o! te
matter0 Wile teory teaces Fireman tat at a gi8en rate o! s%rpl%s-8al%e te latter is proportional
to te labo%r-po@er employed, e learns !rom experience tat at a gi8en a8erage rate o! pro!it,
pro!it is proportional to te total capital employed0 6e explains tis by saying tat pro!it is merely
a con8entional penomenon B@ic means in is lang%age tat it belongs to a de!inite social
!ormation @it @ic it stands and !allsC0 &ts existence is simply tied %p @it capital0 5e latter,
pro8ided it is strong eno%g to sec%re a pro!it !or itsel!, is compelled by competition also to
sec%re !or itsel! a rate o! pro!it eD%al !or all s%ms o! capital0 ;apitalist prod%ction is simply
impossible @ito%t an eD%al rate o! pro!it0 :i8en tis mode o! prod%ction, te D%antity o! pro!it
!or te indi8id%al capitalist can, at a certain rate o! pro!it, depend only on te magnit%de o! is
capital0 3n te oter and, pro!it consists o! s%rpl%s-8al%e, o! %npaid labo%r0 A%t o@ is s%rpl%s-
8al%e, @ose magnit%de inges %pon te degree o! labo%r exploitation, trans!ormed into pro!it,
@ose magnit%de depends %pon te amo%nt o! te capital employedQ
K$imply by selling commodities abo8e teir 8al%e in
all brances o! prod%ction in @ic te ratio
bet@een 000 constant and 8ariable capital is greatest#
b%t tis also implies tat commodities are sold belo@
teir 8al%e in tose brances o! prod%ction in @ic
te ratio bet@een constant and 8ariable capital R c:8 is
smallest, and tat commodities are sold at teir tr%e
8al%e only in brances in @ic te ratio o! c:8
represents a certain mean !ig%re0000 &s tis discrepancy
bet@een indi8id%al prices and teir respecti8e 8al%es
a re!%tation o! te 8al%e principleQ Ay no means0 For
since te prices o! some commodities rise abo8e teir
8al%e as m%c as te prices o! oters !all belo@ it, te
total s%m o! prices remains eD%al to te total s%m o!
8al%es 000 in te end tis incongr%ity disappears0L 5is
incongr%ity is a Kdist%rbanceL# Ko@e8er, in te exact
sciences it is not c%stomary to regard a predictable
dist%rbance as a re!%tation o! a la@L0
3n comparing te rele8ant passages in ;apter &J @it te abo8e, it @ill be seen tat Fireman
as indeed placed is !inger on te salient point0 A%t te %ndeser8edly cool reception o! is able
article so@s o@ many interconnecting links @o%ld still be needed e8en a!ter tis disco8ery to
enable Fireman to @ork o%t a !%ll and compreensi8e sol%tion0 ?lto%g many @ere interested in
tis problem, tey @ere all still !ear!%l o! getting teir !ingers b%rnt0 ?nd tis is explained not
only by te incomplete !orm in @ic Fireman le!t is disco8ery, b%t also by te %ndeniable
!a%ltiness o! bot is conception o! te Marxian analysis and o! is o@n general critiD%e o! te
latter, based as it @as on is misconception0
Wene8er tere is a cance o! making a !ool o! imsel! o8er some di!!ic%lt matter, 6err ,ro!essor
P%li%s "olf, o! 9%ric, ne8er !ails to do so0 6e tells %s BConrads Jahrbcher, 18*1, dritte Folge,
&&, $0 3+< and !ollo@ingC tat te entire problem is resol8ed in relati8e s%rpl%s-8al%e0 5e
prod%ction o! relati8e s%rpl%s-8al%e rests on te increase o! constant capital 8is-O-8is 8ariable
capital0
K? pl%s in constant capital pres%pposes a pl%s in te
prod%cti8e po@er o! te labo%rers0 $ince tis pl%s in
prod%cti8e po@er Bby @ay o! lo@ering te @orkerGs
cost o! li8ingC prod%ces a pl%s in s%rpl%s-8al%e, a
direct relation is establised bet@een te increasing
s%rpl%s-8al%e and te increasing sare o! constant
capital in total capital0 ? pl%s in constant capital
indicates a pl%s in te prod%cti8e po@er o! labo%r0
Wit 8ariable capital remaining te same and constant
capital increasing, s%rpl%s-8al%e m%st tere!ore, in
accordance @it Marx, increase as @ell0 5is @as te
problem presented to %s0L
5r%e, Marx says te 8ery opposite in a %ndred places in te !irst ook# tr%e, te assertion tat,
according to Marx, @en 8ariable capital srinks, relati8e s%rpl%s-8al%e increases in proportion to
te increase in constant capital, is so asto%nding tat it p%ts to same all parliamentary
declamation# tr%e, 6err P%li%s Wol! demonstrates in is e8ery line tat e does not in te least
%nderstand, be it relati8ely or absol%tely, te concepts o! relati8e or absol%te s%rpl%s-8al%e# to be
s%re e says imsel! tat
Kat !irst glance one seems really to e in a nest o!
incongr%itiesL,
@ic, by te @ay, is te only tr%e statement in is entire article0 A%t @at does all tat matterQ
6err P%li%s Wol! is so pro%d o! is brilliant disco8ery tat e cannot re!rain !rom besto@ing
post%mo%s praise on Marx !or it and !rom extolling is o@n !atomless nonsense as a
Kne@ proo! o! te keen and !ar-sigted @ay isL
BMarxGsC Ksystem o! criticism o! capitalist economy is
set !ortL0
A%t no@ comes te coicest bit o! all0 6err Wol! says:
K)icardo as like@ise claimed tat an eD%al
in8estment o! capital yielded eD%al s%rpl%s-8al%e
Bpro!itC, H%st as te same expendit%re o! labo%r created
te same s%rpl%s-8al%e Bas regards its D%antityC0 ?nd
te D%estion no@ @as o@ te one agreed @it te
oter0 A%t Marx as re!%sed to accept tis @ay o!
p%tting te problem0 (e has proved beyond a doubt
)in the third volume* tat te second statement @as
not necessarily a conseD%ence o! te la@ o! 8al%e, tat
it e8en contradicted is la@ o! 8al%e and so%ld
tere!ore be !ort@it rep%diated0L
?nd tere%pon Wol! probes @o o! %s t@o, Marx or &, ad made a mistake0 &t does not occ%r to
im, nat%rally, tat it is e @o is groping in te dark0
& so%ld o!!end my readers and !ail to see te %mo%r o! te sit%ation i! & @ere to @aste a single
@ord on tis coice morsel0 & sall only add tat is a%dacity in %sing te opport%nity to report
te ostensible gossip among pro!essors tat ;onrad $cmidtGs abo8e-named @ork @as Kdirectly
inspired by EngelsL matces te a%dacity @it @ic e dared to say at one time @at KMarx as
pro8ed beyond a do%bt in te tird 8ol%me0L 6err P%li%s Wol!S &t may be c%stomary in te @orld
in @ic yo% li8e and stri8e !or te man @o p%blicly poses a problem to oters to acD%aint is
close !riends on te sly @it its sol%tion0 & am D%ite prepared to belie8e tat yo% are capable o!
tis sort o! ting0 A%t tat a man need not stoop to s%c sabby tricks in my @orld is pro8ed by
te present pre!ace0
-o sooner ad Marx died tan Mr0 +chille ,oria astened to p%blis an article abo%t im in te
$uova +ntologia B?pril 1883C0 5o begin @it, a biograpy brimming @it misin!ormation,
!ollo@ed by a critiD%e o! p%blic, political and literary @ork0 6e !alsi!ies MarxGs materialist
conception o! istory and distorts it @it an ass%rance tat bespeaks a great p%rpose0 ?nd tis
p%rpose @as e8ent%ally carried o%t0 &n 1886, te same Mr0 'oria p%blised a book, ,a teoria
economica della constitu#ione politica, in @ic e anno%nced to is asto%nded contemporaries
tat MarxGs conception o! istory, so completely and p%rpose!%lly misrepresented by im in 1883,
@as is o@n disco8ery0 5o be s%re, te Marxian teory is red%ced in tis book to a rater
,ilistine le8el, and te istorical ill%strations and proo!s abo%nd in bl%nders @ic @o%ld ne8er
be tolerated in a !o%rt-!orm boy0 A%t @at does tat matterQ 5e disco8ery tat political
conditions and e8ents are e8ery@ere in8ariably explained by corresponding economic
conditions @as, as is ere@it demonstrated, not made by Marx in 182+, b%t by Mr0 'oria in
18860 ?t least e as appily con8inced is co%ntrymen o! tis, and, a!ter is book appeared in
Frenc, also some Frencmen, and can no@ pose in &taly as te a%tor o! a ne@ epoc-making
teory o! istory %ntil te &talian $ocialists !ind time to strip te ill%strio%s 'oria o! is stolen
peacock !eaters0
A%t tis is H%st a sample or Mr0 'oriaGs style0 6e ass%res %s tat all MarxGs teories rest on
conscious sopistry Bun consaputo sofismaC# tat Marx did not stop at paralogisms e8en @en he
-new them to be paralogisms )sapendoli tali*, etc0 ?nd a!ter t%s impressing te necessary %pon
is readers @it a series o! similar contemptible insin%ations, so tat tey so%ld regard Marx as
an %nprincipled %pstart . la 'oria @o acie8es is little e!!ects by te same @retced %mb%g as
o%r pro!essor !rom ,ad%a, e re8eals an important secret to tem, and tereby takes %s back to te
rate o! pro!it0
Mr0 'oria says: ?ccording to Marx, te amo%nt o! s%rpl%s-8al%e B@ic Mr0 'oria ere identi!ies
@it pro!itC prod%ced in a capitalist ind%strial establisment so%ld depend on te 8ariable capital
employed in it, since constant capital does not yield pro!it0 A%t tis is contrary to !act0 For in
practice pro!it does not depend on 8ariable, b%t on total capital0 ?nd Marx imsel! recognises tis
BAook &, ;ap0 J&&&C and admits tat on te s%r!ace !acts appear to contradict is teory0 A%t o@
does e get aro%nd tis contradictionQ 6e re!ers is readers to an as yet %np%blised s%bseD%ent
8ol%me0 'oria as already told his readers abo%t tis 8ol%me tat e did not belie8e Marx ad
e8er entertained te to%gt o! @riting it, and no@ exclaims tri%mpantly:
K& a8e not been @rong in contending tat tis second
8ol%me, @ic Marx al@ays !lings at is ad8ersaries
@ito%t it e8er appearing, migt 8ery @ell a8e been
a sre@d expedient applied by Marx @ene8er
scienti!ic arg%ments !ailed im )un ingegnoso
spediente ideato dal Mar a sostitu#ione degli
argomenti scientifici*./ ?nd @osoe8er is not
con8inced a!ter tis tat Marx stands in te same class
o! scienti!ic s@indlers as l!illustre 'oria, is past all
redemption0
We a8e at least learned tis m%c: ?ccording to Mr0 'oria, te Marxian teory o! s%rpl%s-8al%e
is absol%tely incompatible @it te existence o! a general eD%al rate o! pro!it0 5en, tere
appeared te second 8ol%me and tere@it my p%blic callenge precisely on tis 8ery point0 &!
Mr0 'oria ad been one o! %s di!!ident :ermans, e @o%ld a8e experienced a certain degree o!
embarrassment0 A%t e is a cocky so%terner, coming !rom a ot climate, @ere, as e can testi!y,
cool ner8e is a nat%ral reD%irement0 5e D%estion o! te rate o! pro!it as been p%blicly p%t0 Mr0
'oria as p%blicly declared it insol%ble0 ?nd !or tis 8ery reason e is no@ going to o%tdo imsel!
by p%blicly sol8ing it0
5is miracle is accomplised in Conrads Jahrbcher, ne%e Folge, A%c JJ, $0 <>< and
!ollo@ing, in an article dealing @it ;onrad $cmidtGs already cited pamplet0 ?!ter 'oria
learned !rom $cmidt o@ commercial pro!it @as made, e s%ddenly sa@ dayligt0
K$ince determining 8al%e by means o! labo%r-time is
to te ad8antage o! tose capitalists @o in8est a
greater portion o! teir capital in @ages, te
%nprod%cti8eL Bread commercialC Kcapital can deri8e a
iger interestL Bread pro!itC K!rom tese pri8ileged
capitalists and t%s bring abo%t an eD%alisation
bet@een te indi8id%al ind%strial capitalists000 For
instance, i! eac o! te ind%strial capitalists ?, A, ;
%ses 2== @orking-days and =, 2==, <== constant
capital respecti8ely in prod%ction, and i! te @ages !or
2== @orking-days amo%nt to += @orking-days, ten
eac recei8es a s%rpl%s-8al%e o! += @orking-days, and
te rate o! pro!it is 2==T !or te !irst, 3303T !or te
second, and <=T !or te tird capitalist0 A%t i! a
!o%rt capitalist 7 acc%m%lates an %nprod%cti8e
capital o! 3==, @ic claims an interestL Bpro!itC
KeD%al in 8al%e to 2= @orking-days !rom ?, and an
interest o! <= @orking-days !rom A, ten te rate o!
pro!it o! capitalists ? and A @ill sink to <=T, H%st as
tat o! ;, @ile 7 @it is capital o! 3== recei8es
pro!it o! 6=, or a rate o! pro!it o! <=T, te same as te
oter capitalists0L
Wit s%c astonising dexterity, l!illustre 'oria sol8es by sleigt o! and te D%estion @ic e
ad declared insol%ble ten years pre8io%sly0 (n!ort%nately, e did not let %s into te secret
@ere!rom te K%nprod%cti8e capitalL obtained te po@er to sD%eeEe o%t o! te ind%strialists teir
extra pro!it in excess o! te a8erage rate o! pro!it, and to retain it in its o@n pocket, H%st as te
lando@ner pockets te tenantGs s%rpl%s-pro!it as gro%nd-rent0 &ndeed, according to im it @o%ld
be te mercants @o @o%ld raise a trib%te analogo%s to gro%nd-rent !rom te ind%strialists, and
@o%ld tereby bring abo%t an a8erage rate o! pro!it0 ;ommercial capital is indeed a 8ery essential
!actor in prod%cing te general rate o! pro!it, as nearly e8erybody kno@s0 A%t only a literary
ad8ent%rer @o in is eart sneeEes at political economy, can 8ent%re te assertion tat it as te
magic po@er to absorb all s%rpl%s-8al%e in excess o! te general rate o! pro!it e8en be!ore tis
general rate as taken sape, and to con8ert it into gro%nd-rent !or itsel! @ito%t, moreo8er, e8en
a8ing need to do @it any real estate0 -o less astonising is te assertion tat commercial capital
manages to disco8er te partic%lar ind%strialists, @ose s%rpl%s-8al%e H%st co8ers te a8erage rate
o! pro!it, and tat it considers it a pri8ilege to mitigate te lot o! tese l%ckless 8ictims o! te
Marxian la@ o! 8al%e to a certain extent by selling teir prod%cts gratis !or tem, @ito%t asking
as m%c as a commission !or it0 Wat a mo%ntebank one m%st be to imagine tat Marx ad need
to resort to s%c miserable tricksS
A%t it is not %ntil @e compare im @it is nortern competitors, !or instance @it 6err P%li%s
Wol!, @o @as not born yesterday eiter, tat te ill%strio%s 'oria sines in is !%ll glory0 Wat a
yelping p%p 6err Wol! appears e8en in is big 8ol%me on So#ialismus und -apitalistische
Gesellschaftsordnung,alongside te &talianS 6o@ a@k@ard, & am almost tempted to say modest,
e appears beside te rare con!idence o! te maestro @o takes it !or granted tat Marx, neiter
more nor less tan oter people, @as as m%c a sopist, paralogist, %mb%g and mo%ntebank as
Mr0 'oria imsel! I tat Marx took in te p%blic @it te promise o! ro%nding o%t is teory in a
s%bseD%ent 8ol%me @ene8er e @as in a di!!ic%lt position, kno@ing !%ll @ell tat e neiter
co%ld nor e8er @o%ld @rite it0 Ao%ndless ner8e co%pled @it a !lair !or slipping like an eel
tro%g impossible sit%ations, a eroic contempt !or p%mmellings recei8ed, asty plagiarism o!
oter peopleGs accomplisments, import%nate and !an!aronading ad8ertising, spreading is !ame
by means o! a cor%s o! !riends I @o can eD%al im in all tisQ
&taly is te land o! classicism0 E8er since te great era @en te da@n o! modern times rose tere,
it as prod%ced magni!icent caracters o! %neD%alled classic per!ection, !rom 7ante to :aribaldi0
A%t te period o! its degradation and !oreign domination also beD%eated it classic caracter-
masks, among tem t@o partic%larly clear-c%t types, tat o! $ganarelle and 7%lcamara0 5e
classic %nity o! bot is embodied in o%r illustre 'oria0
&n concl%sion & m%st take my readers across te ?tlantic0 7r0 BMed0C George C. Stiebeling, o! -e@
.ork, as also !o%nd a sol%tion to te problem, and a 8ery simple one0 $o simple, indeed, tat no
one eiter ere, or tere, took im serio%sly0 5is aro%sed is ire, and e complained bitterly
abo%t te inH%stice o! it in an endless stream o! pamplets and ne@spaper articles appearing on
bot sides o! te great @ater0 6e @as told in te $eue %eit tat is entire sol%tion rested on a
matematical error0 A%t tis co%ld scarcely dist%rb im0 Marx ad also made matematical errors,
and @as yet rigt in many tings0 'et %s ten take a look at 7r0 $tiebelingGs sol%tion0
K& take t@o !actories @orking @it eD%al capitals !or
an eD%al lengt o! time, b%t @it a di!!erent ratio o!
;onstant and 8ariable capitals0 & make te total capital
Bc U 8C R y, and te di!!erence in te ratio o! te
constant and 8ariable capital R x0 For !actory &, y R c
U 8, !or !actory &&, y R Bc I xC U B8 U xC0 5ere!ore te
rate o! s%rpl%s-8al%e !or !actory & R sN8, and !or
!actory && R sNB8 U xC0 ,ro!it BpC is @at & call te total
s%rpl%s-8al%e BsC by @ic te total capital y, or c U 8,
is a%gmented in te gi8en time# t%s p R s0 6ence, te
rate o! pro!it !or !actory & R pNy, or sNBc U 8C, and !or
!actory && it is also pNy, or sN Bc - xC U B8 U xC, i0e0, it is
also sNBc U 8C0 5e 000 problem t%s resol8es itsel! in
s%c a @ay tat, on te basis o! te la@ o! 8al%e, @it
eD%al capital and eD%al time, b%t %neD%al D%antities o!
li8ing labo%r, a cange in te rate o! s%rpl%s-8al%e
ca%ses te eD%alisation o! an a8erage rate o! pro!it0L
B:0 ;0 $tiebeling, Das "erthgeset# und die &rofitrate,
-e@ .ork, Pon 6einric0C
6o@e8er pretty and re8ealing te abo8e calc%lation may be, @e are compelled to ask 7r0
$tiebeling one D%estion: 6o@ does e kno@ tat te s%m o! s%rpl%s-8al%e prod%ced by !actory &
is exactly eD%al to te s%m o! te s%rpl%s-8al%e prod%ced by !actory &&Q 6e states explicitly tat c,
8, y and x, tat is, all te oter !actors in te calc%lation, are te same !or bot !actories, b%t
makes no mention o! s0 &t does not by any means !ollo@ !rom te !act tat e designated bot o!
te abo8e-mentioned D%antities o! s%rpl%s-8al%e algebraically @it s0 )ater, it is H%st te ting
tat as to be pro8ed, since Mr0 $tiebeling @ito%t !%rter ado also identi!ies pro!it p @it te
s%rpl%s-8al%e0 -o@ tere are H%st t@o possible alternati8es0 Eiter te t@o sGs are eD%al, bot
!actories prod%ce eD%al D%antities o! s%rpl%s-8al%e, and tere!ore also eD%al D%antities o! pro!it,
since bot capitals are eD%al0 &n tat case Mr0 $tiebeling as !rom te start taken !or granted @at
e @as really called %pon to pro8e0 3r, one !actory prod%ces more s%rpl%s-8al%e tan te oter, in
@ic case is entire calc%lation t%mbles abo%t is ears0
Mr0 $tiebeling spared neiter pains nor money to b%ild mo%ntains o! calc%lations %pon tis
matematical error, and to exibit tem to te p%blic0 & can ass%re im, !or is o@n peace o!
mind, tat tey are nearly all eD%ally @rong, and tat in te exceptional cases @en tis is not so,
tey pro8e someting entirely di!!erent !rom @at e set o%t to pro8e0 6e pro8es, !or instance, by
comparing (0$0 cens%s !ig%res !or 18>= and 188= tat te rate o! pro!it as act%ally !allen, b%t
interprets it @rongly and ass%mes tat MarxGs teory o! a constantly stable rate o! pro!it so%ld be
corrected on te basis o! experience0 .et it !ollo@s !rom te tird part o! te present tird book
tat tis Marxian Kstable rate o! pro!itL is p%rely a !igment o! Mr0 $tiebelingGs imagination, and
tat te tendency !or te rate o! pro!it to !all is d%e to circ%mstances @ic are H%st te re8erse o!
tose indicated by 7r0 $tiebeling0 -o do%bt 7r0 $tiebeling as te best intentions, b%t @en a man
@ants to deal @it scienti!ic D%estions e so%ld abo8e all learn to read te @orks e @ises to
%se H%st as te a%tor ad @ritten tem, and abo8e all @ito%t reading anyting into tem tat
tey do not contain0
5e o%tcome o! te entire in8estigation so@s again @it re!erence to tis D%estion as @ell tat it
is te Marxian scool alone @ic as accomplised someting0 &! Fireman and ;onrad $cmidt
read tis tird book, eac one, !or is part, may @ell be satis!ied @it is o@n @ork0
'ondon, 3ctober 2, 18*2
' r e d e r i c - 0 n g e l s
Part I. The Conversion of Surplus-
Value into Proft and of the Rate
of Surplus-Value into the Rate of
Proft
Chapter 1. Cost-Price and Proft
&n Aook & @e analysed te penomena @ic constit%te te process of capitalist production as
s%c, as te immediate prod%cti8e process, @it no regard !or any o! te secondary e!!ects o!
o%tside in!l%ences0 A%t tis immediate process o! prod%ction does not exa%st te li!e span o!
capital0 &t is s%pplemented in te act%al @orld by te process of circulation, @ic @as te obHect
o! st%dy in Aook &&0 &n te latter, namely in ,art &&&, @ic treated te process o! circ%lation as a
medi%m !or te process o! social reprod%ction, it de8eloped tat te capitalist process o!
prod%ction taken as a @ole represents a syntesis o! te processes o! prod%ction and circ%lation0
;onsidering @at tis tird book treats, it cannot con!ine itsel! to general re!lection relati8e to
tis syntesis0 3n te contrary, it m%st locate and describe te concrete !orms @ic gro@ o%t o!
te movements of capital as a whole0 &n teir act%al mo8ement capitals con!ront eac oter in
s%c concrete sape, !or @ic te !orm o! capital in te immediate process o! prod%ction, H%st as
its !orm in te process o! circ%lation, appear only as special instances0 5e 8ario%s !orms o!
capital, as e8ol8ed in tis book, t%s approac step by step te !orm @ic tey ass%me on te
s%r!ace o! society, in te action o! di!!erent capitals %pon one anoter, in competition, and in te
ordinary conscio%sness o! te agents o! prod%ction temsel8es0
5e 8al%e o! e8ery commodity prod%ced in te capitalist @ay is represented in te !orm%la: ; R c
U 8 U s0 &! @e s%btract s%rpl%s-8al%es !rom tis 8al%e o! te prod%ct tere remains a bare
eD%i8alent or a s%bstit%te 8al%e in goods, !or te capital-8al%e c U 8 expended in te elements o!
prod%ction0
For example, i! te prod%ction o! a certain article reD%ires a capital o%tlay o! V+==, o! @ic V<=
are !or te @ear and tear o! instr%ments o! prod%ction, V38= !or te materials o! prod%ction, and
V1== !or labo%r-po@er, and i! te rate o! s%rpl%s-8al%e is 1==T, ten te 8al%e o! te prod%ct R
2==c U 1==8 U 1==s R V6==0
?!ter ded%cting te s%rpl%s-8al%e o! V1==, tere remains a commodity-8al%e o! V+== @ic only
replaces te expended capital o! V+==0 5is portion o! te 8al%e o! te commodity, @ic replaces
te price o! te cons%med means o! prod%ction and labo%r-po@er, only replaces @at te
commodity costs te capitalist imsel!0 For im it, tere!ore, represents te cost-price o! te
commodity0
Wat te commodity costs te capitalist and its act%al prod%ction cost are t@o D%ite di!!erent
magnit%des0 5at portion o! te commodity-8al%e making %p te s%rpl%s-8al%e does not cost te
capitalist anyting simply beca%se it costs te labo%rer %npaid labo%r0 .et, on te basis o!
<= ;apter &
capitalist prod%ction, a!ter te labo%rer enters te prod%ction process e imsel! constit%tes an
ingredient o! operating prod%cti8e capital, @ic belongs to te capitalist0 5ere!ore, te
capitalist is te act%al prod%cer o! te commodity0 For tis reason te cost-price o! te commodity
necessarily appears to te capitalist as te act%al cost o! te commodity0 &! @e take k to be te
cost-price, te !orm%la ; R c U 8 U s t%rns into te !orm%la ; R k U s, tat is, te commodity-
8al%e R cost-price U s%rpl%s-8al%e0
5e gro%ping o! te 8ario%s 8al%e portions o! a commodity @ic only replace te 8al%e o! te
capital expended in its prod%ction %nder te ead o! cost-price expresses, on te one and, te
speci!ic caracter o! capitalist prod%ction0 5e capitalist cost o! te commodity is meas%red by
te expendit%re o!capital, @ile te act%al cost o! te commodity is meas%red by te expendit%re
o! labour0 5%s, te capitalist cost-price o! te commodity di!!ers in D%antity !rom its 8al%e, or its
act%al cost-price0 &t is smaller tan te 8al%e o! te commodity, beca%se, @it ; R k U s, it is
e8ident tat k R ; - s0 3n te oter and, te cost-price o! a commodity is by no means simply a
category @ic exists only in capitalist book-keeping0 5e indi8id%alisation o! tis portion o!
8al%e is contin%ally mani!est in practice in te act%al prod%ction o! te commodity, beca%se it as
e8er to be recon8erted !rom its commodity-!orm by @ay o! te process o! circ%lation into te
!orm o! prod%cti8e capital, so tat te cost-price o! te commodity al@ays m%st rep%rcase te
elements o! prod%ction cons%med in its man%!act%re0
5e category o! cost-price, on te oter and, as noting to do @it te !ormation o!
commodity-8al%e, or @it te process o! sel!-expansion o! capital0 Wen & kno@ tat o! te 8al%e
o! a commodity @ort V6==, !i8e-sixts, or V+==, represent no more tan an eD%i8alent o! te
capital o! V+== cons%med in its prod%ction and tat it can tere!ore s%!!ice only to rep%rcase te
material elements o! tis capital, & kno@ noting as yet eiter o! te @ay in @ic tese !i8e-
sixts o! te 8al%e o! te commodity, @ic represent its cost-price, are prod%ced, or abo%t te
@ay in @ic te last sixt, @ic constit%tes its s%rpl%s-8al%e, @as prod%ced0 5e in8estigation
@ill so@, o@e8er, tat in capitalist economics te cost-price ass%mes te !alse appearance o! a
category o! 8al%e prod%ction itsel!0
5o ret%rn to o%r example0 $%ppose te 8al%e prod%ced by one labo%rer d%ring an a8erage social
@orking-day is represented by a money s%m o! 6s0 R 6M0 5en te ad8anced capital o! V+== R
2==c U 1==8 represents a 8al%e prod%ced in 1,666W ten-o%r @orking-days, o! @ic 1,333X
@orking-days are crystallised in te 8al%e o! te means o! prod%ction R 2==c, and 333X are
crystallised in te 8al%e o! labo%r-po@er R 1==80 6a8ing ass%med a rate o! s%rpl%s-8al%e o! 1==T,
te prod%ction o! te commodity to be ne@ly !ormed entails a labo%r expendit%re R 1==8 U 1==s R
666W ten-o%r @orking-days0
We kno@, ten Bsee A%c 1, Kap0 4&&, $0 <=1N1*3C /Englis edition: ;0 &J, p0 <1<0-0d01 tat te
8al%e o! te ne@ly created prod%ct o! V6== is composed o! 1C te reappearing 8al%e o! te
constant capital o! V2== expended !or means o! prod%ction, and <C a ne@ly prod%ced 8al%e o!
V<==0 5e cost-price o! te commodity R V+== comprises te reappearing 2==c and one-al! o! te
ne@ly prod%ced 8al%e o! V<== B R 1==8C, tat is, t@o elements o! te commodity-8al%e @ic are
o! entirely di!!erent origin0
3@ing to te p%rposi8e nat%re o! te labo%r expended d%ring 666W ten-o%r @orking-days, te
8al%e o! te cons%med means o! prod%ction amo%nting to V2== is trans!erred !rom tese means o!
prod%ction to te prod%ct0 5is pre8io%sly existing 8al%e t%s reappears as a component part o!
te 8al%e o! te prod%ct, b%t is not created in te process o! prod%ction o! this commodity0 &t
exists as a component o! te 8al%e o! te commodity only beca%se it pre8io%sly existed as an
element o! te in8ested capital0 5e expended constant capital is tere!ore replaced by tat
portion o! te 8al%e o! te commodity @ic tis capital itsel! adds to tat 8al%e0 5is element o!
te cost-price, tere!ore, as a do%ble meaning0 3n te one and, it goes into te cost-price o! te
commodity, beca%se it is part o! te commodity-8al%e @ic replaces cons%med capital0 ?nd on
<1 ;apter &
te oter and, it !orms an element o! te commodity-8al%e only beca%se it is te 8al%e o!
expended capital or beca%se te means o! prod%ction cost so and so m%c0
&t is D%ite te re8erse in te case o! te oter element o! te cost-price0 5e 666W @orking-days
expended in te prod%ction o! te commodity create a ne@ 8al%e o! V<==0 3ne portion o! tis
ne@ 8al%e merely replaces te ad8anced 8ariable capital o! V1==, or te price o! te labo%r-po@er
employed0 A%t tis ad8anced capital-8al%e does not in any @ay go into te creation o! te ne@
8al%e0 $o !ar as te ad8ance o! capital is concerned, labo%r-po@er co%nts as a value0 A%t in te
process o! prod%ction it acts as te creator o! 8al%e0 5e place o! te 8al%e o! te labo%r-po@er
tat obtains @itin te ad8anced capital is taken in te act%ally functioning prod%cti8e capital by
li8ing 8al%e-creating labo%r-po@er itsel!0
5e di!!erence bet@een tese 8ario%s elements o! te commodity-8al%e, @ic togeter make %p
te cost-price, leaps to te eye @ene8er a cange takes place in te siEe o! te 8al%e o! eiter te
expended constant, or te expended 8ariable, part o! te capital0 'et te price o! te same means
o! prod%ction, or o! te constant part o! capital, rise !rom V2== to V6==, or, con8ersely, let it !all
to V<==0 &n te !irst case it is not only te cost-price o! te commodity @ic rises !rom V+== to
6==c U 1==8 R V>==, b%t also te 8al%e o! te commodity @ic rises !rom V6== to 6==c U 1==8 U
1==s R V8==0 &n te second case, it is not only te cost-price @ic !alls !rom V+== to <==cU1==8 R
V3==, b%t also te 8al%e o! te commodity @ic !alls !rom V6== to <==c U 1==8 U 1==s R V2==0
$ince te expended constant capital trans!ers its o@n 8al%e to te prod%ct, te 8al%e o! te
prod%ct rises or !alls @it te absol%te magnit%de o! tat capital-8al%e, oter conditions
remaining eD%al0 ?ss%me, on te oter and, tat, oter circ%mstances remaining %ncanged, te
price o! te same amo%nt o! labo%r-po@er rises !rom V1== to V1+=, or, con8ersely, tat it !alls
!rom V1== to V+=0 &n te !irst case, te cost-price rises !rom V+== to 2==c U 1+=8 R V++=, and !alls
in te second case !rom V+== to 2==c U +=8 R V2+=0 A%t in eiter case te commodity-8al%e
remains %ncanged R V6==# one time it is 2==cU 1+=8 U +=s, and te oter time, 2==c U +=8 U 1+=s0
5e ad8anced 8ariable capital does not add its o@n 8al%e to te prod%ct0 5e place o! its 8al%e is
taken in te prod%ct rater by a ne@ 8al%e created by labo%r0 5ere!ore, a cange in te absol%te
magnit%de o! te 8ariable capital, so !ar as it expresses merely a cange in te price o! labo%r-
po@er, does not in te least alter te absol%te magnit%de o! te commodity-8al%e, beca%se it does
not alter anyting in te absol%te magnit%de o! te ne@ 8al%e created by li8ing labo%r-po@er0
$%c a cange rater a!!ects only te relati8e proportion o! te t@o component parts o! te ne@
8al%e, o! @ic one !orms s%rpl%s-8al%e and te oter makes good te 8ariable capital and
tere!ore passes into te cost-price o! te commodity0
5e t@o elements o! te cost-price, in te present case 2==c U 1==8, a8e only tis in common tat
tey are bot parts o! te commodity-8al%e tat replace ad8anced capital0
A%t tis tr%e state o! a!!airs necessarily appears re8ersed !rom te standpoint o! capitalist
prod%ction0
5e capitalist mode o! prod%ction di!!ers !rom te mode o! prod%ction based on sla8ery, among
oter tings, by te !act tat in it te 8al%e, and accordingly te price, o! labo%r-po@er appears as
te 8al%e, or price, o! labo%r itsel!, or as @ages BA%c 1, Kap0 J4&&C /Englis edition: ;0 J&J0 I
0d010 5e 8ariable part o! te ad8anced capital, tere!ore, appears as capital expended in @ages,
as a capital-8al%e @ic pays !or te 8al%e, and accordingly te price, o! all te labo%r expended
in prod%ction0 'et %s ass%me, !or instance, tat an a8erage ten-o%r social @orking-day is
incorporated in a s%m o! money amo%nting to 6 sillings0 &n tat case te ad8ance o! a 8ariable
capital o! V1== represents te money expression o! a 8al%e prod%ced in 333 X# ten-o%r @orking-
days0 A%t tis 8al%e, representing p%rcased labo%r-po@er in te capital ad8anced, does not,
o@e8er, !orm a part o! te act%ally !%nctioning prod%cti8e capital0 &ts place in te process o!
prod%ction is taken by li8ing labo%r-po@er0 &!, as in o%r ill%stration, te degree o! exploitation o!
te latter is 1==T, ten it is expended d%ring 666W ten-o%r @orking-days, and tereby adds to
te prod%ct a ne@ 8al%e o! V<==0 A%t in te capital ad8anced te 8ariable capital o! V1== !ig%res
<< ;apter &
as capital in8ested in @ages, or as te price o! labo%r per!ormed d%ring 666W ten-o%r days0 5e
s%m o! V1== di8ided by 666W gi8es %s 3 sillings as te price o! a ten-o%r @orking-day, @ic
is eD%al in 8al%e to te prod%ct o! !i8e o%rs" labo%r0
-o@, i! @e compare te capital ad8anced on te one and @it te commodity-8al%e on te oter,
@e !ind:
&0 ;apital ad8anced V+== R V2== o! capital expended in means o! prod%ction Bprice
o! means o! prod%ctionC U V1== o! capital expended in labo%r Bprice o! 666W
@orking-days, or @ages !or sameC0
&&0 4al%e o! commodities V6== R V+== representing te cost-price BV2== price o!
expended means o! prod%ction U V1== price o! expended 666W# @orking-daysC U
V1== s%rpl%s-8al%e0
&n tis !orm%la, te portion o! capital in8ested in labo%r-po@er di!!ers !rom tat in8ested in means
o! prod%ction, s%c as cotton or coal, only by ser8ing as payment !or a materially di!!erent
element o! prod%ction, b%t not by any means beca%se it ser8es a !%nctionally di!!erent p%rpose in
te process o! creating commodity-8al%e, and tereby also in te process o! te sel!-expansion o!
capital0 5e price o! te means o! prod%ction reappears in te cost-price o! te commodities, H%st
as it !ig%red in te capital ad8anced, and it does so beca%se tese means o! prod%ction a8e been
p%rposi8ely cons%med0 5e price, or @ages, !or te 666W @orking-days cons%med in te
prod%ction o! tese commodities like@ise reappears in te cost-price o! te commodities H%st as it
as !ig%red in te capital ad8anced, and also beca%se tis amo%nt o! labo%r as been p%rposi8ely
expended0 We see only !inised and existing 8al%es I te portions o! te 8al%e o! te ad8anced
capital @ic go into te making o! te 8al%e o! te prod%ct I b%t not te element creating ne@
8al%es0 5e distinction bet@een constant and 8ariable capital as disappeared0 5e entire cost-
price o! V+== no@ as te do%ble meaning tat, !irst, it is tat portion o! te commodity-8al%e o!
V6== @ic replaces te capital o! V+== expended in te prod%ction o! te commodity# and tat,
secondly, tis component o! te commodity-8al%e exists only beca%se it existed pre8io%sly as te
cost-price o! te elements o! prod%ction employed, namely means o! prod%ction and labo%r, i0e0,
as ad8anced capital0 5e capital-8al%e reappears as te cost-price o! a commodity beca%se, and in
so !ar as, it as been expended as a capital-8al%e0
5e !act tat te 8ario%s components o! te 8al%e o! te ad8anced capital a8e been expended !or
materially di!!erent elements o! prod%ction, namely !or instr%ments o! labo%r, ra@ materials,
a%xiliary materials, and labo%r, reD%ires only tat te cost-price o! te commodity m%st b%y back
tese materially di!!erent elements o! prod%ction0 $o !ar as te !ormation o! te cost-price is
concerned, o@e8er, only one distinction is appreciable, namely tat bet@een !ixed and
circ%lating capital0 &n o%r example @e a8e set do@n V<= !or @ear and tear o! instr%ments o!
labo%r B2==c R V<= !or depreciation o! instr%ments o! labo%r U V38= !or materials o! prod%ctionC0
Ae!ore te prod%cti8e process te 8al%e o! tese instr%ments o! labo%r @as, say, V1,<==0 ?!ter te
commodities a8e been prod%ced it exists in t@o !orms, te V<= as part o! te 8al%e o! te
commodity, and 1,<== - <=, or V1,18=, as te remaining 8al%e o! te instr%ments o! labo%r @ic,
as be!ore, are in te possession o! te capitalist# in oter @ords, as an element o! is prod%cti8e,
not o! is commodity-capital0 Materials o! prod%ction and @ages, as distinct !rom means o!
labo%r, are entirely cons%med in te prod%ction o! te commodity and t%s teir entire 8al%e goes
into tat o! te prod%ced commodity0 We a8e seen o@ tese 8ario%s components o! te
ad8anced capital ass%me te !orms o! !ixed and circ%lating capital in relation to te t%rno8er0
?ccordingly, te capital ad8anced R V1,68=: !ixed capital R V1,<== U circ%lating capital R V28=
B R V38= in materials o! prod%ction pl%s V1== in @agesC0
A%t te cost-price o! te commodity only R V+== BV<= !or te @ear and tear o! te !ixed capital,
and V28= !or circ%lating capitalC0
<3 ;apter &
5is di!!erence bet@een te cost-price o! te commodity and te capital ad8anced merely pro8es,
o@e8er, tat te cost-price o! te commodity is !ormed excl%si8ely by te capital act%ally
cons%med in its prod%ction0
Means o! prod%ction 8al%ed at V1,<== are employed in prod%cing te commodity, b%t only V<= o!
tis ad8anced capital-8al%e are lost in prod%ction0 5%s, te employed !ixed capital goes only
partially into te cost-price o! te commodity, beca%se it is only partially cons%med in its
prod%ction0 5e employed circ%lating capital goes entirely into te cost-price o! te commodity,
beca%se it is entirely cons%med in prod%ction0 A%t does not tis only pro8e tat te cons%med
portions o! te !ixed and circ%lating capital pass %ni!ormly, pro rata to te magnit%de o! teir
8al%es, into te cost-price o! te commodity and tat tis component o! te 8al%e o! te
commodity originates solely @it te capital expended in its prod%ctionQ &! tis @ere not so, it
@o%ld be inexplicable @y te ad8anced !ixed capital o! V1,<== so%ld not, aside !rom te V<=
@ic it loses in te prod%cti8e process, also contrib%te te oter V1,18= @ic it does not lose0
5is di!!erence bet@een !ixed and circ%lating capital @it re!erence to te calc%lation o! te cost-
price, tere!ore, only con!irms te seeming origination o! te cost-price !rom te expended
capital-8al%e, or te price paid by te capitalist imsel! !or te expended elements o! prod%ction,
incl%ding labo%r0 3n te oter and, so !ar as te !ormation o! 8al%e is concerned, te 8ariable
portion o! capital in8ested in labo%r-po@er is ere empatically identi!ied %nder te ead o!
circ%lating capital @it constant capital Btat part o! capital @ic consists o! materials o!
prod%ctionC, and tis completes te mysti!ication o! te sel!-expansion process o! capital0
1

$o !ar @e a8e considered H%st one element o! te 8al%e o! commodities, namely te cost-price0
We m%st no@ t%rn also to te oter component o! te 8al%e o! commodities, namely te excess
o8er te cost-price, or te s%rpl%s-8al%e0 &n te !irst place, ten, s%rpl%s-8al%e is te excess 8al%e
o! a commodity o8er and abo8e its cost-price0 A%t since te cost-price eD%als te 8al%e o! te
cons%med capital, into @ose material elements it is contin%ally recon8erted, tis excess 8al%e is
an accretion in te 8al%e o! te capital expended in te prod%ction o! te commodity and
ret%rning by @ay o! its circ%lation0
We a8e already seen earlier tat, to%g s, te s%rpl%s-8al%e, springs merely !rom a cange in
te 8al%e o! te 8ariable capital 8 and is, tere!ore, originally b%t an increment o! 8ariable capital,
a!ter te process o! prod%ction is o8er it ne8erteless also !orms an increment o! c U 8, te
expended total capital0 5e !orm%la c U B8 U sC, @ic indicates tat s is prod%ced tro%g te
con8ersion o! a de!inite capital-8al%e 8 ad8anced !or labo%r-po@er into a !l%ct%ating magnit%de,
i0e0, o! a constant magnit%de into a 8ariable one, may also be represented as Bc U 8C U s0 Ae!ore
prod%ction took place @e ad a capital o! V+==0 ?!ter prod%ction is completed @e a8e te capital
o! V+== pl%s a 8al%e increment o! V1==0
<

6o@e8er, s%rpl%s-8al%e !orms an increment not only o! te portion o! te ad8anced capital @ic
goes into te sel!-expansion process, b%t also o! te portion @ic does not go into it0 &n oter
@ords, it is an accretion not only to te cons%med capital made good o%t o! te cost-price o! te
commodity, b%t to all te capital in8ested in prod%ction0 Ae!ore te prod%ction process @e ad a
capital 8al%ed at V1,68=, namely V1,<== o! !ixed capital in8ested in means o! prod%ction, only
V<= o! @ic go into te 8al%e o! te commodity !or @ear and tear, pl%s V28= o! circ%lating
capital in materials o! prod%ction and @ages0 ?!ter te prod%ction process @e a8e V1,18= as te
constit%ent element o! te 8al%e o! te prod%cti8e capital pl%s a commodity-capital o! V6==0 Ay
adding tese t@o s%ms o! 8al%e @e !ind tat te capitalist no@ as a 8al%e o! V1,>8=0 ?!ter
ded%cting is ad8anced total capital o! V1,68= tere remains a 8al%e increment o! V1==0 5e V1==
o! s%rpl%s-8al%e t%s !orm as m%c o! an increment in relation to te in8ested V1,68= as to its
!raction o! V+== expended d%ring prod%ction0
&t is no@ clear to te capitalist tat tis increment o! 8al%e springs !rom te prod%cti8e processes
%ndertaken @it te capital, tat it tere!ore springs !rom te capital itsel!, beca%se it is tere a!ter
<2 ;apter &
te prod%ction process, @ile it is not tere be!ore it0 ?s !or te capital cons%med in prod%ction,
te s%rpl%s-8al%e seems to spring eD%ally !rom all its di!!erent elements o! 8al%e consisting o!
means o! prod%ction and labo%r0 For all tese elements contrib%te eD%ally to te !ormation o! te
cost-price0 ?ll o! tem add teir 8al%es, obtaining as ad8anced capital, to te 8al%e o! te prod%ct,
and are not di!!erentiated as constant and 8ariable magnit%des o! 8al%e0 5is becomes ob8io%s i!
@e ass%me !or a moment tat all te expended capital consisted eiter excl%si8ely o! @ages, or
excl%si8ely o! te 8al%e o! te means o! prod%ction0 &n te !irst case, @e so%ld ten a8e te
commodity-8al%e o! +==8 U 1==s instead o! te commodity-8al%e o! 2==c U 1==8 U 1==s0 5e
capital o! V+== laid o%t in @ages represents te 8al%e o! all te labo%r expended in te prod%ction
o! te commodity-8al%e o! V6==, and !or H%st tis reason !orms te cost-price o! te entire
prod%ct0 A%t te !ormation o! tis cost-price, @ereby te 8al%e o! te expended capital is
reprod%ced as a constit%ent part o! te 8al%e o! te prod%ct, is te only process in te !ormation o!
tis commodity-8al%e tat is kno@n to %s0 We do not kno@ o@ its s%rpl%s-8al%e portion o! V1==
is !ormed0 5e same is tr%e in te second case, in @ic te commodity-8al%e R +==c U 1==s0 We
kno@ in bot cases tat s%rpl%s-8al%e is deri8ed !rom a gi8en 8al%e, beca%se tis 8al%e @as
ad8anced in te !orm o! prod%cti8e capital, be it in te !orm o! labo%r or o! means o! prod%ction0
3n te oter and, tis ad8anced capital-8al%e cannot !orm s%rpl%s-8al%e !or te reason tat it as
been expended and tere!ore constit%tes te cost-price o! te commodity0 ,recisely beca%se it
!orms te cost-price o! te commodity, it does not !orm any s%rpl%s-8al%e, b%t merely an
eD%i8alent, a 8al%e replacing te expended capital0 $o !ar, tere!ore, as it !orms s%rpl%s-8al%e, it
does so not in its speci!ic capacity as expended, b%t rater as ad8anced, and ence %tilised,
capital0 For tis reason, te s%rpl%s-8al%e arises as m%c o%t o! te portion o! te ad8anced
capital @ic goes into te cost-price o! te commodity, as o%t o! te portion @ic does not0 &n
sort, it arises eD%ally o%t o! te !ixed and te circ%lating components o! te %tilised capital0 5e
aggregate capital ser8es materially as te creator o! prod%cts, te means o! labo%r as @ell as te
materials o! prod%ction, and te labo%r0 5e total capital materially enters into te act%al labo%r-
process, e8en to%g only a portion o! it enters te process o! sel!-expansion0 5is is, peraps, te
8ery reason @y it contrib%tes only in part to te !ormation o! te cost-price, b%t totally to te
!ormation o! s%rpl%s-8al%e0 6o@e8er tat may be, te o%tcome is tat s%rpl%s-8al%e springs
sim%ltaneo%sly !rom all portions o! te in8ested capital0 5is ded%ction may be s%bstantially
abbre8iated, by saying pointedly and concisely in te @ords o! Malt%s:
K5e capitalist 000 epects an eD%al pro!it %pon all te
parts o! te capital @ic e ad8ances0L
3

&n its ass%med capacity o! o!!spring o! te aggregate ad8anced capital, s%rpl%s-8al%e takes te
con8erted !orm o! profit0 6ence, a certain 8al%e is capital @en it is in8ested @it a 8ie@ to
prod%cing pro!it
2
, or, tere is pro!it beca%se a certain 8al%e @as employed as capital0 $%ppose
pro!it is p0 5en te !orm%la ; R c U 8 U s R k U s t%rns into te !orm%la ; R k U p, or te value of
a commodity R cost1price U profit0
5e pro!it, s%c as it is represented ere, is t%s te same as s%rpl%s-8al%e, only in a mysti!ied
!orm tat is noneteless a necessary o%tgro@t o! te capitalist mode o! prod%ction0 5e genesis
o! te m%tation o! 8al%es tat occ%rs in te co%rse o! te prod%ction process, m%st be trans!erred
!rom te 8ariable portion o! te capital to te total capital, beca%se tere is no apparent distinction
bet@een constant and 8ariable capital in te ass%med !ormation o! te cost-price0 Aeca%se at one
pole te price o! labo%r-po@er ass%mes te transm%ted !orm o! @ages, s%rpl%s-8al%e appears at
te opposite pole in te transm%ted !orm o! pro!it0
We a8e seen tat te cost-price o! a commodity is smaller tan its 8al%e0 $ince ; R k U s, it
!ollo@s tat k R ; - s0 5e !orm%la ; R k U s red%ces itsel! to ; R k, or commodity-8al%e R
commodity cost-price only i! s R =, a case @ic ne8er occ%rs on te basis o! capitalist
<+ ;apter &
prod%ction, alto%g pec%liar market conditions may red%ce te selling price o! commodities to
te le8el o!, or e8en belo@, teir cost-price0
6ence, i! a commodity is sold at its 8al%e, a pro!it is realised @ic is eD%al to te excess o! its
8al%e o8er its cost-price, and tere!ore eD%al to te entire s%rpl%s-8al%e incorporated in te 8al%e
o! te commodity0 A%t te capitalist may sell a commodity at a pro!it e8en @en e sells it belo@
its 8al%e0 $o long as its selling price is iger tan its cost-price, to%g it may be lo@er tan its
8al%e, a portion o! te s%rpl%s-8al%e incorporated in it is al@ays realised, t%s al@ays yielding a
pro!it0 &n o%r ill%stration te 8al%e o! te commodity is V6==, and te cost-price V+==0 &! te
commodity is sold at V+1=, +<=, +3=, +6= or +*=, it is sold respecti8ely V*=, 8=, >=, 2=, or 1=
belo@ its 8al%e0 .et a pro!it o! V1=, <=, 3=, 6=, or *= respecti8ely is realised in its sale0 5ere is
ob8io%sly an inde!inite n%mber o! selling prices possible bet@een te 8al%e o! a commodity and
its cost-price0 5e greater te s%rpl%s-8al%e element o! te 8al%e o! a commodity, te greater te
practical range o! tese intermediate prices0
5is explains more tan H%st te e8eryday penomena o! competition, s%c as certain cases o!
%nderselling, abnormally lo@ commodity-prices in certain lines o! ind%stry
+
, etc0 5e
!%ndamental la@ o! capitalist competition, @ic political economy ad not iterto grasped, te
la@ @ic reg%lates te general rate o! pro!it and te so-called prices o! prod%ction determined
by it, rests, as @e sall later see, on tis di!!erence bet@een te 8al%e and te cost-price o!
commodities, and on te res%lting possibility o! selling a commodity at a pro!it %nder its 8al%e0
5e minimal limit o! te selling price o! a commodity is its cost-price0 &! it is sold %nder its cost-
price, te expended constit%ent elements o! prod%cti8e capital cannot be !%lly replaced o%t o! te
selling price0 &! tis process contin%es, te 8al%e o! te ad8anced capital disappears0 From tis
point o! 8ie@ alone, te capitalist is inclined to regard te cost-price as te tr%e inner 8al%e o! te
commodity, beca%se it is te price reD%ired !or te bare conser8ation o! is capital0 A%t tere is
also tis, tat te cost-price o! a commodity is te p%rcase price paid by te capitalist imsel! !or
its prod%ction, tere!ore te p%rcase price determined by te prod%ction process itsel!0 For tis
reason, te excess 8al%e, or te s%rpl%s-8al%e, realised in te sale o! a commodity appears to te
capitalist as an excess o! its selling price o8er its 8al%e, instead o! an excess o! its 8al%e o8er its
cost-price, so tat accordingly te s%rpl%s-8al%e incorporated in a commodity is not realised
tro%g its sale, b%t springs o%t o! te sale itsel!0 We a8e gi8en tis ill%sion closer consideration
in Aook & BKap0 &4, <C/Englis edition: ;0 4, <0 I 0d01 BK;ontradictions in te :eneral Form%la
o! ;apitalLC, b%t re8ert ere !or a moment to te !orm in @ic it @as rea!!irmed by 5orrens,
among oters, as an ad8ance o! political economy beyond )icardo0
K5e nat%ral price, consisting o! te cost o!
prod%ction, or, in oter @ords, o! te capital expended
in raising or !abricating commodities, cannot incl%de
te pro!it0000 5e !armer, @e @ill s%ppose, expends one
%ndred D%arters o! corn in c%lti8ating is !ields, and
obtains in ret%rn one %ndred and t@enty D%arters0 &n
tis case, t@enty D%arters, being te excess o! prod%ce
abo8e expendit%re, constit%te te !armer"s pro!it# b%t it
@o%ld be abs%rd to call tis excess, or pro!it, a part o!
te expendit%res000 5e master man%!act%rer expends
a certain D%antity o! ra@ material, o! tools and
implements o! trade, and o! s%bsistence !or labo%r,
<6 ;apter &
and obtains in ret%rn a D%antity o! !inised @ork0 5is
!inised @ork m%st possess a iger excangeable
8al%e tan te materials, tools, and s%bsistence, by te
ad8ance o! @ic it @as obtained0L
5orrens concl%des tere!rom tat te excess o! te selling price o8er te cost-price, or pro!it, is
deri8ed !rom te !act tat te cons%mers,
Keiter by immediate or circ%ito%s barter gi8e some
greater portion o! all te ingredients o! capital tan
teir prod%ction costs0L
6

&ndeed, te excess o8er a gi8en magnit%de cannot !orm a part o! tis magnit%de, and tere!ore te
pro!it, te excess 8al%e o! a commodity o8er te capitalist"s expendit%res, cannot !orm a part o!
tese expendit%res0 6ence, i! no oter element tan te 8al%e ad8ance o! te capitalist enters into
te !ormation o! te 8al%e o! a commodity, it is inexplicable o@ more 8al%e so%ld come o%t o!
prod%ction tan @ent into it, !or someting cannot come o%t o! noting0 A%t 5orrens only e8ades
tis creation o%t o! noting by trans!erring it !rom te spere o! commodity-prod%ction to tat o!
commodity-circ%lation0 ,ro!it cannot come o%t o! prod%ction, says 5orrens, !or oter@ise it
@o%ld already be contained in te cost o! prod%ction, and tere @o%ld not be a s%rpl%s o8er tis
cost0 ,ro!it cannot come o%t o! te excange o! commodities, replies )amsay, %nless it already
existed be!ore tis excange0 5e s%m o! te 8al%e o! te excanged prod%cts is e8idently not
altered in te excange o! tese prod%cts, @ose s%m o! 8al%e it is0 &t is te same be!ore and a!ter
te excange0 &t so%ld be noted ere tat Malt%s re!ers expressly to te a%tority o! 5orrens
>
alto%g e imsel! as a di!!erent explanation !or te sale o! commodities abo8e teir 8al%e, or
rater as no explanation at all, since all arg%ments o! tis sort ne8er, in e!!ect, !ail to be red%ced
to te same ting as te once-!amed negati8e @eigt o! plogiston0
&n a social order dominated by capitalist prod%ction e8en te non-capitalist prod%cer is gripped by
capitalist conceptions0 AalEac, @o is generally remarkable !or is pro!o%nd grasp o! reality, aptly
describes in is last no8el, ,es &aysans, o@ a petty peasant per!orms many small tasks
grat%ito%sly !or is %s%rer, @ose good@ill e is eager to retain, and o@ e !ancies tat e does
not gi8e te latter someting !or noting beca%se is o@n labo%r does not cost im any cas
o%tlay0 ?s !or te %s%rer, e t%s !ells t@o dogs @it one stone0 6e sa8es te cas o%tlay !or
@ages and enmeses te peasant, @o is grad%ally r%ined by depri8ing is o@n !ield o! labo%r,
deeper and deeper in te spider-@eb o! %s%ry0
5e to%gtless conception tat te cost-price o! a commodity constit%tes its act%al 8al%e, and
tat s%rpl%s-8al%e springs !rom selling te prod%ct abo8e its 8al%e, so tat commodities @o%ld be
sold at teir 8al%e i! teir selling price @ere to eD%al teir cost-price, i0e0, i! it @ere to eD%al te
price o! te cons%med means o! prod%ction pl%s @ages, as been eralded to te @orld as a ne@ly
disco8ered secret o! socialism by ,ro%don @it is c%stomary D%asi-scienti!ic cicanery0 &ndeed,
tis red%ction o! te 8al%e o! commodities to teir cost-price is te basis o! is ,eople"s Aank0 &t
@as earlier so@n tat te 8ario%s constit%ent elements o! te 8al%e o! a prod%ct may be
represented in proportional parts o! te prod%ct itsel!0 For instance BA%c &, Kap0 4& 1, <, $0
<11N<=3C/Englis edition: ;0 &J, <, pp0 <<=-<10 I 0d01 i! te 8al%e o! <= lbs0 o! yarn is 3=
sillings I namely <2 sillings o! means o! prod%ction, 3 sillings o! labo%r-po@er, and 3
sillings o! s%rpl%s-8al%e I ten tis s%rpl%s-8al%e may be represented as 1N1= o! te prod%ctR<
lbs0 o! yarn0 $o%ld tese <= lbs0 o! yarn no@ be sold at teir cost-price, at <> sillings, ten te
p%rcaser recei8es < lbs0 o! yarn !or noting, or te article is sold 1N1= belo@ its 8al%e0 A%t te
labo%rer as, as be!ore, per!ormed is s%rpl%s-labo%r, only tis time !or te p%rcaser o! te yarn
instead o! te capitalist yarn prod%cer0 &t @o%ld be altogeter @rong to ass%me tat i! all
<> ;apter &
commodities @ere sold at teir cost-price, te res%lt @o%ld really be te same as i! tey ad all
been sold abo8e teir cost-price, b%t at teir 8al%e0 For e8en i! te 8al%e o! te labo%r-po@er, te
lengt o! te @orking-day, and te degree o! exploitation o! labo%r @ere te same e8ery@ere,
te D%antities o! s%rpl%s-8al%e contained in te 8al%es o! te 8ario%s kinds o! commodities @o%ld
be %neD%al, depending on te di!!erent organic composition o! te capitals ad8anced !or teir
prod%ction0
8
Chapter 2. The Rate of Proft
5e general !orm%la o! capital is M-;-M"0 &n oter @ords, a s%m o! 8al%e is tro@n into
circ%lation to extract a larger s%m o%t o! it0 5e process @ic prod%ces tis larger s%m is
capitalist prod%ction0 5e process tat realises it is circ%lation o! capital0 5e capitalist does not
prod%ce a commodity !or its o@n sake, nor !or te sake o! its %se-8al%e, or is personal
cons%mption0 5e prod%ct in @ic te capitalist is really interested is not te palpable prod%ct
itsel!, b%t te excess 8al%e o! te prod%ct o8er te 8al%e o! te capital cons%med by it0 5e
capitalist ad8ances te total capital @ito%t regard to te di!!erent roles played by its components
in te prod%ction o! s%rpl%s-8al%e0 6e ad8ances all tese components %ni!ormly, not H%st to
reprod%ce te ad8anced capital, b%t rater to prod%ce 8al%e in excess o! it0 5e only @ay in @ic
e can con8ert te 8al%e o! is ad8anced 8ariable capital into a greater 8al%e is by excanging it
!or li8ing labo%r and exploiting li8ing labo%r0 A%t e cannot exploit tis labo%r %nless e makes a
sim%ltaneo%s ad8ance o! te conditions !or per!orming tis labo%r, namely means o! labo%r and
s%bHects o! labo%r, macinery and ra@ materials, i0e0, %nless e con8erts a certain amo%nt o! 8al%e
in is possession into te !orm o! conditions o! prod%ction# !or e is a capitalist and can %ndertake
te process o! exploiting labo%r only beca%se, being te o@ner o! te conditions o! labo%r, e
con!ronts te labo%rer as te o@ner o! only labo%r-po@er0 ?s already so@n in te !irst book
/Englis edition: 4ol0 1, pp0 168-6*0 >12-160 I0d01, it is precisely te !act tat non-@orkers o@n
te means o! prod%ction @ic t%rns labo%rers into @age-@orkers and non-@orkers into
capitalists0
5e capitalist does not care @eter it is considered tat e ad8ances constant capital to make a
pro!it o%t o! is 8ariable capital, or tat e ad8ances 8ariable capital to enance te 8al%e o! te
constant capital# tat e in8ests money in @ages to raise te 8al%e o! is macinery and ra@
materials, or tat e in8ests money in macinery and ra@ materials to be able to exploit labo%r0
?lto%g it is only te 8ariable portion o! capital @ic creates s%rpl%s-8al%e, it does so only i!
te oter portions, te conditions o! prod%ction, are like@ise ad8anced0 $eeing tat te capitalist
can exploit labo%r only by ad8ancing constant capital and tat e can t%rn is constant capital to
good acco%nt only by ad8ancing 8ariable capital, e l%mps tem all togeter in is imagination,
and m%c more so since te act%al rate o! is gain is not determined by its proportion to te
8ariable, b%t to te total capital, not by te rate o! s%rpl%s-8al%e, b%t by te rate o! pro!it0 ?nd te
latter, as @e sall see, may remain te same and yet express di!!erent rates o! s%rpl%s-8al%e0
5e costs o! te prod%ct incl%de all te elements o! its 8al%e paid by te capitalist or !or @ic e
as tro@n an eD%i8alent into prod%ction0 5ese costs m%st be made good to preser8e te capital
or to reprod%ce it in its original magnit%de0
5e 8al%e contained in a commodity is eD%al to te labo%r-time expended in its prod%ction, and
te s%m o! tis labo%r consists o! paid and %npaid portions0 A%t !or te capitalist te costs o! te
commodity consist only o! tat portion o! te labo%r materialised in it !or @ic e as paid0 5e
s%rpl%s-labo%r contained in te commodity costs te capitalist noting, alto%g, like te paid
portion, it costs te labo%rer is labo%r, and alto%g it creates 8al%e and enters into te
commodity as a 8al%e-creating element D%ite like paid labo%r0 5e capitalist"s pro!it is deri8ed
!rom te !act tat e as someting to sell !or @ic e as paid noting0 5e s%rpl%s-8al%e, or
pro!it, consists precisely in te excess 8al%e o! a commodity o8er its cost-price, i0e0, te excess o!
te total labo%r embodied in te commodity o8er te paid labo%r embodied in it0 5e s%rpl%s-
8al%e, @ate8er its origin, is t%s a s%rpl%s o8er te ad8anced total capital0 5e proportion o! tis
s%rpl%s to te total capital is tere!ore expressed by te !raction sN;, in @ic ; stands !or total
capital0 We t%s obtain te rate of profitsN;RsNBcU8C, as distinct !rom te rate o! s%rpl%s-8al%e sN80
<* ;apter &&
5e rate o! s%rpl%s-8al%e meas%red against te 8ariable capital is called rate o! s%rpl%s-8al%e0 5e
rate o! s%rpl%s-8al%e meas%red against te total capital is called rate o! pro!it0 5ese are t@o
di!!erent meas%rements o! te same entity, and o@ing to te di!!erence o! te t@o standards o!
meas%rement tey express di!!erent proportions or relations o! tis entity0
5e trans!ormation o! s%rpl%s-8al%e into pro!it m%st be ded%ced !rom te trans!ormation o! te
rate o! s%rpl%s-8al%e into te rate o! pro!it, not 8ice 8ersa0 ?nd in !act it @as rate o! pro!it @ic
@as te istorical point o! depart%re0 $%rpl%s-8al%e and rate o! s%rpl%s-8al%e are, relati8ely, te
in8isible and %nkno@n essence tat @ants in8estigating, @ile rate o! pro!it and tere!ore te
appearance o! s%rpl%s-8al%e in te !orm o! pro!it are re8ealed on te s%r!ace o! te penomenon0
$o !ar as te indi8id%al capitalist is concerned, it is e8ident tat e is only interested in te
relation o! te s%rpl%s-8al%e, or te excess 8al%e at @ic e sells is commodities, to te total
capital ad8anced !or te prod%ction o! te commodities, @ile te speci!ic relationsip and inner
connection o! tis s%rpl%s @it te 8ario%s components o! capital !ail to interest im, and it is,
moreo8er, rater in is interests to dra@ te 8eil o8er tis speci!ic relationsip and tis intrinsic
connection0
?lto%g te excess 8al%e o! a commodity o8er its cost-price is saped in te immediate process
o! prod%ction, it is realised only in te process o! circ%lation, and appears all te more readily to
a8e arisen !rom te process o! circ%lation, since in reality, %nder competition, in te act%al
market, it depends on market conditions @eter or not and to @at extent tis s%rpl%s is realised0
5ere is no need to @aste @ords at tis point abo%t te !act tat i! a commodity is sold abo8e or
belo@ its 8al%e, tere is merely anoter kind o! di8ision o! s%rpl%s-8al%e, and tat tis di!!erent
di8ision, tis canged proportion in @ic 8ario%s persons sare in te s%rpl%s-8al%e, does not in
any @ay alter eiter te magnit%de or te nat%re o! tat s%rpl%s-8al%e0 &t is not alone te
metamorposes disc%ssed by %s in Aook && tat take place in te process o! circ%lation# tey !all
in @it act%al competition, te sale and p%rcase o! commodities abo8e or belo@ teir 8al%e, so
tat te s%rpl%s-8al%e realised by te indi8id%al capitalist depends as m%c on te sarpness o!
is b%siness @its as on te direct exploitation o! labo%r0
&n te process o! circ%lation te time o! circ%lation comes to exert its in!l%ence alongside te
@orking-time, tereby limiting te amo%nt o! s%rpl%s-8al%e realisable @itin a gi8en time span0
$till oter elements deri8ed !rom circ%lation intr%de decisi8ely into te act%al prod%ction process0
5e act%al process o! prod%ction and te process o! circ%lation intert@ine and intermingle
contin%ally, and tereby in8ariably ad%lterate teir typical distincti8e !eat%res0 5e prod%ction o!
s%rpl%s-8al%e, and o! 8al%e in general, recei8es ne@ de!inition in te process o! circ%lation, as
pre8io%sly so@n0 ;apital passes tro%g te circ%it o! its metamorposes0 Finally, stepping
beyond its inner organic li!e, so to say, it enters into relations @it o%ter li!e, into relations in
@ic it is not capital and labo%r @ic con!ront one anoter, b%t capital and capital in one case,
and indi8id%als, again simply as b%yers and sellers, in te oter0 5e time o! circ%lation and
@orking-time cross pats and t%s bot seem to determine te s%rpl%s-8al%e0 5e original !orm in
@ic capital and @age-labo%r con!ront one anoter is disg%ised tro%g te inter8ention o!
relationsips seemingly independent o! it0 $%rpl%s-8al%e itsel! does not appear as te prod%ct o!
te appropriation o! labo%r-time, b%t as an excess o! te selling price o! commodities o8er teir
cost-price, te latter t%s being easily represented as teir act%al 8al%e Bvaleur intrins23ueC, @ile
pro!it appears as an excess o! te selling price o! commodities o8er teir immanent 8al%e0
5r%e, te nat%re o! s%rpl%s-8al%e impresses itsel! constantly %pon te conscio%sness o! te
capitalist d%ring te process o! prod%ction, as is greed !or te labo%r-time o! oters, etc0, as
re8ealed in o%r analysis o! s%rpl%s-8al%e0 A%t: 1C 5e act%al process o! prod%ction is only a
!leeting stage @ic contin%ally merges @it te process o! circ%lation, H%st as te latter merges
@it te !ormer, so tat in te process o! prod%ction, te more or less clearly da@ning notion o!
te so%rce o! te gain made in it, i0e0, te inkling o! te nat%re o! s%rpl%s-8al%e, stands at best as a
!actor eD%ally 8alid as te idea tat te realised s%rpl%s originates in a mo8ement tat is
3= ;apter &&
independent o! te prod%ction process, tat it arises in circ%lation, and tat it belongs to capital
irrespecti8e o! te latter"s relation to labo%r0 E8en s%c modern economists as )amsay, Malt%s,
$enior, 5orrens, etc0, identi!y tese penomena o! circ%lation directly as proo!s tat capital in its
bare material existence, independent o! its social relation to labo%r @ic makes capital o! it, is,
as it @ere, an independent so%rce o! s%rpl%s-8al%e alongside labo%r and independent o! labo%r0 <C
(nder te item o! expenses, @ic embrace @ages as @ell as te price o! ra@ materials, @ear and
tear o! macinery, etc0, te extortion o! %npaid labo%r !ig%res only as a sa8ing in paying !or an
article @ic is incl%ded in expenses, only as a smaller payment !or a certain D%antity o! labo%r,
similar to te sa8ing @en ra@ materials are bo%gt more ceaply, or te depreciation o!
macinery decreases0 &n tis @ay te extortion o! s%rpl%s-labo%r loses its speci!ic caracter0 &ts
speci!ic relationsip to s%rpl%s-8al%e is obsc%red0 5is is greatly !%rtered and !acilitated, as
so@n in Aook & B?bscn0 4&C /Englis edition: ,art 4&, pp0 +3+-230 I 0d01, by representing te
8al%e o! labo%r-po@er in te !orm o! @ages0
5e relationsips o! capital are obsc%red by te !act tat all parts o! capital appear eD%ally as te
so%rce o! excess 8al%e Bpro!itC0
5e @ay in @ic s%rpl%s-8al%e is trans!ormed into te !orm o! pro!it by @ay o! te rate o! pro!it
is, o@e8er, a !%rter de8elopment o! te in8ersion o! s%bHect and obHect tat takes place already
in te process o! prod%ction0 &n te latter, @e a8e seen, te s%bHecti8e prod%cti8e !orces o! labo%r
appear as prod%cti8e !orces o! capital0 /Englis edition: 4ol0 1, pp0 33<-330 I 0d01 3n te one
and, te 8al%e, or te past labo%r, @ic dominates li8ing labo%r, is incarnated in te capitalist0
3n te oter and, te labo%rer appears as bare material labo%r-po@er, as a commodity0 E8en in
te simple relations o! prod%ction tis in8erted relationsip necessarily prod%ces certain
correspondingly in8erted conceptions, a transposed conscio%sness @ic is !%rter de8eloped by
te metamorposes and modi!ications o! te act%al circ%lation process0
&t is altogeter erroneo%s, as a st%dy o! te )icardian scool so@s, to try to identi!y te la@s o!
te rate o! pro!it @it te la@s o! te rate o! s%rpl%s-8al%e, or 8ice 8ersa0 5e capitalist nat%rally
does not see te di!!erence bet@een tem0 &n te !orm%la sN; te s%rpl%s-8al%e is meas%red by te
8al%e o! te total capital ad8anced !or its prod%ction, o! @ic a part @as totally cons%med in tis
prod%ction and a part @as merely employed in it0 &n !act, te !orm%la sN; expresses te degree o!
sel!-expansion o! te total capital ad8anced, or, taken in con!ormity @it inner concept%al
connections and te nat%re o! s%rpl%s-8al%e, it indicates te ratio o! te amo%nt o! 8ariation o!
8ariable capital to te magnit%de o! te ad8anced total capital0
&n itsel!, te magnit%de o! 8al%e o! total capital as no inner relationsip to te magnit%de o!
s%rpl%s-8al%e, at least not directly0 $o !ar as its material elements are concerned, te total capital
min%s te 8ariable capital, tat is, te constant capital, consists o! te material reD%isites I te
means o! labo%r and materials o! labo%r I needed to materialise labo%r0 &t is necessary to a8e a
certain D%antity o! means and materials o! labo%r !or a speci!ic D%antity o! labo%r to materialise in
commodities and tereby to prod%ce 8al%e0 ? de!inite tecnical relation depending on te special
nat%re o! te labo%r applied is establised bet@een te D%antity o! labo%r and te D%antity o!
means o! prod%ction to @ic tis labo%r is to be applied0 6ence tere is also to tat extent a
de!inite relation bet@een te D%antity o! s%rpl%s-8al%e, or s%rpl%s-labo%r, and te D%antity o!
means o! prod%ction0 For instance, i! te labo%r necessary !or te prod%ction o! te @age amo%nts
to a daily 6 o%rs, te labo%rer m%st @ork 1< o%rs to do 6 o%rs o! s%rpl%s-labo%r, or prod%ce a
s%rpl%s-8al%e o! 1==T0 6e %ses %p t@ice as m%c o! te means o! prod%ction in 1< o%rs as e
does in 60 .et tis is no reason !or te s%rpl%s-8al%e prod%ced by im in 6 o%rs to be directly
related to te 8al%e o! te means o! prod%ction %sed %p in tose 6, or in 1< o%rs0 5is 8al%e is
ere altogeter immaterial# it is only a matter o! te tecnically reD%ired D%antity0 &t does not
matter @eter te ra@ materials or means o! labo%r are ceap or dear, as long as tey a8e te
reD%ired %se-8al%e and are a8ailable in tecnically prescribed proportion to te labo%r to be
applied0 &! & kno@ tat x lbs0 o! cotton are cons%med in an o%r o! spinning and tat tey cost a
31 ;apter &&
sillings, ten, o! co%rse, & also kno@ tat 1< o%rs" spinning cons%mes 1<x lbs0 o! cotton R 1< a
sillings, and can ten calc%late te proportion o! te s%rpl%s-8al%e to te 8al%e o! te 1< as @ell
as to tat o! te 60 A%t te relation o! li8ing labo%r to te value o! means o! prod%ction obtains
ere only to te extent tat a sillings ser8e as a name !or x lbs0 o! cotton# beca%se a de!inite
D%antity o! cotton as a de!inite price, and tere!ore, con8ersely, a de!inite price may also ser8e
as an index !or a de!inite D%antity o! cotton, so long as te price o! cotton does not cange0 &! &
kno@ tat te labo%rer m%st @ork 1< o%rs !or me to appropriate 6 o%rs o! s%rpl%s-labo%r, tat
tere!ore & m%st a8e a 1<-o%r s%pply o! cotton ready !or %se, and i! & kno@ te price o! tis
D%antity o! cotton needed !or 1< o%rs, ten & a8e an indirect relation bet@een te price o! cotton
Bas an index o! te reD%ired D%antityC and te s%rpl%s-8al%e0 A%t, con8ersely, & can ne8er concl%de
te D%antity o! te ra@ material tat may be cons%med in, say, one o%r, and not 6, o! spinning
!rom te price o! te ra@ material0 5ere is, ten, no necessary inner relation bet@een te 8al%e o!
te constant capital, nor, tere!ore, bet@een te 8al%e o! te total capital BRcU8C and te s%rpl%s-
8al%e0
&! te rate o! s%rpl%s-8al%e is kno@n and its magnit%de gi8en, te rate o! pro!it expresses noting
b%t @at it act%ally is, namely a di!!erent @ay o! meas%ring s%rpl%s-8al%e, its meas%rement
according to te 8al%e o! te total capital instead o! te 8al%e o! te portion o! capital !rom @ic
s%rpl%s-8al%e directly originates by @ay o! its excange !or labo%r0 A%t in reality Bi0e0, in te
@orld o! penomenaC te matter is re8ersed0 $%rpl%s-8al%e is gi8en, b%t gi8en as an excess o! te
selling price o! te commodity o8er its cost-price# and it remains a mystery @ere tis s%rpl%s
originated I !rom te exploitation o! labo%r in te process o! prod%ction, or !rom o%t@itting te
p%rcaser in te process o! circ%lation, or !rom bot0 Wat is also gi8en is te proportion o! tis
s%rpl%s to te 8al%e o! te total capital, or te rate o! pro!it0 5e calc%lation o! tis excess o! te
selling price o8er te cost-price in relation to te 8al%e o! te ad8anced total capital is 8ery
important and nat%ral, beca%se in e!!ect it yields te ratio in @ic total capital as been
expanded, i0e0, te degree o! its sel!-expansion0 &! @e proceed !rom tis rate o! pro!it, @e cannot
tere!ore concl%de te speci!ic relations bet@een te s%rpl%s and te portion o! capital in8ested in
@ages0 We sall see in a s%bseD%ent capter /K0 Marx, 4heorien ber den Mehrwert0 K0 MarxNF0
Engels, "er-e, Aand <6, 5eil 3, $0 <+-<8 0 I 0d01 @at am%sing somersa%lts Malt%s makes @en
e tries in tis @ay to get at te secret o! te s%rpl%s-8al%e and o! its speci!ic relation to te
8ariable part o! te capital0 Wat te rate o! pro!it act%ally so@s is rater a %ni!orm relation o!
te s%rpl%s to eD%al portions o! te total capital, @ic, !rom tis point o! 8ie@, does not so@
any inner di!!erence at all, %nless it be bet@een te !ixed and circ%lating capital0 ?nd it so@s tis
di!!erence, too, only beca%se te s%rpl%s is calc%lated in t@o @ays# namely, !irst, as a simple
magnit%de I as excess o8er te cost-price0 &n tis, its initial, !orm, te entire circ%lating capital
goes into te cost-price, @ile o! te !ixed capital only te @ear and tear goes into it0 $econd, te
relation o! tis excess in 8al%e to te total 8al%e o! te ad8anced capital0 &n tis case, te 8al%e o!
te total !ixed capital enters into te calc%lation, D%ite te same as te circ%lating capital0
5ere!ore, te circ%lating capital goes in bot times in te same @ay, @ile te !ixed capital goes
in di!!erently te !irst time, and in te same @ay as circ%lating capital te second time0 (nder te
circ%mstances te di!!erence bet@een !ixed and circ%lating capital is te only one @ic obtr%des
itsel!0
&!, as 6egel @o%ld p%t it, te s%rpl%s tere!ore re-re!lects itsel! in itsel! o%t o! te rate o! pro!it, or,
p%t di!!erently, te s%rpl%s is more closely caracterised by te rate o! pro!it, it appears as a
s%rpl%s prod%ced by capital abo8e its o@n 8al%e o8er a year, or in a gi8en period o! circ%lation0
?lto%g te rate o! pro!it t%s di!!ers n%merically !rom te rate o! s%rpl%s-8al%e, @ile s%rpl%s-
8al%e and pro!it are act%ally te same ting and n%merically eD%al, pro!it is ne8erteless a
con8erted !orm o! s%rpl%s-8al%e, a !orm in @ic its origin and te secret o! its existence are
obsc%red and exting%ised0 &n e!!ect, pro!it is te !orm in @ic s%rpl%s-8al%e presents itsel! to
te 8ie@, and m%st initially be stripped by analysis to disclose te latter0 &n s%rpl%s-8al%e, te
3< ;apter &&
relation bet@een capital and labo%r is laid bare# in te relation o! capital to pro!it, i0e0, o! capital
to s%rpl%s-8al%e tat appears on te one and as an excess o8er te cost-price o! commodities
realised in te process o! circ%lation and, on te oter, as a s%rpl%s more closely determined by its
relation to te total capital, the capital appears as a relation to itself, a relation in @ic it, as te
original s%m o! 8al%e, is disting%ised !rom a ne@ 8al%e @ic it generated0 3ne is conscio%s tat
capital generates tis ne@ 8al%e by its mo8ement in te processes o! prod%ction and circ%lation0
A%t te @ay in @ic tis occ%rs is cloaked in mystery and appears to originate !rom idden
D%alities inerent in capital itsel!0
5e !%rter @e !ollo@ te process o! te sel!-expansion o! capital, te more mysterio%s te
relations o! capital @ill become, and te less te secret o! its internal organism @ill be re8ealed0
&n tis part, te rate o! pro!it is n%merically di!!erent !rom te rate o! s%rpl%s-8al%e# @ile pro!it
and s%rpl%s-8al%e are treated as a8ing te same n%merical magnit%de b%t only a di!!erent !orm0
&n te next part @e sall see o@ te alienation goes !%rter, and o@ pro!it represents a
magnit%de di!!ering also n%merically !rom s%rpl%s-8al%e0
Chapter 3. The Relation of the Rate of Proft to
the Rate of Surplus-Value
6ere, as at te close o! te preceding capter, and generally in tis entire !irst part, @e pres%me
te amo%nt o! pro!it !alling to a gi8en capital to be eD%al to te total amo%nt o! s%rpl%s-8al%e
prod%ced by means o! tis capital d%ring a certain period o! circ%lation0 We t%s lea8e aside !or
te present te !act tat, on te one and, tis s%rpl%s-8al%e may be broken %p into 8ario%s s%b-
!orms, s%c as interest on capital, gro%nd-rent, taxes, etc0, and tat, on te oter, it is not, as a
r%le, identical @it pro!it as appropriated by 8irt%e o! a general rate o! pro!it, @ic @ill be
disc%ssed in te second part0
$o !ar as te D%antity o! pro!it is ass%med to be eD%al to tat o! s%rpl%s-8al%e, its magnit%de, and
tat o! te rate o! pro!it, is determined by ratios o! simple !ig%res gi8en or ascertainable in e8ery
indi8id%al case0 5e analysis, tere!ore, !irst is carried on p%rely in te matematical !ield0
We retain te designations %sed in Aooks & and &&0 5otal capital ; consists o! constant capital c
and 8ariable capital 8, and prod%ces a s%rpl%s-8al%e s0 5e ratio o! tis s%rpl%s-8al%e to te
ad8anced 8ariable capital, or sN8, is called te rate o! s%rpl%s-8al%e and designated s"0 5ere!ore
sN8 R s", and conseD%ently s R s"80 &! tis s%rpl%s-8al%e is related to te total capital instead o! te
8ariable capital, it is called pro!it, p, and te ratio o! te s%rpl%s-8al%e s to te total capital ;, or
sN;, is called te rate o! pro!it, p"0 ?ccordingly,
p" R sN; R sNBc U 8C
-o@, s%bstit%ting !or s its eD%i8alent s"8, @e !ind
p" R s" B8N;C R s" 8NBc U 8C
@ic eD%ation may also be expressed by te proportion
p" : s" R 8 : ; #
te rate o! pro!it is related to te rate o! s%rpl%s-8al%e as te 8ariable capital is to te total capital0
&t !ollo@s !rom tis proportion tat te rate o! pro!it, p", is al@ays smaller tan s", te rate o!
s%rpl%s-8al%e, beca%se 8, te 8ariable capital, is al@ays smaller tan ;, te s%m o! 8 U c, or te
8ariable pl%s te constant capital# te only, practically impossible case excepted, in @ic 8 R ;,
tat is, no constant capital at all, no means o! prod%ction, b%t only @ages are ad8anced by te
capitalist0
6o@e8er, o%r analysis also considers a n%mber o! oter !actors @ic a8e a determining
in!l%ence on te magnit%de o! c, 8, and s, and m%st tere!ore be brie!ly examined0
First, te value of money0 We may ass%me tis to be constant tro%go%t0
$econd, te turnover0 We sall lea8e tis !actor entirely o%t o! consideration !or te present, since
its in!l%ence on te rate o! pro!it @ill be treated specially in a later capter0 /6ere @e anticipate
H%st one point, tat te !orm%la p" R s" B8N;C is strictly correct only !or one period o! t%rno8er o!
te 8ariable capital0 A%t @e may correct it !or an ann%al t%rno8er by s%bstit%ting !or te simple
rate o! s%rpl%s-8al%e, s", te ann%al rate o! s%rpl%s-8al%e, s"n0 &n tis, n is te n%mber o! t%rno8ers
o! te 8ariable capital @itin one year0 B;!0 Aook &&, ;apter J4&, 1C I F0 E01
5ird, d%e consideration m%st be gi8en to productivity of labour, @ose in!l%ence on te rate o!
s%rpl%s-8al%e as been toro%gly disc%ssed in Aook & B?bscnitt &4C0 /Englis edition: ,art &40 I
Ed01 ,rod%cti8ity o! labo%r may also exert a direct in!l%ence on te rate o! pro!it, at least o! an
indi8id%al capital, i!, as as been demonstrated in Aook & BKap0 J, $0 3<3N3<2 / R MEW <3,
32 ;apter &&&
$033+N3361C /Englis edition: ;0 J&&, pp0 316-1>0 I Ed01 tis indi8id%al capital operates @it a
iger tan te a8erage social prod%cti8ity and prod%ces commodities at a lo@er 8al%e tan teir
a8erage social 8al%e, tereby realising an extra pro!it0 6o@e8er, tis case @ill not be considered
!or te present, since in tis part o! te @ork @e also proceed !rom te premise tat commodities
are prod%ced %nder normal social conditions and are sold at teir 8al%es0 6ence, @e ass%me in
eac case tat te prod%cti8ity o! labo%r remains constant0 &n e!!ect, te 8al%e-composition o! a
capital in8ested in a branc o! ind%stry, tat is, a certain proportion bet@een te 8ariable and
constant capital, al@ays expresses a de!inite degree o! labo%r prod%cti8ity0 ?s soon, tere!ore, as
tis proportion is altered by means oter tan a mere cange in te 8al%e o! te material elements
o! te constant capital, or a cange in @ages, te prod%cti8ity o! labo%r m%st like@ise %ndergo a
corresponding cange, and @e sall o!ten eno%g see, !or tis reason, tat canges in te !actors
c, 8, and s also imply canges in te prod%cti8ity o! labo%r0
5e same applies to te tree remaining !actors I te length of the wor-ing1day, intensity of
labour, and wages0 5eir in!l%ence on te D%antity and rate o! s%rpl%s-8al%e as been
exa%sti8ely disc%ssed in Aook & /Englis edition: 4ol0 1, pp0 +1*-3=0 I Ed01 &t @ill be
%nderstood, tere!ore, tat not@itstanding te ass%mption, @ic @e make !or te sake o!
simplicity, tat tese tree !actors remain constant, te canges tat occ%r in 8 and s may
ne8erteless imply canges in te magnit%de o! tese, teir determining elements0 &n tis respect
@e m%st brie!ly recall tat te @age in!l%ences te D%antity o! s%rpl%s-8al%e and te rate o!
s%rpl%s-8al%e in in8erse proportion to te lengt o! te @orking-day and te intensity o! labo%r#
tat an increase in @ages red%ces te s%rpl%s-8al%e, @ile a lengtening o! te @orking-day and
an increase in te intensity o! labo%r add to it0
$%ppose a capital o! 1== prod%ces a s%rpl%s-8al%e o! <= employing <= labo%rers @orking a 1=-
o%r day !or a total @eekly @age o! <=0 5en @e a8e:
8=c U <=8 U <=s# s" R 1==T, p" R <=T0
-o@ te @orking-day is lengtened to 1+ o%rs @ito%t raising te @ages0 5e total 8al%e
prod%ced by te <= labo%rers @ill tereby increase !rom 2= to 6= B1= : 1+ R 2= : 6=C0 $ince 8, te
@ages paid to te labo%rers, remains te same, te s%rpl%s-8al%e rises !rom <= to 2=, and @e
a8e:
8=c U <=8 U 2=s# s" R <==T, p" R 2=T0
&!, con8ersely, te ten-o%r @orking-day remains %ncanged, @ile @ages !all !rom <= to 1<, te
total 8al%e-prod%ct amo%nts to 2= as be!ore, b%t is di!!erently distrib%ted# 8 !alls to 1<, lea8ing a
remainder o! <8 !or s0 5en @e a8e:
8=c U <=8 U <8s# s" R <33XT, p" R <8N*< R 3= 1=N<3 T0
6ence, @e see tat a prolonged @orking-day Bor a corresponding increase in te intensity o!
labo%rC and a !all in @ages bot increase te amo%nt, and t%s te rate, o! s%rpl%s-8al%e0
;on8ersely, a rise in @ages, oter tings being eD%al, @o%ld lo@er te rate o! s%rpl%s-8al%e0
6ence, i! 8 rises tro%g a rise in @ages, it does not express a greater, b%t only a dearer D%antity
o! labo%r, in @ic case s" and p" do not rise, b%t !all0
5is indicates tat canges in te @orking-day, intensity o! labo%r and @ages cannot take place
@ito%t a sim%ltaneo%s cange in 8 and s and teir ratio, and tere!ore also p", @ic is te ratio
o! s to te total capital c U 80 ?nd it is also e8ident tat canges in te ratio o! s to 8 also imply
corresponding canges in at least one o! te tree abo8e-mentioned labo%r conditions0
,recisely tis re8eals te speci!ic organic relationsip o! 8ariable capital to te mo8ement o! te
total capital and to its sel!-expansion, and also its di!!erence !rom constant capital0 $o !ar as
generation o! 8al%e is concerned, te constant capital is important only !or te 8al%e it as0 ?nd it
is immaterial to te generation o! 8al%e @eter a constant capital o! V1,+== represents 1,+== tons
o! iron at, say, V1, or +== tons o! iron at V30 5e D%antity o! act%al material, in @ic te 8al%e o!
3+ ;apter &&&
te constant capital is incorporated, is altogeter irrele8ant to te !ormation o! 8al%e and te rate
o! pro!it, @ic 8aries in8ersely to tis 8al%e no matter @at te ratio o! te increase or decrease
o! te 8al%e o! constant capital to te mass o! material %se-8al%e @ic it represents0
&t is di!!erent @it 8ariable capital0 &t is not te 8al%e it as, not te labo%r incorporated in it, tat
matter at tis point, b%t tis 8al%e as a mere index o! te total labo%r tat it sets in motion and
@ic is not expressed in it I te total labo%r, @ose di!!erence !rom te labo%r expressed in tat
8al%e, ence te paid labo%r, i0e0, tat portion o! te total labo%r @ic prod%ces s%rpl%s-8al%e, is
all te greater, te less labo%r is contained in tat 8al%e itsel!0 $%ppose, a ten-o%r @orking-day is
eD%al to ten sillings R ten marks0 &! te labo%r necessary to replace te @ages, and t%s te
8ariable capital R + o%rs R + sillings, ten te s%rpl%s-labo%r R + o%rs and te s%rpl%s-8al%e R
+ sillings0 $o%ld te necessary labo%r R 2 o%rs R 2 sillings, ten te s%rpl%s-labo%r R 6 o%rs
and te s%rpl%s-8al%e R 6 sillings0
6ence, as soon as te 8al%e o! te 8ariable capital ceases to be an index o! te D%antity o! labo%r
set in motion by it, and, moreo8er, te meas%re o! tis index is altered, te rate o! s%rpl%s-8al%e
@ill cange in te opposite direction and in8ersely0
'et %s no@ go on to apply te abo8e-mentioned eD%ation o! te rate o! pro!it, p" R s" B8N;C, to te
8ario%s possible cases0 We sall s%ccessi8ely cange te 8al%e o! te indi8id%al !actors o! s" B8N;C
and determine te e!!ect o! tese canges on te rate o! pro!it0 &n tis @ay @e sall obtain
di!!erent series o! cases, @ic @e may regard eiter as s%ccessi8e altered conditions o! operation
!or one and te same capital, or as di!!erent capitals existing side by side and introd%ced !or te
sake o! comparison, taken, as it @ere, !rom di!!erent brances o! ind%stry or di!!erent co%ntries0
&n cases, tere!ore, @ere te conception o! some o! o%r examples as s%ccessi8e conditions !or
one and te same capital appears to be !orced or impracticable, tis obHection !alls a@ay te
moment tey are regarded as comparisons o! independent capitals0
6ence, @e no@ separate te prod%ct s" B8N;C into its t@o !actors s" and 8N;0 ?t !irst @e sall treat
s" as constant and analyse te e!!ect o! te possible 8ariations o! 8N;0 ?!ter tat @e sall treat te
!raction 8N; as constant and let s" pass tro%g its possible 8ariations0 Finally @e sall treat all
!actors as 8ariable magnit%des and tereby exa%st all te cases !rom @ic la@s concerning te
rate o! pro!it may be deri8ed0
I. s. constant, v7C varia4le
5is case, @ic embraces a n%mber o! s%bordinate cases, may be co8ered by a general !orm%la0
5ake t@o capitals, ; and ;1, @it teir respecti8e 8ariable components, 8 and 81, @it a common
rate o! s%rpl%s-8al%e, s", and rates o! pro!it p" and p"10 5en:
p" R s" B8N;C # p"1 R s" B81N;1C
-o@ let %s make a proportion o! ; and ;1, and o! 8 and 810 For instance, let te 8al%e o! te
!raction ;1N; R E, and tat o! 81N8 R e0 5en ;1 R E;, and 81 R e80 $%bstit%ting in te abo8e
eD%ation tese 8al%es !or p1, ;1 and 81, @e obtain
p"1 R s" e8NE;
?gain, @e may deri8e a second !orm%la !rom te abo8e t@o eD%ations by trans!orming tem into
te proportion:
p" : p"1 R s" B8N;C : s" B81N;1C R B8N;C : 81N;1 0
$ince te 8al%e o! a !raction is not canged i! @e m%ltiply or di8ide its n%merator and
denominator by te same n%mber, @e may red%ce 8N; and 81N;1 to percentages, tat is, @e may
make ; and ;1 bot R 1==0 5en @e a8e 8N; R 8N1== and 81N;1 R 81N1==, and may ten drop te
denominators in te abo8e proportion, obtaining:
p" : p"1 R 8 : 81", or:
36 ;apter &&&
5aking any t@o capitals operating @it te same rate o! s%rpl%s-8al%e, te rates o! pro!it are to
eac oter as te 8ariable portions o! te capitals calc%lated as percentages o! teir respecti8e
total capitals0
5ese t@o !orm%las embrace all te possible 8ariations o! 8N;0
3ne more remark be!ore @e analyse tese 8ario%s cases singly0 $ince ; is te s%m o! c and 8, o!
te constant and 8ariable capitals, and since te rates o! s%rpl%s-8al%e, as o! pro!it, are %s%ally
expressed in percentages, it is con8enient to ass%me tat te s%m o! c U 8 is also eD%al to 1==, i0e0,
to express c and 8 in percentages0 For te determination o! te rate o! pro!it, i! not o! te amo%nt,
it is immaterial @eter @e say tat a capital o! 1+,===, o! @ic 1<,=== is constant and 3,=== is
8ariable, prod%ces a s%rpl%s-8al%e o! 3,===, or @eter @e red%ce tis capital to percentages:
1+,=== ; R 1<,===c U 3,===8 B U 3,===sC
1== ; R 8=c U <=8 B U <=sC0
&n eiter case te rate o! s%rpl%s-8al%e s" R 1==T, and te rate o! pro!it R <=T0
5e same is tr%e @en @e compare t@o capitals, say, te !oregoing capital @it anoter, s%c as
1<,=== ; R 1=,8==c U 1,<==8 B U 1,<==sC
1== ; R *=c U 1=8 B U 1=sC0
in bot o! @ic s" R 1==T, p" R 1=T, and in @ic te comparison @it te !oregoing capital is
clearer in percentage !orm0
3n te oter and, i! it is a matter o! canges taking place in one and te same capital, te !orm
o! percentages is rarely to be %sed, beca%se it almost al@ays obsc%res tese canges0 &! a capital
expressed in te !orm o! percentages:
8=c U <=8 U <=s
ass%mes te !orm o! percentages:
*=c U 1=8 U 1=s,
@e cannot tell @eter te canged composition in percentages, *=8 U 1=c, is d%e to an absol%te
decrease o! 8 or an absol%te increase o! c, or to bot0 We @o%ld need te absol%te magnit%des in
!ig%res to ascertain tis0 &n te analysis o! te !ollo@ing indi8id%al cases o! 8ariation, o@e8er,
e8eryting depends on o@ tese canges a8e come abo%t# @eter 8=8 U <=c canged into *=c U
1=8 tro%g an increase o! te constant capital @ito%t any cange in te 8ariable capital, !or
instance tro%g 1<,===c U 3,===8 canging into <>,===c U 3,===8 Bcorresponding to a percentage
o! *=c U 1=8C# or @eter tey took tis !orm tro%g a red%ction o! te 8ariable capital, @it te
constant capital remaining %ncanged, tat is, tro%g a cange into 1<,===c U 1,333X 8 Balso
corresponding to a percentage o! *=c U 1=8C# or, lastly, @eter bot o! te terms canged into
13,+==c U 1,+==8 Bcorresponding once more to a percentage o! *=c U 1=8C0 A%t it is precisely tese
cases @ic @e sall a8e to s%ccessi8ely analyse, and in so doing dispense @it te con8enient
!orm o! percentages, or at least employ tese only as a secondary alternati8e0
1C s5 and C constant, v variable.
&! 8 canges in magnit%de, ; can remain %naltered only i! c, te oter component o! ;, tat is, te
constant capital, canges by te same amo%nt as 8, b%t in te opposite direction0
&! ; originally R 8=c U <=8 R 1==, and i! 8 is ten red%ced to 1=, ten ; can R 1== only i! c is
increased to *=# *=c U 1=8 R 1==0 :enerally speaking, i! 8 is trans!ormed into 8 Y d, into 8
increased or decreased by d, ten c m%st be trans!ormed into c Y d, into c 8arying by te same
amo%nt, b%t in te opposite direction, so tat te conditions o! te present case are satis!ied0
$imilarly, i! te rate o! s%rpl%s-8al%e s" remains te same, @ile te 8ariable capital 8 canges, te
amo%nt o! s%rpl%s-8al%e s m%st cange, since s R s"8, and since one o! te !actors o! s"8, namely 8,
is gi8en anoter 8al%e0
3> ;apter &&&
5e ass%mptions o! te present case prod%ce, alongside te original eD%ation,
p" R s" B8N;C ,
still anoter eD%ation tro%g te 8ariation o! 8:
p"1 R s" B81N;C
in @ic 8 as become 81 and p"1, te res%ltant canged rate o! pro!it, is to be !o%nd0
&t is determined by te !ollo@ing proportion:
p" : p"1 R s" B8N;C : s" B81N;C R 8 : 81
3r: @it te rate o! s%rpl%s-8al%e and total capital remaining te same, te original rate o! pro!it
is to te ne@ rate o! pro!it prod%ced by a cange in te 8ariable capital as te original 8ariable
capital is to te canged 8ariable capital0
&! te original capital @as, as abo8e:
&0 1+,=== ; R 1<,===c U 3,===8 B U 3,===sC, and i! it is no@:
&&0 1+,=== ; R 13,===c U <,===8 B U <,===sC, ten ; R 1+,=== and s" R 1==T in eiter case, and te
rate o! pro!it o! &, <=T, is to tat o! &&, 13XT, as te 8ariable capital o! &, 3,===, is to tat o! &&,
<,===, i0 e0, <=T : 13XT R 3,=== : <,===0
-o@, te 8ariable capital may eiter rise or !all0 'et %s !irst take an example in @ic it rises0 'et
a certain capital be originally constit%ted and employed as !ollo@s:
&0 1==c U <=8 U 1=s# ; R 1<=, s" R +=T, p" R 8XT0
-o@ let te 8ariable capital rise to 3=0 &n tat case, according to o%r ass%mption, te constant
capital m%st !all !rom 1== to *= so tat total capital remains %ncanged at 1<=0 5e rate o!
s%rpl%s-8al%e remaining constant at +=T, te s%rpl%s-8al%e prod%ced @ill ten rise !rom 1= to 1+0
We sall ten a8e:
&&0 *=c U 3=8 U 1+s# ; R 1<=, s" R +=T, p" R 1<ZT0
'et %s !irst proceed !rom te ass%mption tat @ages remain %ncanged0 5en te oter !actors o!
te rate o! s%rpl%s-8al%e, i0e0, te @orking-day and te intensity o! labo%r, m%st also remain
%ncanged0 &n tat e8ent te rise o! 8 B!rom <= to 3=C can signi!y only tat anoter al! as many
labo%rers are employed0 5en te total 8al%e prod%ced also rises one-al!, !rom 3= to 2+, and is
distrib%ted, H%st as be!ore, W !or @ages and X !or s%rpl%s-8al%e0 A%t at te same time, @it te
increase in te n%mber o! labo%rers, te constant capital, te 8al%e o! te means o! prod%ction,
as !allen !rom 1== to *=0 We a8e, ten, a case o! decreasing prod%cti8ity o! labo%r combined
@it a sim%ltaneo%s srinkage o! constant capital0 &s s%c a case economically possibleQ
&n agric%lt%re and te extracti8e ind%stries, in @ic a decrease in labo%r prod%cti8ity and,
tere!ore, an increase in te n%mber o! employed labo%rers is D%ite compreensible, tis process
is on te basis and @itin te scope o! capitalist prod%ction attended by an increase, instead o! a
decrease, o! constant capital0 E8en i! te abo8e !all o! c @ere d%e merely to a !all in prices, an
indi8id%al capital @o%ld be able to accomplis te transition !rom & to && only %nder 8ery
exceptional circ%mstances0 A%t in te case o! t@o independent capitals in8ested in di!!erent
co%ntries, or in di!!erent brances o! agric%lt%re or extracti8e ind%stry, it @o%ld be noting o%t o!
te ordinary i! in one o! te cases more labo%rers Band tere!ore more 8ariable capitalC @ere
employed and @orked @it less 8al%able or scantier means o! prod%ction tan in te oter case0
A%t let %s drop te ass%mption tat te @age remains te same, and let %s explain te rise o! te
8ariable capital !rom <= to 3= tro%g a rise o! @ages by one-al!0 5en @e sall a8e an entirely
di!!erent case0 5e same n%mber o! labo%rers I say, t@enty I contin%e to @ork @it te same or
only sligtly red%ced means o! prod%ction0 &! te @orking-day remains %ncanged I say, 1= o%rs
I ten te total 8al%e prod%ced also remains %ncanged0 &t @as and remains R 3=0 A%t all o! tis
3= is no@ reD%ired to make good te ad8anced 8ariable capital o! 3=# te s%rpl%s-8al%e @o%ld
disappear0 We a8e ass%med, o@e8er, tat te rate o! s%rpl%s-8al%e so%ld remain constant, tat
38 ;apter &&&
is, te same as in &, at +=T0 5is is possible only i! te @orking-day is prolonged by one-al! to
1+ o%rs0 5en te <= labo%rers @o%ld prod%ce a total 8al%e o! 2+ in 1+ o%rs, and all conditions
@o%ld be satis!ied:
&&0 *=c U 3=8 U 1+s# ; R 1<=, s" R +=T, p" R 1<ZT0
&n tis case, te <= labo%rers do not reD%ire any more means o! labo%r, tools, macines, etc0, tan
in case &0 3nly te ra@ materials or a%xiliary materials @o%ld a8e to be increased by one-al!0 &n
te e8ent o! a !all in te prices o! tese materials, te transition !rom & to && migt be more
possible economically, e8en !or an indi8id%al capital in keeping @it o%r ass%mption0 ?nd te
capitalist @o%ld be some@at compensated by increased pro!its !or any loss inc%rred tro%g te
depreciation o! is constant capital0
-o@ let %s ass%me tat te 8ariable capital !alls, instead o! rising0 5en @e a8e b%t to re8erse
o%r example, taking && as te original capital, and passing !rom && to &0
&&0 *=c U 3=8 U 1+s, ten canges into &0 1==c U <=8 U 1=s, and it is e8ident tat tis transposition
does not in te least alter any o! te conditions reg%lating te respecti8e rates o! pro!it and teir
m%t%al relation0
&! 8 !alls !rom 3= to <= beca%se X !e@er labo%rers are employed @it te gro@ing constant
capital, ten @e a8e be!ore %s te normal case o! modern ind%stry, namely, an increasing
prod%cti8ity o! labo%r, and te operation o! a larger D%antity o! means o! prod%ction by !e@er
labo%rers0 5at tis mo8ement is necessarily connected @it a sim%ltaneo%s drop in te rate o!
pro!it @ill be de8eloped in te tird part o! tis book0
&!, on te oter and, 8 !alls !rom 3= to <=, beca%se te same n%mber o! labo%rers is employed at
lo@er @ages, te total 8al%e prod%ced @o%ld, @it te @orking-day %ncanged, as be!ore R 3=8 U
1+s R 2+0 $ince 8 !ell to <=, te s%rpl%s-8al%e @o%ld rise to <+, te rate o! s%rpl%s-8al%e !rom +=T
to 1<+T, @ic @o%ld be contrary to o%r ass%mption0 5o comply @it te conditions o! o%r case,
te s%rpl%s-8al%e, @it its rate at +=T, m%st rater !all to 1=, and te total 8al%e prod%ced m%st,
tere!ore, !all !rom 2+ to 3=, and tis is possible only i! te @orking-day is red%ced by X0 5en,
as be!ore, @e a8e:
1==c U <=8 U 1=s# s" R +=T, p" R 8XT0
&t need ardly be said tat tis red%ction o! te @orking-time, in te case o! a !all in @ages, @o%ld
not occ%r in practice0 A%t tat is immaterial0 5e rate o! pro!it is a !%nction o! se8eral 8ariable
magnit%des, and i! @e @is to kno@ o@ tese 8ariables in!l%ence te rate o! pro!it, @e m%st
analyse te indi8id%al e!!ect o! eac in t%rn, regardless o! @eter s%c an isolated e!!ect is
economically practicable @it one and te same capital0
<C s5 constant, v variable, C changes through the variation of v.
5is case di!!ers !rom te preceding one only in degree0 &nstead o! decreasing or increasing by as
m%c as 8 increases or decreases, c remains constant0 (nder present-day conditions in te maHor
ind%stries and agric%lt%re te 8ariable capital is only a relati8ely small part o! te total capital0
For tis reason, its increase or decrease, so !ar as eiter is d%e to canges in te 8ariable capital,
are like@ise relati8ely small0
'et %s again proceed @it a capital:
&0 1==c U <=8 U 1=s# ; R 1<=, s" R +=T, p" R 8XT0
@ic @o%ld ten cange, say, into:
&&0 1==c U 3=8 U 1+s# ; R 13=, s" R +=T, p" R 11 >N13T0
5e opposite case, in @ic te 8ariable capital decreases, @o%ld again be ill%strated by te
re8erse transition !rom && to &0
5e economic conditions @o%ld be essentially te same as in te preceding case, and tere!ore
tey need not be disc%ssed again0 5e transition !rom & to && implies a decrease in te prod%cti8ity
3* ;apter &&&
o! labo%r by one-al!# !or && te %tilisation o! 1== reD%ires an increase o! labo%r by one-al! o8er
tat o! &0 5is case may occ%r in agric%lt%re0
1

A%t @ile te total capital remains constant in te preceding case, o@ing to te con8ersion o!
constant into 8ariable capital, or 8ice 8ersa, tere is in tis case a tie-%p o! additional capital i! te
8ariable capital increases, and a release o! pre8io%sly employed capital i! te 8ariable capital
decreases0
3C s5 and v constant, c and therefore C variable.
&n tis case te eD%ation canges !rom:
p" R s" B8N;C into p" R s" B8N;1C ,
and a!ter red%cing te same !actors on bot sides, @e a8e:
p"1 : p" R ; : ;1#
@it te same rate o! s%rpl%s-8al%e and eD%al 8ariable capitals, te rates o! pro!it are in8ersely
proportional to te total capitals0
$o%ld @e, !or example, a8e tree capitals, or tree di!!erent conditions o! te same capital:
&0 8=c U <=8 U <=s# ; R 1==, s" R 1==T, p" R <=T#
&&0 1==c U <=8 U <=s# ; R 1<=, s" R 1==T, p" R 16WT#
&&&0 6=c U <=8 U <=s# ; R 8=, s" R 1==T, p" R <+T0
5en @e obtain te proportions:
<=T : 16WT R 1<= : 1== and <=T : <+T R 8= : 1==0
5e pre8io%sly gi8en general !orm%la !or 8ariations o! 8N; @it a constant s" @as:
p"1 R s" e8NE; # no@ it becomes: p"1 R s" 8NE; ,
since 8 does not cange, te !actor e R 81N8 , becomes R 10
$ince s"8 R s, te D%antity o! s%rpl%s-8al%e, and since bot s" and 8 remain constant, it !ollo@s tat
s, too, is not a!!ected by any 8ariation o! ;0 5e amo%nt o! s%rpl%s-8al%e is te same a!ter te
cange as it @as be!ore it0
&! c @ere to !all to Eero, p" @o%ld R s", i0e0, te rate o! pro!it @o%ld eD%al te rate o! s%rpl%s-8al%e0
5e alteration o! c may be d%e eiter to a mere cange in te 8al%e o! te material elements o!
constant capital, or to a cange in te tecnical composition o! te total capital, tat is, a cange
in te prod%cti8ity o! labo%r in te gi8en branc o! ind%stry0 &n te latter case, te prod%cti8ity o!
social labo%r mo%nting d%e to te de8elopment o! modern ind%stry and large-scale agric%lt%re
@o%ld bring abo%t a transition Bin te abo8e ill%strationC in te seD%ence !rom &&& to & and !rom &
to &&0 ? D%antity o! labo%r @ic is paid @it <= and prod%ces a 8al%e o! 2= @o%ld !irst %tilise
means o! labo%r to a 8al%e o! 6=# i! prod%cti8ity mo%nted and te 8al%e remained te same, te
%sed %p means o! labo%r @o%ld rise !irst to 8=, and ten to 1==0 ?n in8ersion o! tis seD%ence
@o%ld imply a decrease in prod%cti8ity0 5e same D%antity o! labo%r @o%ld p%t a smaller D%antity
o! means o! prod%ction into motion and te operation @o%ld be c%rtailed, as may occ%r in
agric%lt%re, mining, etc0
? sa8ing in constant capital increases te rate o! pro!it on te one and, and, on te oter, sets
!ree capital, !or @ic reason it is o! importance to te capitalist0 We sall make a closer st%dy o!
tis, and like@ise o! te in!l%ence o! a cange in te prices o! te elements o! constant capital,
partic%larly o! ra@ materials, at a later point0 /,resent edition: ;0 4, 4&0 I Ed01
&t is again e8ident ere tat a 8ariation o! te constant capital eD%ally a!!ects te rate o! pro!it,
regardless o! @eter tis 8ariation is d%e to an increase or decrease o! te material elements o! c,
or merely to a cange in teir 8al%e0
2C s5 constant, v, c and C all variable.
2= ;apter &&&
&n tis case, te general !orm%la !or te canged rate o! pro!it, gi8en at te o%tset, remains in
!orce:
p"1 R s" e8NE; 0
&t !ollo@s !rom tis tat @it te rate o! s%rpl%s-8al%e remaining te same:
aC 5e rate o! pro!it !alls i! E is greater tan e, tat is, i! te constant capital is a%gmented to s%c
an extent tat te total capital gro@s at a !aster rate tan te 8ariable capital0 &! a capital o! 8=c U
<=8 U <=s canges into 1>=c U 3=8 U 3=s, ten s" remains R 1==T, b%t 8N; !alls !rom <=N1== to
3=N1==, in spite o! te !act tat bot 8 and ; a8e gro@n, and te rate o! pro!it !alls
correspondingly !rom <=T to 1+T0
bC 5e rate o! pro!it remains %ncanged only i! e R E, tat is, i! te !raction 8N; retains te same
8al%e in spite o! a seeming cange, i0e0, i! its n%merator and denominator are m%ltiplied or
di8ided by te same !actor0 5e capitals 8=c U <=8 U <=s and 16=c U 2=8 U 2=s ob8io%sly a8e te
same rate o! pro!it o! <=T, beca%se s" remains R 1==T and 8N; R <=N1== R 2=N<== represents te
same 8al%e in bot examples0
cC 5e rate o! pro!it rises @en e is greater tan E, tat is, @en te 8ariable capital gro@s at a
!aster rate tan te total capital0 &! 8=c U <=8 U <=s t%rns into 1<=c U 2=8 U 2=s, te rate o! pro!it
rises !rom <=T to <+T, beca%se @it an %ncanged s" B8N;C R <=N1== rises to 2=N16=, or !rom 1N+
to 1N20
&! te canges o! 8 and ; are in te same direction, @e may 8ie@ tis cange o! magnit%de as
to%g, to a certain extent, bot o! tem 8aried in te same proportion, so tat 8N; remained
%ncanged %p to tat point0 Aeyond tis point, only one o! tem @o%ld 8ary, and @e sall a8e
tereby red%ced tis complicated case to one o! te preceding simpler ones0
$o%ld, !or instance, 8=c U <=8 U <=s become 1==c U 3=8 U 3=s, ten te proportion o! 8 to c, and
also to ;, remains te same in tis 8ariation %p to : 1==c U <+8 U <+s0 (p to tat point, tere!ore,
te rate o! pro!it like@ise remains %ncanged0 We may ten take 1==c U <+8 U <+s as o%r point o!
depart%re# @e !ind tat 8 increased by + to become 3=8, so tat ; rose !rom 1<+ to 13=, t%s
gi8ing %s te second case, tat o! te simple 8ariation o! 8 and te conseD%ent 8ariation o! ;0 5e
rate o! pro!it, @ic @as originally <=T, rises tro%g tis addition o! +8 to <3 1N13 T, pro8ided
te rate o! s%rpl%s-8al%e remains te same0
5e same red%ction to a simpler case can also take place i! 8 and ; cange teir magnit%des in
opposite directions0 For instance, let %s again start @it 8=cU <=8 U <=s, and let tis become: 11=c U
1=8 U 1=s0 &n tat case, @it te cange going as !ar as 2=c U 1=8 U 1=s, te rate o! pro!it @o%ld
remain te same <=T0 Ay adding >=c to tis intermediate !orm, it @ill drop to 8XT0 5%s, @e
a8e again red%ced te case to an instance o! cange o! one 8ariable, namely o! c0
$im%ltaneo%s 8ariation o! 8, c, and ;, does not, tere!ore, o!!er any ne@ aspects and in te !inal
analysis leads back to a case in @ic only one !actor is a 8ariable0
E8en te sole remaining case as act%ally been exa%sted, namely tat in @ic 8 and ; remain
n%merically te same, @ile teir material elements %ndergo a cange o! 8al%e, so tat 8 stands
!or a canged D%antity o! labo%r p%t in motion and c !or a canged D%antity o! means o!
prod%ction p%t in motion0
&n 8=c U <=8 U <=s, let <=8 originally represent te @ages o! <= labo%rers @orking 1= o%rs daily0
5en let te @ages o! eac rise !rom 1 to 1 [0 &n tat case te <=8 @ill pay only 16 labo%rers
instead o! <=0 A%t i! <= labo%rers prod%ce a 8al%e o! 2= in <== @orking-o%rs, 16 labo%rers
@orking 1= o%rs daily @ill in 16= @orking-o%rs prod%ce a 8al%e o! only 3<0 ?!ter ded%cting <=8
!or @ages, only 1< o! te 3< @o%ld ten remain !or s%rpl%s-8al%e0 5e rate o! s%rpl%s-8al%e
@o%ld a8e !allen !rom 1==T to 6=T0 A%t since @e a8e ass%med te rate o! s%rpl%s-8al%e to be
constant, te @orking-day @o%ld a8e to be prolonged by one-D%arter, !rom 1= to 1<Z o%rs0 &!
<= labo%rers @orking 1= o%rs daily R <== @orking-o%rs prod%ce a 8al%e o! 2=, ten 16
21 ;apter &&&
labo%rers @orking 1<Z o%rs daily R <== o%rs @ill prod%ce te same 8al%e, and te capital o!
8=c U <=8 @o%ld as be!ore yield te same s%rpl%s-8al%e o! <=0
;on8ersely, i! @ages @ere to !all to s%c an extent tat <=8 @o%ld represent te @ages o! 3=
labo%rers, ten s @o%ld remain constant only i! te @orking-day @ere red%ced !rom 1= to 6W
o%rs0 For <= \ 1= R 3= \ 6W R <== @orking-o%rs0
We a8e already in te main disc%ssed to @at extent c may in tese di8ergent examples remain
%ncanged in terms o! 8al%e expressed in money and yet represent di!!erent D%antities o! means
o! prod%ction canged in accordance @it canging conditions0 &n its p%re !orm tis case @o%ld
be possible only by @ay o! an exception0
?s !or a cange in te 8al%e o! te elements o! c @ic increases or decreases teir mass b%t
lea8es te s%m o! te 8al%e o! c %ncanged, it does not a!!ect eiter te rate o! pro!it or te rate o!
s%rpl%s-8al%e, so long as it does not lead to a cange in te magnit%de o! 80
We a8e ere@it exa%sted all te possible cases o! 8ariation o! 8, c, and ; in o%r eD%ation0 We
a8e seen tat te rate o! pro!it may !all, remain %ncanged, or rise, @ile te rate o! s%rpl%s-
8al%e remains te same, @it te least cange in te proportion o! 8 to c or to ;, being s%!!icient
to cange te rate o! pro!it as @ell0
We a8e seen, !%rtermore, tat in 8ariations o! 8 tere is a certain limit e8ery@ere beyond
@ic it is economically impossible !or s" to remain constant0 $ince e8ery one-sided 8ariation o! c
m%st also reac a certain limit @ere 8 can no longer remain %ncanged, @e !ind tat tere are
limits !or e8ery possible 8ariation o! 8N;, beyond @ic s" m%st like@ise become 8ariable0 &n te
8ariations o! s" @ic @e sall no@ disc%ss, tis interaction o! te di!!erent 8ariables o! o%r
eD%ation @ill stand o%t still clearer0
II. s. varia4le
We obtain a general !orm%la !or te rates o! pro!it @it di!!erent rates o! s%rpl%s-8al%e, no matter
@eter 8N; remains constant or not, by con8erting te eD%ation:
p" R s" B8N;C
into
p"1 R s"1 B81N;1C ,
in @ic p"1, s"1, 81 and ;1 denote te canged 8al%es o! p", s", 8 and ;0 5en @e a8e:
p" : p"1 R s"1 B8N;C : s"1 B81N;1C ,
and ence:
p"1 R Bs"1Ns1C \ 81N8 \ ;N;1 \ p"0
1C s5 variable, v6C constant.
&n tis case @e a8e te eD%ations:
p" R s" B8N;C# p"1 R s" B8N;C ,
in bot o! @ic 8N; is eD%al0 5ere!ore:
p" : p"1 R s" : s"1
5e rates o! pro!it o! t@o capitals o! te same composition are to eac oter as te t@o
corresponding rates o! s%rpl%s-8al%e0 $ince in te !raction 8N; it is not a D%estion o! te absol%te
magnit%des o! 8 and ;, b%t only o! teir ratio, tis applies to all capitals o! eD%al composition
@ate8er teir absol%te magnit%de0
8=c U <=8 U <=s# ; R 1==, s" R 1==T, p" R <=T
16=c U 2=8 U <=s# ; R <==, s" R +=T, p" R 1=T
1==T : +=T R <=T : 1=T0
2< ;apter &&&
&! te absol%te magnit%des o! 8 and ; are te same in bot cases, te rates o! pro!it are moreo8er
also related to one anoter as te amo%nts o! s%rpl%s-8al%e:
p" : p"1 R s"8 : s"18 R s : s10
For instance:
8=c U <=8 U <=s# s" R 1==T, p" R <=T
8=c U <=8 U 1=s# s" R +=T, p" R 1=T
<=T : 1=T R 1== \ <= : += \ <= R <=s : 1=s0
&t is no@ clear tat @it capitals o! eD%al absol%te or percentage composition te rate o! s%rpl%s-
8al%e can di!!er only i! eiter te @ages, or te lengt o! te @orking-day, or te intensity o!
labo%r, di!!er0 &n te !ollo@ing tree cases:
&0 8=c U <=8 U 1=s# s" R +=T, p" R 1=T
&&0 8=c U <=8 U <=s# s" R 1==T, p" R <=T
&&&0 8=c U <=8 U 2=s# s" R <==T, p" R 2=T
te total 8al%e prod%ced in & is 3= B<=8 U 1=sC# in && it is 2=# in &&& it is 6=0 5is may come abo%t in
tree di!!erent @ays0
'irst, i! te @ages are di!!erent, and <=8 stands !or a di!!erent n%mber o! labo%rers in e8ery
indi8id%al case0 $%ppose capital & employs 1+ labo%rers 1= o%rs daily at a @age o! V1X, @o
prod%ce a 8al%e o! V3=, o! @ic V<= replace te @ages and V1= are s%rpl%s-8al%e0 &! @ages !all
to V1, ten <= labo%rers may be employed !or 1= o%rs# tey @ill prod%ce a 8al%e o! V2=, o!
@ic V<= @ill replace te @ages and V<= @ill be s%rpl%s-8al%e0 $o%ld @ages !all still more, to
VW, tirty labo%rers may be employed !or 1= o%rs0 5ey @ill prod%ce a 8al%e o! V6=, o! @ic
V<= @ill be ded%cted !or @ages and V2= @ill represent s%rpl%s-8al%e0
5is case I a constant composition o! capital in per cent, a constant @orking-day and constant
intensity o! labo%r, and te rate o! s%rpl%s-8al%e 8arying beca%se o! 8ariation in @ages I is te
only one in @ic )icardo"s ass%mption is correct:
K,ro!it @o%ld be ig or lo@, eactly in proportion as
@ages @ere lo@ or ig0L B&rinciples, ;0 &, $ect0 &&&,
p0 18 o! te "or-s o! 70 )icardo, ed0 by Mac;%lloc,
18+<0C
3r second, i! te intensity o! labo%r 8aries0 &n tat case, say, <= labo%rers @orking 1= o%rs daily
@it te same means o! prod%ction prod%ce 3= pieces o! a certain commodity in &, 2= in &&, and
6= in &&&, o! @ic e8ery piece, aside !rom te 8al%e o! te means o! prod%ction incorporated in it,
represents a ne@ 8al%e o! V10 $ince e8ery <= pieces R V<= make good te @ages, tere remain 1=
pieces R V1= !or s%rpl%s-8al%e in &, <= pieces R V<= in &&, and 2= pieces R V2= in &&&0
3r third, te @orking-day di!!ers in lengt0 &! <= labo%rers @ork @it te same intensity !or *
o%rs in &, 1< o%rs in &&, and 18 o%rs in &&&, teir total prod%cts, 3= : 2= : 6= 8ary as * : 1< : 180
?nd since @ages R <= in e8ery case, 1=, <=, and 2= respecti8ely again remain as s%rpl%s-8al%e0
? rise or !all in @ages, tere!ore, in!l%ences te rate o! s%rpl%s-8al%e in8ersely, and a rise or !all
in te intensity o! labo%r, and a lengtening or sortening o! te @orking-day, act te same @ay
on te rate o! s%rpl%s-8al%e and tereby, @it 8N; constant, on te rate o! pro!it0
<C s5 and v variable, C constant.
5e !ollo@ing proportion applies in tis case:
p" : p"1 R s" B8N;C : s" B81N;C R s"8 : s"181 R s : s10
5e rates o! pro!it are related to one anoter as te respecti8e amo%nts o! s%rpl%s-8al%e0
23 ;apter &&&
;anges in te rate o! s%rpl%s-8al%e @it te 8ariable capital remaining constant meant a cange
in te magnit%de and distrib%tion o! te prod%ced 8al%e0 ? sim%ltaneo%s 8ariation o! 8 and s" also
al@ays implies a di!!erent distrib%tion, b%t not al@ays a cange in te magnit%de o! te prod%ced
8al%e0 5ree cases are possible:
aC 4ariation o! 8 and s" takes place in opposite directions, b%t by te same amo%nt# !or instance:
8=c U <=8 U 1=s# s" R +=T, p" R 1=T
*=c U 1=8 U <=s# s" R <==T, p" R <=T
5e prod%ced 8al%e is eD%al in bot cases, ence also te D%antity o! labo%r per!ormed# <=8 U 1=s
R 1=8 U <=s R 3=0 5e only di!!erence is tat in te !irst case <= is paid o%t !or @ages and 1=
remains as s%rpl%s-8al%e, @ile in te second case @ages are only 1= and s%rpl%s-8al%e is
tere!ore <=0 5is is te only case in @ic te n%mber o! labo%rers, te intensity o! labo%r, and
te lengt o! te @orking-day remain %ncanged, @ile 8 and s" 8ary sim%ltaneo%sly0
bC 4ariation o! s" and 8 also takes place in opposite directions, b%t not by te same amo%nt0 &n tat
case te 8ariation o! eiter 8 or s" o%t@eigs te oter0
&0 8=c U <=8 U <=s# s" R 1==T, p" R <=T
&&0 ><c U <88 U <=s# s" R >1 3N>T, p" R <=T
&&&0 82c U 168 U <=s# s" R 1<+T, p" R <=T0
;apital & pays !or prod%ced 8al%e amo%nting to 2= @it <=8, && a 8al%e o! 28 @it <88, and &&& a
8al%e o! 36 @it 1680 Aot te prod%ced 8al%e and te @ages a8e canged0 A%t a cange in te
prod%ced 8al%e means a cange in te amo%nt o! labo%r per!ormed, ence a cange eiter in te
n%mber o! labo%rers, te o%rs o! labo%r, te intensity o! labo%r, or in more tan one o! tese0
cC 4ariation o! s" and 8 takes place in te same direction0 &n tat case te one intensi!ies te e!!ect
o! te oter0
*=c U 1=8 U 1=s# s" R 1==T, p" R 1=T
8=c U <=8 U 3=s# s" R 1+=T, p" R 3=T
*<c U 88 U 6s# s" R >+T, p" R 6T0
6ere too te tree 8al%es prod%ced are di!!erent, namely <=, +=, and 120 ?nd tis di!!erence in te
magnit%de o! te respecti8e D%antities o! labo%r red%ces itsel! once more to a di!!erence in te
n%mber o! labo%rers, te o%rs o! labo%r, and te intensity o! labo%r, or se8eral or all o! tese
!actors0
3C s5, v and C variable.
5is case o!!ers no ne@ aspects and is sol8ed by te general !orm%la gi8en %nder &&, in @ic s" is
8ariable0
5e e!!ect o! a cange in te magnit%de o! te rate o! s%rpl%s-8al%e on te rate o! pro!it ence
yields te !ollo@ing cases:
1C p" increases or decreases in te same proportion as s" i! 8N; remains constant0
8=c U <=8 U <=s# s" R 1==T, p" R <=T
8=c U <=8 U 1=s# s" R +=T, p" R 1=T
1==T : +=T R <=T : 1=T0
<C p" rises or !alls at a !aster rate tan s" i! 8N; mo8es in te same direction as s", tat is, i! it
increases or decreases @en s" increases or decreases0
8=c U <=8 U 1=s# s" R +=T, p" R 1=T
>=c U 3=8 U <=s# s" R 66WT, p" R 1=T
22 ;apter &&&
+=T : 66WT ] 1=T : <=T0
3C p" rises or !alls at a slo@er rate tan s" i! 8N; canges in8ersely to s", b%t at a slo@er rate0
8=c U <=8 U 1=s# s" R +=T, p" R 1=T
*=c U 1=8 U 1+s# s" R 1+=T, p" R 1+T
+=T : 1+=T ^ 1=T : 1+T0
2C p" rises @ile s" !alls, or !alls @ile s" rises i! 8N; canges in8ersely to, and at, a !aster rate tan,
s"0
8=c U <=8 U <=s# s" R 1==T, p" R <=T
*=c U 1=8 U 1+s# s" R 1+=T, p" R 1+T0
s" as risen !rom 1==T to 1+=T, p" as !allen !rom <=T to 1+T0
+C Finally, p" remains constant @ereas s" rises or !alls, @ile 8N; canges in8ersely to, b%t in
exactly te same proportion as, s"0
&t is only tis last case @ic still reD%ires some explanation0 We a8e obser8ed earlier in te
8ariations o! 8N; tat one and te same rate o! s%rpl%s-8al%e may be expressed in 8ery m%c
di!!erent rates o! pro!it0 -o@ @e see tat one and te same rate o! pro!it may be based on 8ery
m%c di!!erent rates o! s%rpl%s-8al%e0 A%t @ile any cange in te proportion o! 8 to ; is
s%!!icient to prod%ce a di!!erence in te rate o! pro!it so long as s is constant, a cange in te
magnit%de o! s m%st lead to a corresponding in8erse cange o! 8N; in order tat te rate o! pro!it
remains te same0 &n te case o! one and te same capital, or in tat o! t@o capitals in one and te
same co%ntry tis is possible b%t in exceptional cases0 ?ss%me, !or example, tat @e a8e a
capital o!
8=c U <=8 U <=s# ; R 1==, s" R 1==T, p" R <=T#
and let %s s%ppose tat @ages !all to s%c an extent tat te same n%mber o! labo%rers is
obtainable !or 168 instead o! <=80 5en, oter tings being eD%al, and 28 being released, @e sall
a8e:
8=c U 168 U <2s# ; R *6, s" R 1+=T, p" R <+T0
&n order tat p" may no@ R <=T as be!ore, te total capital @o%ld a8e to increase to 1<=, te
constant capital tere!ore rising to 1=2:
1=2c U 168 U <2s# ; R 1<=, s" R 1+=T, p" R <=T0
5is @o%ld only be possible i! te !all in @ages @ere attended sim%ltaneo%sly by a cange in te
prod%cti8ity o! labo%r @ic reD%ired s%c a cange in te composition o! capital0 3r, i! te 8al%e
in money o! te constant capital increased !rom 8= to 1=20 &n sort, it @o%ld reD%ire an accidental
coincidence o! conditions s%c as occ%rs in exceptional cases0 &n !act, a 8ariation o! s" tat does
not call !or te sim%ltaneo%s 8ariation o! 8, and t%s o! 8N;, is concei8able only %nder 8ery
de!inite conditions, namely in s%c brances o! ind%stry in @ic only !ixed capital and labo%r
are employed, @ile te materials o! labo%r are s%pplied by -at%re0
A%t tis is not so @en te rates o! pro!it o! t@o di!!erent co%ntries are compared0 For in tat case
te same rate o! pro!it is, in e!!ect, based largely on di!!erent rates o! s%rpl%s-8al%e0
&t !ollo@s !rom all o! tese !i8e cases, tere!ore, tat a rising rate o! pro!it may correspond to a
!alling or rising rate o! s%rpl%s-8al%e, a !alling rate o! pro!it to a rising or !alling rate o! s%rpl%s-
8al%e, and a constant rate o! pro!it to a rising or !alling rate o! s%rpl%s-8al%e0 ?nd @e a8e seen in
& tat a rising, !alling, or constant rate o! pro!it may also accord @it a constant rate o! s%rpl%s-
8al%e0
5e rate o! pro!it, tere!ore, depends on t@o main !actors I te rate o! s%rpl%s-8al%e and te
8al%e-composition o! capital0 5e e!!ects o! tese t@o !actors may be brie!ly s%mmed %p as
2+ ;apter &&&
!ollo@s, by gi8ing te composition in per cent, !or it is immaterial @ic o! te t@o portions o!
te capital ca%ses te 8ariation:
5e rates o! pro!it o! t@o di!!erent capitals, or o! one and te same capital in t@o s%ccessi8e
di!!erent conditions,
are e3ual
1C i! te per cent composition o! te capitals is te same and teir rates o! s%rpl%s-8al%e are eD%al#
<C i! teir per cent composition is not te same, and te rates o! s%rpl%s-8al%e are %neD%al,
pro8ided te prod%cts o! te rates o! s%rpl%s-8al%e by te percentages o! te 8ariable portions o!
capitals Bs" by 8C are te same, i0e0, i! te masses o! s%rpl%s-8al%e Bs R s"8C calc%lated in per cent o!
te total capital are eD%al# in oter @ords, i! te !actors s" and 8 are in8ersely proportional to one
anoter in bot cases0
4hey are une3ual
1C i! te per cent composition is eD%al and te rates o! s%rpl%s-8al%e are %neD%al, in @ic case
tey are related as te rates o! s%rpl%s-8al%e#
<C i! te rates o! s%rpl%s-8al%e are te same and te per cent composition is %neD%al, in @ic
case tey are related as te 8ariable portions o! te capitals#
3C i! te rates o! s%rpl%s-8al%e are %neD%al and te per cent composition not te same, in @ic
case tey are related as te prod%cts s"8, i0e0, as te D%antities o! s%rpl%s-8al%e calc%lated in per
cent o! te total capital0
<

Chapter 4. The Efect of the Turnover on the
Rate of Proft
5e e!!ect o! te t%rno8er on te prod%ction o! s%rpl%s-8al%e, and conseD%ently o! pro!it, as
been disc%ssed in Aook &&0 Arie!ly s%mmarised it signi!ies tat o@ing to te time span reD%ired
!or t%rno8er, not all te capital can be employed all at once in prod%ction# some o! te capital
al@ays lies idle, eiter in te !orm o! money-capital, o! ra@ material s%pplies, o! !inised b%t still
%nsold commodity-capital, or o! o%tstanding claims# tat te capital in acti8e prod%ction, i0e0, in
te prod%ction and appropriation o! s%rpl%s-8al%e, is al@ays sort by tis amo%nt, and tat te
prod%ced and appropriated s%rpl%s-8al%e is al@ays c%rtailed to te same extent0 5e sorter te
period o! t%rno8er, te smaller tis idle portion o! capital as compared @it te @ole, and te
larger, tere!ore, te appropriated s%rpl%s-8al%e, pro8ided oter conditions remain te same0
&t as already been so@n in detail in Aook && /Englis edition: 4ol0 &&, pp0 <*3-*80 I 0d01 o@ te
D%antity o! prod%ced s%rpl%s-8al%e is a%gmented by red%ctions in te period o! t%rno8er, or o!
one o! its t@o sections, in te time o! prod%ction and te time o! circ%lation0 A%t since te rate o!
pro!it only expresses te relation o! te prod%ced D%antity o! s%rpl%s-8al%e to te total capital
employed in its prod%ction, it is e8ident tat any s%c red%ction increases te rate o! pro!it0
Wate8er as been said earlier in ,art && o! Aook && in regard to s%rpl%s-8al%e, applies eD%ally to
pro!it and te rate o! pro!it and needs no repetition ere0 We @is only to stress a !e@ o! te
principal points0
5e cie! means o! red%cing te time o! prod%ction is iger labo%r prod%cti8ity, @ic is
commonly called ind%strial progress0 &! tis does not in8ol8e a sim%ltaneo%s considerable
increase in te o%tlay o! total capital res%lting !rom te installation o! expensi8e macinery, etc0,
and t%s a red%ction o! te rate o! pro!it, @ic is calc%lated on te total capital, tis rate m%st
rise0 ?nd tis is decidedly tr%e in te case o! many o! te latest impro8ements in metall%rgy and
in te cemical ind%stry0 5e recently disco8ered metods o! prod%cing iron and steel, s%c as te
processes o! Aessemer, $iemens, :ilcrist-5omas, etc0, c%t to a minim%m at relati8ely small
costs te !ormerly ard%o%s processes0 5e making o! aliEarin, a red dye-st%!! extracted !rom coal-
tar, reD%ires b%t a !e@ @eeks, and tis by means o! already existing coal-tar dye-prod%cing
installations, to yield te same res%lts @ic !ormerly reD%ired years0 &t took a year !or te
madder to mat%re, and it @as c%stomary to let te roots gro@ a !e@ years more be!ore tey @ere
processed0
5e cie! means o! red%cing te time o! circ%lation is impro8ed comm%nications0 5e last !i!ty
years a8e bro%gt abo%t a re8ol%tion in tis !ield, comparable only @it te ind%strial re8ol%tion
o! te latter al! o! te 18t cent%ry0 3n land te macadamised road as been displaced by te
rail@ay, on sea te slo@ and irreg%lar sailing 8essel as been p%sed into te backgro%nd by te
rapid and dependable steamboat line, and te entire globe is being girdled by telegrap @ires0 5e
$%eE ;anal as !%lly opened East ?sia and ?%stralia to steamer tra!!ic0 5e time o! circ%lation o!
a sipment o! commodities to East ?sia, at least t@el8e monts in 182> Bc!0 A%c &&, $0 <3+
/Englis edition: Karl Marx, Capital, 4ol0 &&, pp0 <+1-+<0 I 0d01C, as no@ been red%ced to almost
as many @eeks0 5e t@o large centres o! te crises o! 18<+-+>, ?merica and &ndia, a8e been
bro%gt !rom >= to *= per cent nearer to te E%ropean ind%strial co%ntries by tis re8ol%tion in
transport, and a8e tereby lost a good deal o! teir explosi8e nat%re0 5e period o! t%rno8er o!
te total @orld commerce as been red%ced to te same extent, and te e!!icacy o! te capital
2> ;apter &4
in8ol8ed in it as been more tan do%bled or trebled0 &t goes @ito%t saying tat tis as not been
@ito%t e!!ect on te rate o! pro!it0
5o single o%t te e!!ect o! te t%rno8er o! total capital on te rate o! pro!it @e m%st ass%me all
oter conditions o! te capitals to be compared as eD%al0 ?side !rom te rate o! s%rpl%s-8al%e and
te @orking-day it is also notably te per cent composition @ic @e m%st ass%me to be te
same0 -o@ let %s take a capital ? composed o! 8=c U <=8 R 1== ;, @ic makes t@o t%rno8ers
yearly at a rate o! s%rpl%s-8al%e o! 1==T0 5e ann%al prod%ct is ten:
16=c U 2=8 U 2=s0 6o@e8er, to determine te rate o! pro!it @e do not calc%late te 2=s on te
t%rned-o8er capital-8al%e o! <==, b%t on te ad8anced capital o! 1==, and t%s obtain p" R 2=T0
-o@ let %s compare tis @it a capital A R 16=c U 2=8 R <== ;, @ic as te same rate o!
s%rpl%s-8al%e o! 1==T, b%t @ic is t%rned o8er only once a year0 5e ann%al prod%ct o! tis
capital is, tere!ore, te same as tat o! ?:
16=c U 2=8 U 2=s0 A%t tis time te 2=s are to be calc%lated on an ad8ance o! capital amo%nting to
<==, @ic yields a rate o! pro!it o! only <=T, or one-al! tat o! ?0
We !ind, ten, tat !or capitals @it an eD%al per cent composition, @it eD%al rates o! s%rpl%s-
8al%e and eD%al @orking-days, te rates o! pro!it o! te t@o capitals are related in8ersely as teir
periods o! t%rno8er0 &! eiter te composition, te rates o! s%rpl%s-8al%e, te @orking-day, or te
@ages, are %neD%al in te t@o compared cases, tis @o%ld nat%rally prod%ce !%rter di!!erences in
te rates o! pro!it# b%t tese are independent o! te t%rno8er and, !or tis reason, do not concern
%s at tis point0 5ey a8e already been disc%ssed in ;apter &&&0
5e direct e!!ect o! a red%ced period o! t%rno8er on te prod%ction o! s%rpl%s-8al%e, and
conseD%ently o! pro!it, consists o! an increased e!!iciency imparted tereby to te 8ariable portion
o! capital, as so@n in Aook &&, ;apter J4&, K5e 5%rno8er o! 4ariable ;apitalL0 5is capter
demonstrated tat a 8ariable capital o! +== t%rned o8er ten times a year prod%ces as m%c
s%rpl%s-8al%e in tis time as a 8ariable capital o! +,=== @it te same rate o! s%rpl%s-8al%e and
te same @ages, t%rned o8er H%st once a year0
5ake capital &, consisting o! 1=,=== !ixed capital @ose ann%al depreciation is 1=T R 1,===, o!
+== circ%lating constant and +== 8ariable capital0 'et te 8ariable capital t%rn o8er ten times per
year at a 1==T rate o! s%rpl%s-8al%e0 For te sake o! simplicity @e ass%me in all te !ollo@ing
examples tat te circ%lating constant capital is t%rned o8er in te same time as te 8ariable,
@ic is generally te case in practice0 5en te prod%ct o! one s%c period o! t%rno8er @ill be:
1==c BdepreciationC U +==c U +==8 U +==s R 1,6==
and te prod%ct o! one entire year, @it ten s%c t%rno8ers, @ill be
1,===c BdepreciationC U +,===c U +,===8 U +,===s R 16,===,
; R 11,===, s R +,===, p" R +,===N11,=== R 2+ +N11 T0
-o@ let %s take capital &&: *,=== !ixed capital, 1,=== ann%al @ear and tear, 1,=== circ%lating
constant capital, 1,=== 8ariable capital, 1==T rate o! s%rpl%s-8al%e, + t%rno8ers o! 8ariable capital
per year0 5en te prod%ct o! eac o! te t%rno8ers o! te 8ariable capital @ill be:
<==c BdepreciationC U 1,===c U 1,===8 U 1,===s R 3,<==,
and te total ann%al prod%ct a!ter !i8e t%rno8ers:
1,===c BdepreciationC U +,===c U +,===8 U +,===s R 16,===,
; R 11,===, s R +,===, p" R +,===N11,=== R 2+ +N11 T
F%rter, take capital &&& @it no !ixed capital, 6,=== circ%lating constant capital and +,=== 8ariable
capital0 'et tere be one t%rno8er per year at a 1==T rate o! s%rpl%s-8al%e0 5en te total ann%al
prod%ct is:
6,===c U +,===8 U +,===s R 16,===,
; R 11,===, s R +,===, p" R +,===N11,=== R 2+ +N11T0
28 ;apter &4
&n all te tree cases @e tere!ore a8e te same ann%al D%antity o! s%rpl%s-8al%e R +,===, and,
since te total capital is like@ise eD%al in all tree cases, namely R 11,===, also te same rate o!
pro!it o! 2+ +N11T0
A%t so%ld capital & a8e only + instead o! 1= t%rno8ers o! its 8ariable part per year, te res%lt
@o%ld be di!!erent0 5e prod%ct o! one t%rno8er @o%ld ten be:
<==c BdepreciationC U +==c U +==8 U +==s R 1,>==0
?nd te ann%al prod%ct:
1,===c BdepreciationC U <,+==c U <,+==8 U <,+==s R 8,+==,
; R 11,===, s R <,+==# p" R <,+==N11,=== R << 8N11T0
5e rate o! pro!it as !allen one-al!, beca%se te period o! t%rno8er as do%bled0
5e D%antity o! s%rpl%s-8al%e appropriated in one year is tere!ore eD%al to te D%antity o!
s%rpl%s-8al%e appropriated in one t%rno8er o! te variablecapital m%ltiplied by te n%mber o!
s%c t%rno8ers per year0 $%ppose @e call te s%rpl%s-8al%e, or pro!it, appropriated in one year $,
te s%rpl%s-8al%e appropriated in one period o! t%rno8er s, te n%mber o! t%rno8ers o! te 8ariable
capital in one year n, ten $ R sn, and te ann%al rate o! s%rpl%s-8al%e $" R s"n, as already
demonstrated in Aook &&, ;apter J4&, &0 /Englis edition: 4ol0 &&, p0 3=+0 I 0d01
&t goes @ito%t saying tat te !orm%la p" R s" B8N;C R s" 8NBc U 8C is correct only so long as te 8 in
te n%merator is te same as tat in te denominator0 &n te denominator 8 stands !or te entire
portion o! te total capital %sed on an a8erage as 8ariable capital !or te payment o! @ages0 5e 8
o! te n%merator is primarily only determined by te !act tat a certain D%antity o! s%rpl%s-8al%e
R s is prod%ced and appropriated by it, @ose relation to it sN8, is m", te rate o! s%rpl%s-8al%e0 &t
is only along tese lines tat te !orm%la p" R sNBc U 8C is trans!ormed into te oter: p" R s" 8NBc U
8C0 5e 8 o! te n%merator @ill no@ be more acc%rately determined by te !act tat it m%st eD%al
te 8 o! te denominator, tat is, te entire 8ariable portion o! capital ;0 &n oter @ords, te
eD%ation p" R BsN;C may be correctly trans!ormed into te eD%ation p" R s" 8NBc U 8C only i! s stands
!or s%rpl%s-8al%e prod%ced in one t%rno8er o! te 8ariable capital0 $o%ld s be only a portion o!
tis s%rpl%s-8al%e, ten s R s"8 is still correct, b%t tis 8 is ten smaller tan te 8 in ; R c U 8,
beca%se it is smaller tan te entire 8ariable capital expended !or @ages0 A%t so%ld s stand !or
more tan te s%rpl%s-8al%e o! one t%rno8er o! 8, ten a portion o! tis 8, or peraps te @ole o!
it, ser8es t@ice, namely in te !irst and in te second t%rno8er, and e8ent%ally in s%bseD%ent
t%rno8ers0 5e 8 @ic prod%ces te s%rpl%s-8al%e and represents te s%m o! all paid @ages, is
tere!ore greater tan te 8 in c U 8 and te calc%lation !alls into error0
5o make te !orm%la precise !or te ann%al rate o! pro!it, @e m%st s%bstit%te te ann%al rate o!
s%rpl%s-8al%e !or te simple rate o! s%rpl%s-8al%e, tat is, s%bstit%te $" or s"n !or s"0 &n oter @ords,
@e m%st m%ltiply te rate o! s%rpl%s-8al%e s", or, @at amo%nts to te same ting, te 8ariable
capital 8 contained in ;, by n, te n%mber o! t%rno8ers o! tis 8ariable capital in one year0 5%s
@e obtain p" R s"n B8N;C, @ic is te !orm%la !or te ann%al rate o! pro!it0
5e amo%nt o! 8ariable capital in8ested in is b%siness is someting te capitalist imsel! does
not kno@ in most cases0 We a8e seen in ;apter 4&&& o! Aook &&, and sall see !%rter along, tat
te only essential distinction @itin is capital @ic impresses itsel! %pon te capitalist is tat o!
!ixed and circ%lating capital0 6e takes money to pay @ages !rom is cas-box containing te part
o! te circ%lating capital e as on and in te !orm o! money, so !ar as it is not deposited in a
bank# e takes money !rom te same cas-box !or ra@ and a%xiliary materials, and credits bot
items to te same cas-acco%nt0 ?nd e8en i! e so%ld keep a separate acco%nt !or @ages, at te
close o! te year tis @o%ld only so@ te s%m paid o%t !or tis item, ence 8n, b%t not te
8ariable capital 8 itsel!0 &n order to ascertain tis, e @o%ld a8e to make a special calc%lation, o!
@ic @e propose ere to gi8e an ill%stration0
2* ;apter &4
For tis p%rpose @e select te cotton spinnery o! 1=,=== m%le spindles described in Aook & B$0
<=*N<=1C /Englis edition: p0 <1*0 I 0d01 and ass%me tat te data gi8en tere !or one @eek o!
?pril 18>1, are in !orce d%ring te @ole year0 5e !ixed capital incorporated in te macinery
@as V1=,===0 5e circ%lating capital @as not gi8en0 We ass%me it to a8e been V<,+==0 5is is a
rater ig estimate, b%t H%sti!ied by te ass%mption, @ic @e m%st al@ays make ere, tat no
credit operations @ere e!!ected, ence no permanent or temporary employment o! oter people"s
capital0 5e 8al%e o! te @eekly prod%ct @as composed o! V<= !or depreciation o! macinery,
V3+8 circ%lating constant ad8anced capital Brent V6# cotton V32<# coal, gas, oil, V1=C, V+< 8ariable
capital paid o%t !or @ages, and V8= s%rpl%s-8al%e0 5ere!ore,
<=c BdepreciationC U 3+8c U +<8 U 8=s R +1=0
5e @eekly ad8ance o! circ%lating capital tere!ore @as 3+8c U +<8 R 21=0 &n terms o! per cent
tis @as 8>03c U 1<0>80 For te entire circ%lating capital o! V<,+== tis @o%ld be V<,18< constant
and V318 8ariable capital0 $ince te total expendit%re !or @ages in one year @as +< times V+<, or
V<,>=2, it !ollo@s tat in a year te 8ariable capital o! V318 @as t%rned o8er almost exactly 8Z
times0 5e rate o! s%rpl%s-8al%e @as 8=N+< R 1+3 11N130 We calc%late te rate o! pro!it on te
basis o! tese elements by inserting te abo8e 8al%es in te !orm%la p" R s"n B8N;C : s" R 1+3 11N13,
n R 8Z, 8 R 318, ; R 1<,+==# ence:
p" R 1+3 11N13 \ 8Z \ 318N1<,+== R 330<>T0
We test tis by means o! te simple !orm%la p" R BsN;C0 5e total ann%al s%rpl%s-8al%e or pro!it
amo%nts to +< times V8=, or V2,16=, and tis di8ided by te total capital o! V1<,+== gi8es %s
330<8T, or almost an identical res%lt0 5is is an abnormally ig rate o! pro!it, @ic may only
be explained by extraordinarily !a8o%rable conditions o! te moment B8ery lo@ prices o! cotton
along @it 8ery ig prices o! yarnC, and co%ld certainly not a8e obtained tro%go%t te year0
5e s"n in te !orm%la p" R s"n B8N;C stands, as as been said, !or te ting called in Aook &&
/Englis edition: 4ol0 &&, p0 <*+0 I 0d01 te ann%al rate o! s%rpl%s-8al%e0 &n te abo8e case it is 1+3
11N13T m%ltiplied by 8Z or in exact !ig%res, 1,3=> *N18T0 5%s, i! a certain Aiedermann
/Aiedermann I ,ilistine0 ? p%n, being also te name o! te editor o! te Deutsche +llgemeine
%eitung0 I 0d01 @as socked by te abnormity o! an ann%al rate o! s%rpl%s-8al%e o! 1,===T %sed
as an ill%stration in Aook &&, e @ill no@ peraps be paci!ied by tis ann%al rate o! s%rpl%s-8al%e
o! more tan 1,3==T taken !rom te li8ing experience o! Mancester0 &n times o! greatest
prosperity, s%c as @e a8e not indeed seen !or a long time, s%c a rate is by no means a rarity0
For tat matter @e a8e ere an ill%stration o! te act%al composition o! capital in modern large-
scale ind%stry0 5e total capital is broken %p into V1<,18< constant and V318 8ariable capital, a
s%m o! V1<,+==0 &n terms o! percent tis is *>Zc U <Z8 R 1== ;0 3nly one-!ortiet o! te total,
b%t in more tan an eigt-!old ann%al t%rno8er, ser8es !or te payment o! @ages0
$ince 8ery !e@ capitalists e8er tink o! making calc%lations o! tis sort @it re!erence to teir
o@n b%siness, statistics is almost completely silent abo%t te relation o! te constant portion o!
te total social capital to its 8ariable portion0 3nly te ?merican cens%s gi8es @at is possible
%nder modern conditions, namely te s%m o! @ages paid in eac line o! b%siness and te pro!its
realised0 M%estionable as tey may be, being based on te capitalist"s o@n %ncontrolled
statements, tey are ne8erteless 8ery 8al%able and te only records a8ailable to %s on tis
s%bHect0 /&n E%rope @e are !ar too delicate to expect s%c re8elations !rom o%r maHor capitalists0 I
'.001
Chapter 5. Economy in the Employment of
Constant Capital
I. In General
5e increase o! absol%te s%rpl%s-8al%e, or te prolongation o! s%rpl%s-labo%r, and t%s o! te
@orking-day, @ile te 8ariable capital remains te same and t%s employs te same n%mber o!
labo%rers at te same nominal @ages, regardless o! @eter o8ertime is paid or not, red%ces te
relati8e 8al%e o! te constant capital as compared to te total and te 8ariable capital, and tereby
increases te rate o! pro!it, again irrespecti8e o! te gro@t o! te D%antity o! s%rpl%s-8al%e and a
possibly rising rate o! s%rpl%s-8al%e0 5e 8ol%me o! te !ixed portion o! constant capital, s%c as
!actory b%ildings, macinery, etc0, remains te same, no matter @eter tese ser8e te labo%r-
process 16 or 1< o%rs0 ? prolongation o! te @orking-day does not entail any !res expendit%res
in tis, te most expensi8e portion o! constant capital0 F%rtermore, te 8al%e o! te !ixed capital
is tereby reprod%ced in a smaller n%mber o! t%rno8er periods, so tat te time !or @ic it m%st
be ad8anced to make a certain pro!it is abbre8iated0 ? prolongation o! te @orking-day tere!ore
increases te pro!it, e8en i! o8ertime is paid, or e8en i!, %p to a certain point, it is better paid tan
te normal o%rs o! labo%r0 5e e8er-mo%nting need to increase !ixed capital in modern ind%stry
@as tere!ore one o! te main reasons prompting pro!it-mad capitalists to lengten te @orking-
day0
1
5e same conditions do not obtain i! te @orking-day is constant0 5en it is necessary
eiter to increase te n%mber o! labo%rers, and @it tem to a certain extent te amo%nt o! !ixed
capital, te b%ildings, macinery, etc0, in order to exploit a greater D%antity o! labo%r B!or @e
lea8e aside ded%ctions !rom @ages or te depression o! @ages belo@ teir normal le8elC, or, i! te
intensity and, conseD%ently, te prod%cti8ity o! labo%r, increase and, generally, more relati8e
s%rpl%s-8al%e is prod%ced, te magnit%de o! te circ%lating portion o! constant capital increases in
s%c ind%strial brances @ic %se ra@ materials, since more ra@ material, etc0, is processed in a
gi8en time# and, secondly, te amo%nt o! macinery set in motion by te same n%mber o!
labo%rers, tere!ore also tis part o! constant capital, increases as @ell0 6ence, an increase in
s%rpl%s-8al%e is accompanied by an increase in constant capital, and te gro@ing exploitation o!
labo%r by greater o%tlays o! te means o! prod%ction tro%g @ic labo%r is exploited, i0e0, by a
greater in8estment o! capital0 5ere!ore, te rate o! pro!it is tereby red%ced on te one and
@ile it increases on te oter0
M%ite a n%mber o! c%rrent expenses remain almost or entirely te same @eter te @orking-day
is longer or sorter0 5e cost o! s%per8ision is less !or +== @orking-men d%ring 18 @orking-o%rs
tan !or >+= @orking-men d%ring 1< @orking-o%rs0
K5e expense o! @orking a !actory 1= o%rs almost eD%als tat o! @orking it 1<0L B)eports o!
&nsp0 o! Fact0, 3ctober 1828, p0 3>0C
$tate and m%nicipal taxes, !ire ins%rance, @ages o! 8ario%s permanent employees, depreciation o!
macinery, and 8ario%s oter expenses o! a !actory, remain %ncanged @eter te @orking-time
is long or sort0 5o te extent to @ic prod%ction decreases, tese expenses rise as compared to
te pro!it0 B)eports o! &nsp0 o! Fact0, 3ctober 186<, p0 1*0C
5e period in @ic te 8al%e o! te macinery and o! te oter components o! !ixed capital is
reprod%ced is determined in practice not by teir mere li!etime, b%t by te d%ration o! te entire
labo%r-process d%ring @ic tey ser8e and @ear o%t0 &! te labo%rers m%st @ork 18 instead o! 1<
o%rs, tis makes a di!!erence o! tree days more per @eek, so tat one @eek is stretced into one
+1 ;apter 4
and a al!, and t@o years into tree0 &! tis o8ertime is %npaid te labo%rers gi8e a@ay gratis a
@eek o%t o! e8ery tree and a year o%t o! e8ery tree on top o! te normal s%rpl%s-labo%r time0 &n
tis @ay, te reprod%ction o! te 8al%e o! te macinery is speeded %p +=T and accomplised in
W o! te %s%ally reD%ired time0
5o a8oid %seless complications, @e proceed in tis analysis, and in tat o! price !l%ct%ations !or
ra@ materials B;ap0 4&C, !rom te ass%mption tat te mass and rate o! s%rpl%s-8al%e are gi8en0
?s already so@n in te presentation o! co-operation, di8ision o! labo%r and macinery, te
economy o! prod%ction conditions /Englis edition: 4ol0 &, pp0 3<2-<+ I 0d01 !o%nd in large-scale
prod%ction is essentially d%e to te !act tat tese conditions pre8ail as conditions o! social, or
socially combined, labo%r, and tere!ore as social conditions o! labo%r0 5ey are commonly
cons%med in te process o! prod%ction by te aggregate labo%rer, instead o! being cons%med in
small !ractions by a mass o! labo%rers operating disconnectedly or, at best, directly co-operating
on a small scale0 &n a large !actory @it one or t@o central motors te cost o! tese motors does
not increase in te same ratio as teir orse-po@er and, ence, teir possible spere o! acti8ity0
5e cost o! te transmission eD%ipment does not gro@ in te same ratio as te total n%mber o!
@orking macines @ic it sets in motion0 5e !rame o! a macine does not become dearer in te
same ratio as te mo%nting n%mber o! tools @ic it employs as its organs, etc0 F%rtermore, te
concentration o! means o! prod%ction yields a sa8ing on b%ildings o! 8ario%s kinds not only !or
te act%al @orksops, b%t also !or storage, etc0 5e same applies to expendit%res !or !%el, ligting,
etc0 3ter conditions o! prod%ction remain te same, @eter %sed by many or by !e@0
5is total economy, arising as it does !rom te concentration o! means o! prod%ction and teir %se
en masse, imperati8ely reD%ires, o@e8er, te acc%m%lation and co-operation o! labo%rers, i0e0, a
social combination o! labo%r0 6ence, it originates D%ite as m%c !rom te social nat%re o! labo%r,
H%st as s%rpl%s-8al%e originates !rom te s%rpl%s-labo%r o! te indi8id%al labo%rer considered
singly0 E8en te contin%al impro8ements, @ic are ere possible and necessary, are d%e solely to
te social experience and obser8ation ens%red and made possible by prod%ction o! aggregate
labo%r combined on a large scale0
5e same is tr%e o! te second big so%rce o! economy in te conditions o! prod%ction0 We re!er to
te recon8ersion o! te excretions o! prod%ction, te so-called @aste, into ne@ elements o!
prod%ction, eiter o! te same, or o! some oter line o! ind%stry# to te processes by @ic tis
so-called excretion is tro@n back into te cycle o! prod%ction and, conseD%ently, cons%mption,
@eter prod%cti8e or indi8id%al0 5is line o! sa8ings, @ic @e sall later examine more closely,
is like@ise te res%lt o! large-scale social labo%r0 &t is te attendant ab%ndance o! tis @aste @ic
renders it a8ailable again !or commerce and tereby t%rns it into ne@ elements o! prod%ction0 &t is
only as @aste o! combined prod%ction, tere!ore, o! large-scale prod%ction, tat it becomes
important to te prod%ction process and remains a bearer o! excange-8al%e0 5is @aste, aside
!rom te ser8ices @ic it per!orms as ne@ element o! prod%ction, red%ces te cost o! te ra@
material to te extent to @ic it is again saleable, !or tis cost al@ays incl%des te normal @aste,
namely te D%antity ordinarily lost in processing0 5e red%ction o! te cost o! tis portion o!
constant capital increases pro tanto te rate o! pro!it, ass%ming te magnit%de o! te 8ariable
capital and te rate o! s%rpl%s-8al%e to be gi8en0
&! te s%rpl%s-8al%e is gi8en, te rate o! pro!it can be increased only by red%cing te 8al%e o! te
constant capital reD%ired !or commodity-prod%ction0 $o !ar as constant capital enters into te
prod%ction o! commodities, it is not its excange-8al%e, b%t its %se-8al%e alone, @ic matters0
5e D%antity o! labo%r @ic !lax can absorb in a spinnery does not depend on its 8al%e, b%t on
its D%antity, ass%ming te prod%cti8ity o! labo%r, i0e0, te le8el o! tecnical de8elopment, to be
gi8en0 &n like manner te assistance rendered by a macine to, say, tree labo%rers does not
depend on its 8al%e, b%t on its %se-8al%e as a macine0 3n one le8el o! tecnical de8elopment a
bad macine may be expensi8e and on anoter a good macine may be ceap0
+< ;apter 4
5e increased pro!it recei8ed by a capitalist tro%g te ceapening o!, say, cotton and spinning
macinery, is te res%lt o! iger labo%r prod%cti8ity# not in te spinnery, to be s%re, b%t in cotton
c%lti8ation and constr%ction o! macinery0 &t reD%ires smaller o%tlays o! te conditions o! labo%r
to incorporate a gi8en D%antity o! labo%r, and ence to extract a gi8en D%antity o! s%rpl%s-labo%r0
5e costs reD%ired to appropriate a certain D%antity o! s%rpl%s-labo%r diminis0
We a8e already mentioned sa8ings yielded in te prod%ction process tro%g co-operati8e %se o!
means o! prod%ction by te aggregate, or socially combined, labo%r0 3ter sa8ings o! constant
capital arising !rom te sortening o! te time o! circ%lation in @ic te de8elopment o! means
o! comm%nication is a dominant material !actor @ill be disc%ssed later0 ?t tis point @e sall deal
@it te sa8ings yielded by contin%o%s impro8ements o! macinery, namely 1C o! its material,
e0g0, te s%bstit%tion o! iron !or @ood# <C te ceapening o! macinery d%e to te general
impro8ement o! macine-b%ilding# so tat, alto%g te 8al%e o! te !ixed portion o! constant
capital increases contin%ally @it te de8elopment o! labo%r on a large scale, it does not increase
at te same rate
<
# 3C special impro8ements enabling existing macinery to @ork more ceaply and
e!!ecti8ely# !or instance, impro8ements o! steam-boilers, etc0, @ic @ill be disc%ssed later on in
greater detail# 2C red%ction o! @aste tro%g better macinery0
Wate8er red%ces te @ear o! macinery, and o! !ixed capital in general, !or any gi8en period o!
prod%ction, ceapens not only te indi8id%al commodity, in 8ie@ o! te !act tat in its price e8ery
indi8id%al commodity reprod%ces its aliD%ot sare o! tis depreciation, b%t red%ces also te
aliD%ot portion o! te in8ested capital !or tis period0 )epair @ork, etc0, to te extent tat it
becomes necessary, is added to te original cost o! te macinery0 ? red%ction in repair costs, d%e
to greater d%rability o! te macinery, lo@ers pro tanto te price o! tis macinery0
&t may again be said o! all tese sa8ings tat tey are largely possible only !or combined labo%r,
and are o!ten not realised %ntil prod%ction is carried !or@ard on a still larger scale, so tat tey
reD%ire an e8en greater combination o! labo%r in te immediate process o! prod%ction0
6o@e8er, on te oter and te de8elopment o! te prod%cti8e po@er o! labo%r in any one line o!
prod%ction, e0g0, te prod%ction o! iron, coal, macinery, in arcitect%re, etc0, @ic may again be
partly connected @it progress in te !ield o! intellect%al prod%ction, notably nat%ral science and
its practical application, appears to be te premise !or a red%ction o! te 8al%e, and conseD%ently
o! te cost, o! means o! prod%ction in other lines o! ind%stry, e0g0, te textile ind%stry, or
agric%lt%re0 5is is sel!-e8ident, since a commodity @ic is te prod%ct o! a certain branc o!
ind%stry enters anoter as a means o! prod%ction0 &ts greater or lesser price depends on te
prod%cti8ity o! labo%r in te line o! prod%ction !rom @ic it iss%es as a prod%ct, and is at te
same time a !actor tat not only ceapens te commodities into @ose prod%ction it goes as a
means o! prod%ction, b%t also red%ces te 8al%e o! te constant capital @ose element it ere
becomes, and tereby one tat increases te rate o! pro!it0
5e caracteristic !eat%re o! tis kind o! sa8ing o! constant capital arising !rom te progressi8e
de8elopment o! ind%stry is tat te rise in te rate o! pro!it inone line o! ind%stry depends on te
de8elopment o! te prod%cti8e po@er o! labo%r in another0 Wate8er !alls to te capitalist"s
ad8antage in tis case is once more a gain prod%ced by social labo%r, i! not a prod%ct o! te
labo%rers e imsel! exploits0 $%c a de8elopment o! prod%cti8e po@er is again traceable in te
!inal analysis to te social nat%re o! te labo%r engaged in prod%ction# to te di8ision o! labo%r in
society# and to te de8elopment o! intellect%al labo%r, especially in te nat%ral sciences0 Wat te
capitalist t%s %tilises are te ad8antages o! te entire system o! te social di8ision o! labo%r0 &t is
te de8elopment o! te prod%cti8e po@er o! labo%r in its exterior department, in tat department
@ic s%pplies it @it means o! prod%ction, @ereby te 8al%e o! te constant capital employed
by te capitalist is relati8ely lo@ered and conseD%ently te rate o! pro!it is raised0
?noter rise in te rate o! pro!it is prod%ced, not by sa8ings in te labo%r creating te constant
capital, b%t by sa8ings in te application o! tis capital itsel!0 3n te one and, te concentration
+3 ;apter 4
o! labo%rers, and teir large-scale co-operation, sa8es constant capital0 5e same b%ildings, and
eating and ligting appliances, etc0, cost relati8ely less !or te large-scale tan !or small-scale
prod%ction0 5e same is tr%e o! po@er and @orking macinery0 ?lto%g teir absol%te 8al%e
increases, it !alls in comparison to te increasing extension o! prod%ction and te magnit%de o!
te 8ariable capital, or te D%antity o! labo%r-po@er set in motion0 5e economy realised by a
certain capital @itin its o@n line o! prod%ction is !irst and !oremost an economy in labo%r, i0 e0, a
red%ction o! te paid labo%r o! its o@n labo%rers0 5e pre8io%sly mentioned economy, on te
oter and, is disting%ised !rom tis one by te !act tat it accomplises te greatest possible
appropriation o! oter people"s %npaid labo%r in te most economical @ay, i0 e0, @it as little
expense as te gi8en scale o! prod%ction @ill permit0 &nasm%c as tis economy does not rest @it
te pre8io%sly mentioned exploitation o! te prod%cti8ity o! te social labo%r employed in te
prod%ction o! constant capital, b%t @it te economy in te constant capital itsel!, it springs eiter
directly !rom te co-operation and social !orm o! labo%r @itin a certain branc o! prod%ction, or
!rom te prod%ction o! macinery, etc0, on a scale in @ic its 8al%e does not gro@ at te same
rate as its %se-8al%e0
5@o points m%st be borne in mind ere: &t te 8al%e o! c R Eero, ten p" R s", and te rate o! pro!it
@o%ld be at its maxim%m0 $econd, o@e8er, te most important ting !or te direct exploitation
o! labo%r itsel! is not te 8al%e o! te employed means o! exploitation, be tey !ixed capital, ra@
materials or a%xiliary s%bstances0 &n so !ar as tey ser8e as means o! absorbing labo%r, as media
in or by @ic labo%r and, ence, s%rpl%s-labo%r are materialised, te excange-8al%e o!
macinery, b%ildings, ra@ materials, etc0, is D%ite immaterial0 Wat is %ltimately essential is, on
te one and, te D%antity o! tem tecnically reD%ired !or combination @it a certain D%antity o!
li8ing labo%r, and, on te oter, teir s%itability, i0e0, not only good macinery, b%t also good ra@
and a%xiliary materials0 5e rate o! pro!it depends partly on te good D%ality o! te ra@ material0
:ood material prod%ces less @aste0 'ess ra@ materials are ten needed to absorb te same
D%antity o! labo%r0 F%rtermore, te resistance to be o8ercome by te @orking macine is also
less0 5is partly a!!ects e8en te s%rpl%s-8al%e and te rate o! s%rpl%s-8al%e0 5e labo%rer needs
more time @en %sing bad ra@ materials to process te same D%antity0 ?ss%ming @ages remain
te same, tis ca%ses a red%ction in s%rpl%s-labo%r0 5is also s%bstantially a!!ects te reprod%ction
and acc%m%lation o! capital, @ic depend more on te prod%cti8ity tan on te amo%nt o! labo%r
employed, as so@n in Aook & B$0 6<>N61*!!0C /Englis edition: p0 6=30 I 0d010
5e capitalist"s !anatical insistence on economy in means o! prod%ction is tere!ore D%ite
%nderstandable0 5at noting is lost or @asted and te means o! prod%ction are cons%med only in
te manner reD%ired by prod%ction itsel!, depends partly on te skill and intelligence o! te
labo%rers and partly on te discipline en!orced by te capitalist !or te combined labo%r0 5is
discipline @ill become s%per!l%o%s %nder a social system in @ic te labo%rers @ork !or teir
o@n acco%nt, as it as already become practically s%per!l%o%s in piece-@ork0 5is !anatical
insistence comes to te s%r!ace also con8ersely in te ad%lteration o! te elements o! prod%ction,
@ic is one o! te principal means o! lo@ering te relation o! te 8al%e o! te constant capital to
te 8ariable capital, and t%s o! raising te rate o! pro!it0 Wereby te sale o! tese elements o!
prod%ction abo8e teir 8al%e, so !ar as tis reappears in te prod%ct, acD%ires a marked element o!
ceating0 5is practice plays an essential part partic%larly in :erman ind%stry, @ose maxim is:
,eople @ill s%rely appreciate i! @e send tem good samples at !irst, and ten in!erior goods
a!ter@ard0 6o@e8er, as tese matters belong to te spere o! competition tey do not concern %s
ere0
&t so%ld be noted tat tis raising o! te rate o! pro!it by means o! lo@ering te 8al%e o! te
constant capital, i0 e0, by red%cing its expensi8eness, does not in any @ay depend on @eter te
branc o! ind%stry in @ic it takes place prod%ces l%x%ries, or necessities !or te cons%mption o!
labo%rers, or means o! prod%ction generally0 5is last circ%mstance @o%ld only be o! material
importance i! it @ere a D%estion o! te rate o! s%rpl%s-8al%e, @ic depends essentially on te
+2 ;apter 4
8al%e o! labo%r-po@er, i0 e0, on te 8al%e o! te c%stomary necessities o! te labo%rer0 A%t in te
present case te s%rpl%s-8al%e and te rate o! s%rpl%s-8al%e a8e been ass%med as gi8en0 5e
relation o! s%rpl%s-8al%e to total capital I and tis determines te rate o! pro!it I depends %nder
tese circ%mstances excl%si8ely on te 8al%e o! te constant capital, and in no @ay on te %se-
8al%e o! te elements o! @ic it is composed0
? relati8e ceapening o! te means o! prod%ction does not, o! co%rse, excl%de te possible
increase o! teir absol%te aggregate 8al%e, !or te absol%te 8ol%me in @ic tey are employed
gro@s tremendo%sly @it te de8elopment o! te prod%cti8e po@er o! labo%r and te attendant
gro@t o! te le8el o! prod%ction0 Economy in te %se o! constant capital, !rom @ate8er angle it
may be 8ie@ed, is, in part, te excl%si8e res%lt o! te !act tat te means o! prod%ction !%nction
and are cons%med as Hoint means o! prod%ction o! te combined labo%rer, so tat te res%lting
sa8ing appears as a prod%ct o! te social nat%re o! directly prod%cti8e labo%r# in part, o@e8er, it
is te res%lt o! de8eloping prod%cti8ity o! labo%r in speres @ic s%pply capital @it its means
o! prod%ction, so tat i! @e 8ie@ te total labo%r in relation to total capital, and not simply te
labo%rers employed by capitalist J in relation to capitalist ., tis economy presents itsel! once
more as a prod%ct o! te de8elopment o! te prod%cti8e !orces o! social labo%r, @it te only
di!!erence tat capitalist J enHoys te ad8antage not only o! te prod%cti8ity o! labo%r in is o@n
establisment, b%t also o! tat in oter establisments0 .et te capitalist 8ie@s economy o! is
constant capital as a condition @olly independent o!, and entirely alien to, is labo%rers0 6e is
al@ays @ell a@are, o@e8er, tat te labo%rer as someting to do @it te employer b%ying
m%c or little labo%r @it te same amo%nt o! money B!or tis is o@ te transaction bet@een te
capitalist and labo%rer appears in is mindC0 5is economy in te application o! te means o!
prod%ction, tis metod o! obtaining a certain res%lt @it a minim%m o%tlay appears more tan
any oter inner po@er o! labo%r as an inerent po@er o! capital and a metod pec%liar and
caracteristic o! te capitalist mode o! prod%ction0
5is conception is so m%c te less s%rprising since it appears to accord @it !act, and since te
relationsip o! capital act%ally conceals te inner connection beind te %tter indi!!erence,
isolation, and alienation in @ic tey place te labo%rer 8is-O-8is te means incorporating is
labo%r0
'irst, te means o! prod%ction tat make %p te constant capital represent only te money
belonging to te capitalist BH%st as te body o! te )oman debtor represented te money o! is
creditor, according to 'ing%et /4h7orie des loi civiles, ou principes fondamentau de la soci7t7,
tome &&, 'ondres, 1>6>, li8re 4, capitre JJ0 I 0d01C and are related to im alone, @ile te
labo%rer, @o comes in contact @it tem only in te direct process o! prod%ction, deals @it
tem as %se-8al%es o! prod%ction only as means o! labo%r and materials o! prod%ction0 &ncrease or
decrease o! teir 8al%e, tere!ore, as as little bearing on is relations to te capitalist as te
circ%mstance @eter e may be @orking @it copper or iron0 For tat matter, te capitalist likes
to 8ie@ tis point di!!erently, as @e sall later indicate, @ene8er te means o! prod%ction gain in
8al%e and tereby red%ce is rate o! pro!it0
Second, in so !ar as tese means o! prod%ction in te capitalist prod%ction process are at te same
time means o! exploiting labo%r, te labo%rer is no more concerned @it teir relati8e dearness or
ceapness tan a orse is concerned @it te dearness or ceapness o! its bit and bridle0
'inally, @e a8e earlier /Englis edition: 4ol0 1, p0 3<+0 I 0d01 seen tat, in !act, te labo%rer
looks at te social nat%re o! is labo%r, at its combination @it te labo%r o! oters !or a common
p%rpose, as e @o%ld at an alien po@er# te condition o! realising tis combination is alien
property, @ose dissipation @o%ld be totally indi!!erent to im i! e @ere not compelled to
economise @it it0 5e sit%ation is D%ite di!!erent in !actories o@ned by te labo%rers temsel8es,
as in )ocdale, !or instance0
++ ;apter 4
&t scarcely needs to be mentioned, ten, tat as !ar as concerns te prod%cti8ity o! labo%r in one
branc o! ind%stry as a le8er !or ceapening and impro8ing te means o! prod%ction in anoter,
and tereby raising te rate o! pro!it, te general interconnection o! social labo%r a!!ects te
labo%rers as a matter alien to tem, a matter tat act%ally concerns te capitalist alone, since it is
e @o b%ys and appropriates tese means o! prod%ction0 5e !act tat e b%ys te prod%ct o!
labo%rers in anoter branc o! ind%stry @it te prod%ct o! labo%rers in is o@n, and tat e
tere!ore disposes o! te prod%ct o! te labo%rers o! anoter capitalist only by grat%ito%sly
appropriating tat o! is o@n, is a de8elopment tat is !ort%nately concealed by te process o!
circ%lation, etc0
Moreo8er, since prod%ction on a large scale de8elops !or te !irst time in its capitalist !orm, te
tirst !or pro!its on te one and, and competition on te oter, @ic compels te ceapest
possible prod%ction o! commodities, make tis economy in te employment o! constant capital
appear as someting pec%liar to te capitalist mode o! prod%ction and tere!ore as a !%nction o!
te capitalist0
P%st as te capitalist mode o! prod%ction promotes te de8elopment o! te prod%cti8e po@ers o!
social labo%r, on te one and, so does it @ip on to economy in te employment o! constant
capital on te oter0
6o@e8er, it is not only te alienation and indi!!erence tat arise bet@een te labo%rer, te bearer
o! li8ing labo%r, and te economical, i0e0, rational and tri!ty, %se o! te material conditions o! is
labo%r0 &n line @it its contradictory and antagonistic nat%re, te capitalist mode o! prod%ction
proceeds to co%nt te prodigio%s dissipation o! te labo%rer"s li!e and ealt, and te lo@ering o!
is li8ing conditions, as an economy in te %se o! constant capital and tereby as a means o!
raising te rate o! pro!it0
$ince te labo%rer passes te greater portion o! is li!e in te process o! prod%ction, te
conditions o! te prod%ction process are largely te conditions o! is acti8e li8ing process, or is
li8ing conditions, and economy in tese li8ing conditions is a metod o! raising te rate o! pro!it#
H%st as @e sa@ earlier /Englis edition: 4ol0 &, pp0 <31-3=<0 I 0d01 tat o8er@ork, te
trans!ormation o! te labo%rer into a @ork orse, is a means o! increasing capital, or speeding %p
te prod%ction o! s%rpl%s-8al%e0 $%c economy extends to o8ercro@ding close and %nsanitary
premises @it labo%rers, or, as capitalists p%t it, to space sa8ing# to cro@ding dangero%s
macinery into close D%arters @ito%t %sing sa!ety de8ices# to neglecting sa!ety r%les in
prod%ction processes pernicio%s to ealt, or, as in mining, bo%nd %p @it danger, etc0 -ot to
mention te absence o! all pro8isions to render te prod%ction process %man, agreeable, or at
least bearable0 From te capitalist point o! 8ie@ tis @o%ld be D%ite a %seless and senseless @aste0
5e capitalist mode o! prod%ction is generally, despite all its niggardliness, altogeter too
prodigal @it its %man material, H%st as, con8ersely, tanks to its metod o! distrib%tion o!
prod%cts tro%g commerce and manner o! competition, it is 8ery prodigal @it its material
means, and loses !or society @at it gains !or te indi8id%al capitalist0
P%st as capital as te tendency to red%ce te direct employment o! li8ing labo%r to no more tan
te necessary labo%r, and al@ays to c%t do@n te labo%r reD%ired to prod%ce a commodity by
exploiting te social prod%cti8eness o! labo%r and t%s to sa8e a maxim%m o! directly applied
li8ing labo%r, so it as also te tendency to employ tis labo%r, red%ced to a minim%m, %nder te
most economical conditions, i0e0, to red%ce to its minim%m te 8al%e o! te employed constant
capital0 &! it is te necessary labo%r-time @ic determines te 8al%e o! commodities, instead o!
all te labo%r-time contained in tem, so it is te capital @ic realises tis determination and, at
te same time, contin%ally red%ces te labo%r-time socially necessary to prod%ce a gi8en
commodity0 5e price o! te commodity is tereby lo@ered to its minim%m since e8ery portion o!
te labo%r reD%ired !or its prod%ction is red%ced to its minim%m0
+6 ;apter 4
We m%st make a distinction in economy as regards %se o! constant capital0 &! te D%antity, and
conseD%ently te s%m o! te 8al%e o! employed capital, increases, tis is primarily only a
concentration o! more capital in a single and0 .et it is precisely tis greater D%antity applied by a
single so%rce I attended, as a r%le, by an absol%tely greater b%t relati8ely smaller amo%nt o!
employed labo%r I @ic permits economy o! constant capital0 5o take an indi8id%al capitalist,
te 8ol%me o! te necessary in8estment o! capital, especially o! its !ixed portion, increases0 A%t
its 8al%e decreases relati8e to te mass o! @orked-%p materials and exploited labo%r0
5is is no@ to be brie!ly ill%strated by a !e@ examples0 We sall begin at te end I te economy
in te conditions o! prod%ction, in so !ar as tese also constit%te te li8ing conditions o! te
labo%rer0
II. Savings In Labour Conditions At The
!pense "f The Labourers.
Coal mines. $eglect of indisputable outlays.
K(nder te competition @ic exists among te coal-
o@ners and coal-proprietors 000 no more o%tlay is
inc%rred tan is s%!!icient to o8ercome te most
ob8io%s pysical di!!ic%lties# and %nder tat @ic
pre8ails among te labo%ring colliers, @o are
ordinarily more n%mero%s tan te @ork to be done
reD%ires, a large amo%nt o! danger and expos%re to te
most noxio%s in!l%ences @ill gladly be enco%ntered
!or @ages a little in ad8ance o! te agric%lt%ral
pop%lation ro%nd tem, in an occ%pation, in @ic
tey can moreo8er make a pro!itable %se o! teir
cildren0 5is do%ble competition is D%ite s%!!icient 000
to ca%se a large proportion o! te pits to be @orked
@it te most imper!ect drainage and 8entilation#
o!ten @it ill-constr%cted sa!ts, bad gearing,
incompetent engineers, and ill-constr%cted and ill-
prepared bays and road@ays# ca%sing a destr%ction o!
li!e, and limb, and ealt, te statistics o! @ic
@o%ld present an appalling pict%re0L BFirst )eport on
;ildren"s Employment in Mines and ;ollieries, etc0,
?pril <1, 18<*, p0 1=<0C
?bo%t 186=, a @eekly a8erage o! 1+ men lost teir li8es in te Englis collieries0 ?ccording to
te report on ;oal Mines ?ccidents BFebr%ary 6, 186<C, a total o! 8,266 @ere killed in te ten
years 18+<-610 A%t te report admits tat tis n%mber is !ar too lo@, beca%se in te !irst !e@
+> ;apter 4
years, @en te inspectors ad H%st been installed and teir districts @ere !ar too large, a great
many accidents and deats @ere not reported0 5e 8ery !act tat te n%mber o! accidents, to%g
still 8ery ig, as decreased markedly since te inspection system @as establised, and tis in
spite o! te limited po@ers and ins%!!icient n%mbers o! te inspectors, demonstrates te nat%ral
tendency o! capitalist exploitation0I 5ese %man sacri!ices are mostly d%e to te inordinate
a8arice o! te mine o@ners0 4ery o!ten tey ad only one sa!t s%nk, so tat apart !rom te lack
o! e!!ecti8e 8entilation tere @as no escape @ere tis sa!t to become obstr%cted0
;apitalist prod%ction, @en considered in isolation !rom te process o! circ%lation and te
excesses o! competition, is 8ery economical @it te materialised labo%r incorporated in
commodities0 .et, more tan any oter mode o! prod%ction, it sD%anders %man li8es, or li8ing-
labo%r, and not only blood and !les, b%t also ner8e and brain0 &ndeed, it is only by dint o! te
most extra8agant @aste o! indi8id%al de8elopment tat te de8elopment o! te %man race is at
all sa!eg%arded and maintained in te epoc o! istory immediately preceding te conscio%s
reorganisation o! society0 $ince all o! te economising ere disc%ssed arises !rom te social
nat%re o! labo%r, it is indeed H%st tis directly social nat%re o! labo%r @ic ca%ses te @aste o!
li!e and ealt0 5e !ollo@ing D%estion s%ggested by !actory inspector )0 Aaker is caracteristic
in tis respect:
K5e @ole D%estion is one !or serio%s consideration,
and in @at @ay this sacrifice of infant life
occasioned by congregational labour can be best
a8ertedQL B)eports o! &nsp0 o! Fact0, 3ctober 1863, p0
1+>0C
'actories0 (nder tis eading tere is co8ered te disregard !or sa!ety meas%res to ens%re te
sec%rity, com!ort, and ealt o! labo%rers also in te act%al !actories0 &t is to blame !or a large
portion o! te cas%alty lists containing te @o%nded and killed ind%strial @orkers Bc!0 te ann%al
!actory reportsC0 $imilarly, lack o! space, 8entilation, etc0
?s !ar back as 3ctober 18++, 'eonard 6orner complained abo%t te resistance o! 8ery many
man%!act%rers to te legal reD%irements concerning sa!ety de8ices on oriEontal sa!ts, alto%g
te danger @as contin%ally empasised by accidents, many o! tem !atal, and alto%g tese
sa!ety de8ices did not cost m%c and did not inter!ere @it prod%ction0 B)eports o! &nsp0 o! Fact0,
3ctober 18++, p0 60C &n teir resistance against tese and oter legal reD%irements te
man%!act%rers @ere openly seconded by te %npaid H%stices o! te peace, @o @ere temsel8es
mostly man%!act%rers or !riends o! man%!act%rers, and anded do@n teir decisions accordingly0
Wat sort o! 8erdicts tese gentlemen anded do@n @as re8ealed by $%perior P%dge ;ampbell,
@o said @it re!erence to one o! tem, against @ic an appeal ad been made to im:
K&t is not an interpretation o! te ?ct o! ,arliament, it
is a repeal o! te ?ct o! ,arliamentL Bloc. cit0, p0 11C0
6orner states in te same report tat in many !actories labo%rers are not @arned @en macinery
is abo%t to be started %p0 $ince tere is al@ays someting to be done abo%t macinery e8en @en
it is not operating, !ingers and ands are al@ays occ%pied @it it, and accidents appen
contin%ally d%e to te mere omission o! a @arning signal Bloc. cit0, p0 22C0 5e man%!act%rers ad
a trades-%nion at te time to oppose !actory legislation, te so-called -ational ?ssociation !or te
?mendment o! te Factory 'a@s in Mancester, @ic in Marc 18++ collected more tan
V+=,=== by assessing < sillings per orse-po@er, to pay !or te co%rt proceedings against its
members started by !actory inspectors, and to cond%ct te cases in te name o! te %nion0 &t @as a
matter o! pro8ing tat killing @as no m%rder /?ll%sion to te pamplet "Killing no M%rder" @ic
+8 ;apter 4
appeared in England in 16+>0 &ts a%tor @as te le8eller Ed@ard $exby0 I 0d01 @en it occ%rred
!or te sake o! pro!it0 ? !actory inspector !or $cotland, $ir Pon Kincaid, tells abo%t a certain !irm
in :lasgo@ @ic %sed te iron scrap at its !actory to make protecti8e sields !or all its
macinery, te cost amo%nting to V* 1s0 Poining te man%!act%rers" %nion @o%ld a8e cost it an
assessment o! V11 !or its 11= orse-po@er, @ic @as more tan te cost o! all its protecti8e
appliances0 A%t te -ational ?ssociation ad been organised in 18+2 !or te express p%rpose o!
opposing te la@ @ic prescribed s%c protection0 5e man%!act%rers ad not paid te least eed
to it d%ring te @ole period !rom 1822 to 18+20 Wen te !actory inspectors, at instr%ctions !rom
,almerston, ten in!ormed te man%!act%rers tat te la@ @o%ld be en!orced in earnest, te
man%!act%rers instantly !o%nded teir association, many o! @ose most prominent members @ere
temsel8es H%stices o! te peace and in tis capacity @ere s%pposed to en!orce te la@0 Wen in
?pril 18++ te ne@ Minister o! te &nterior, $ir :eorge :rey, o!!ered a compromise %nder @ic
te go8ernment @o%ld be content @it practically nominal sa!ety appliances te ?ssociation
indignantly reHected e8en tis0 &n 8ario%s la@s%its te !amo%s engineer William Fairbairn tre@
te @eigt o! is rep%tation beind te principle o! economy and in de!ence o! te !reedom o!
capital @ic ad been 8iolated0 5e ead o! !actory inspection, 'eonard 6orner, @as persec%ted
and maligned by te man%!act%rers in e8ery concei8able manner0
A%t te man%!act%rers did not rest %ntil tey obtained a @rit o! te ;o%rt o! M%een"s Aenc,
according to @ic te 'a@ o! 1822 did not prescribe protecti8e de8ices !or oriEontal sa!ts
installed more tan se8en !eet abo8e te gro%nd and, !inally, in 18+6 tey s%cceeded in sec%ring
an ?ct o! ,arliament entirely satis!actory to tem in te circ%mstances, tro%g te ser8ices o! te
bigot Wilson ,atten, one o! tose pio%s so%ls @ose display o! religion is al@ays ready to do te
dirty @ork !or te knigts o! te money-bag0 5is ?ct practically depri8ed te labo%rers o! all
special protection and re!erred tem to te common co%rts !or compensation in te e8ent o!
ind%strial accidents Bseer mockery in 8ie@ o! te excessi8e cost o! Englis la@s%itsC, @ile it
made it almost impossible !or te man%!act%rer to lose te la@s%it by pro8iding in a !inely-
@orded cla%se !or expert testimony0 5e res%lt @as a rapid increase o! accidents0 &n te six
monts !rom May to 3ctober 18+8, &nspector Aaker reported tat accidents increased by <1T
compared @it te preceding al!-year0 &n is opinion 360>T o! tese accidents migt a8e been
a8oided0 &t is tr%e tat te n%mber o! accidents in 18+8 and 18+* @as considerably belo@ tat o!
182+ and 18260 &t @as act%ally <*T less alto%g te n%mber o! labo%rers in te ind%stries
s%bHect to inspection ad increased <=T0 A%t @at @as te reason !or tisQ &n so !ar as tis iss%e
as been settled no@ B186+C, it @as mainly accomplised tro%g te introd%ction o! ne@
macinery already pro8ided @it sa!ety de8ices to @ic te man%!act%rer did not obHect beca%se
tey cost im no extra expense0 F%rtermore, a !e@ labo%rers s%cceeded in sec%ring ea8y
damages !or teir lost arms, and ad tis H%dgement %peld e8en by te igest co%rts0 B)eports
o! &nsp0 o! Fact0, ?pril 3=, 1861, p0 31, ditto ?pril 186<, p0 1>0C
$o m%c !or economy in de8ices protecting te li!e and limbs o! labo%rers Bamong @om many
cildrenC against te dangers o! andling and operating macinery0
"or- in enclosed places generally0 &t is @ell kno@n to @at extent economy o! space, and t%s o!
b%ildings, cro@ds labo%rers into close D%arters0 &n addition, tere is also economy in means o!
8entilation0 ;o%pled @it te long @orking-o%rs, te t@o ca%se a large increase in diseases o!
te respiratory organs, and an attendant increase in te deat-rate0 5e !ollo@ing ill%strations
a8e been taken !rom )eports on ,%blic 6ealt, 6t report, 18630 5is report @as compiled by
7r0 Pon $imon, @ell kno@n !rom o%r Aook &0
P%st as combination and co-operation o! labo%r permits large-scale employment o! macinery,
concentration o! means o! prod%ction, and economy in teir %se, it is tis 8ery @orking togeter
en masse in enclosed places and %nder conditions rater determined by ease o! man%!act%re tan
by ealt reD%irements I it is tis mass concentration in one and te same @orksop tat acts, on
te one and, as a so%rce o! greater pro!its !or te capitalist and, on te oter, %nless co%nteracted
+* ;apter 4
by a red%ced n%mber o! o%rs and special preca%tions, as te ca%se o! te sD%andering o! te li8es
and ealt o! te labo%rers0
7r0 $imon !orm%lates te !ollo@ing r%le and backs it %p @it ab%ndant statistics:
K&n proportion as te people o! a district are attracted
to any collecti8e indoor occ%pation, in s%c
proportion, oter tings being eD%al, te district
deat-rate by l%ng diseases @ill be increasedL Bp0 <3C0
5e ca%se is bad 8entilation0 K?nd probably in all
England tere is no exception to te r%le, tat, in
e8ery district @ic as a large indoor ind%stry, te
increased mortality o! te @orkpeople is s%c as to
colo%r te deat-ret%rn o! te @ole district @it a
marked excess o! l%ng diseaseL Bp0 <3C0
Mortality !ig%res !or ind%stries carried on in enclosed places, collected by te Aoard o! 6ealt in
186= and 1861, indicate tat !or te same n%mber o! men bet@een te ages o! 1+ and ++, !or
@ic te deat-rate !rom cons%mption and oter p%lmonary diseases in Englis agric%lt%ral
districts is 1==, te deat-rate in ;o8entry is 163, in Alackb%rn and $kipton 16>, ;ongleton and
Arad!ord 168, 'eicester 1>1, 'eek 18<, Maccles!ield 182, Aolton 1*=, -ottingam 1*<, )ocdale
1*3, 7erby 1*8, $al!ord and ?ston-%nder-'yne <=3, 'eeds <18, ,reston <<=, and Mancester
<63 Bp0 <2C0 5e !ollo@ing table presents a still more striking ill%stration0
7istrict ;ie! ind%stry 7eats !rom p%lmonary diseases
bet@een te ages o! 1+ and <+, per
1==,=== pop%lation
Men Women
Aerkampstead $tra@ plaiting B@omenC <1* +>8
'eigton A%EEard $tra@ plaiting B@omenC 3=* ++2
-e@port ,agnell 'ace man%!act%re
B@omenC
3=1 61>
5o@cester 'ace man%!act%re
B@omenC
<3* +>>
.eo8il Man%!act%re o! glo8es
Bmainly @omenC
<8= 2=*
'eek $ilk ind%stry
Bpredominantly @omenC
23> 8+6
;ongleton $ilk ind%stry
Bpredominantly @omenC
+66 >*=
Maccles!ield $ilk ind%stry
Bpredominantly @omenC
+*3 8*=
6= ;apter 4
6ealty co%ntry
district
?gric%lt%re 331 333
&t so@s te deat-rate !or p%lmonary diseases separately !or bot sexes bet@een te ages o! 1+
and <+ comp%ted !or e8ery 1==,=== pop%lation0 &n te districts selected only @omen are
employed in ind%stries carried on in enclosed places, @ile men @ork in all oter possible lines0
&n te silk districts, @ere more men are employed in te !actory, teir mortality is also iger0
5e deat-rate !rom cons%mption, etc0, !or bot sexes, re8eals, as te report says,
Kte atrocio%s sanitary circ%mstances %nder @ic
m%c o! o%r silk ind%stry is cond%ctedL0
?nd it is in tis same silk ind%stry tat te man%!act%rers, pleading exceptionally !a8o%rable and
sanitary conditions in teir establisments, demanded by @ay o! an exception, and partially
obtained, long @orking-o%rs !or cildren %nder 13 years o! age BA%c &, Kap0 4&&&, 6, $0
<*6N<86C /Englis edition: ;0 J, 6, p0 <*30 I 0d01
K,robably no ind%stry @ic as yet been in8estigated
as a!!orded a @orse pict%re tan tat @ic 7r0
$mit gi8es o! tailoring: I "$ops 8ary m%c in teir
sanitary conditions, b%t almost %ni8ersally are
o8ercro@ded and ill-8entilated, and in a ig degree
%n!a8o%rable to ealt0000 $%c rooms are necessarily
@arm# b%t @en te gas is lit, as d%ring te day-time
on !oggy days, and at nigt d%ring te @inter, te eat
increases to 8=_ and e8en to %p@ards o! *=_, ca%sing
pro!%se perspiration, and condensation o! 8apo%r
%pon te panes o! glass, so tat it r%ns do@n in
streams or drops !rom te roo!, and te operati8es are
compelled to keep some @indo@s open, at @ate8er
risk to temsel8es o! taking cold0" ?nd e gi8es te
!ollo@ing acco%nt o! @at e !o%nd in 16 o! te most
important West End sops0I "5e largest c%bic space
in tese ill-8entilated rooms allo@ed to eac operati8e
is <>= !eet, and te least 1=+ !eet, and in te @ole
a8erages only 1+6 !eet per man0 &n one room, @it a
gallery r%nning ro%nd it, and ligted only !rom te
roo!, !rom *< to %p@ards o! 1== men are employed,
@ere a large n%mber o! gasligts b%rn, and @ere te
%rinals are in te closest proximity, te c%bic space
does not exceed 1+= !eet per man0 &n anoter room,
61 ;apter 4
@ic can only be called a kennel in a yard, ligted
!rom te roo!, and 8entilated by a small skyligt
opening, !i8e to six men @ork in a space o! 11< c%bic
!eet per man0" 000 5ailors, in tose atrocio%s @orksops
@ic 7r0 $mit describes, @ork generally !or abo%t
1< or 13 o%rs a day, and at some times te @ork @ill
be contin%ed !or 1+ or 16 o%rsL Bpp0 <+, <6, <8C
-%mbers o! persons
employed
Arances o! ind%stry and
locality
7eat-rate per 1==,=== bet@een
te ages o!
<+-3+ 3+-2+ 2+-++
*+8,<6+ ?gric%lt%re, England and
Wales
>23 8=+ 1,12+
<<,3=1 men and 5ailoring, 'ondon *+8 1,<6< <,=*3
1<,3>> @omen
13,8=3 5ype-setters and printers,
'ondon
8*2 1,>2> <,36>
Bp0 3=C0 &t m%st be noted, and as in !act been remarked by Pon $imon, cie! o! te Medical
7epartment and a%tor o! te report, tat te mortality-rate !or tailors, type-setters, and printers o!
'ondon bet@een te ages o! <+ and 3+ @as cited lo@er tan te real !ig%re, beca%se 'ondon
employers in bot lines o! b%siness a8e a large n%mber o! yo%ng people Bprobably %p to 3= years
o! ageC !rom te co%ntry engaged as apprentices and Kimpro8ersL, i0e0, men getting additional
training0 5ese s@ell te n%mber o! ands !or @ic te 'ondon ind%strial deat-rates are
comp%ted0 A%t tey do not proportionally contrib%te to te n%mber o! deats in 'ondon beca%se
teir stay tere is only temporary0 &! tey !all ill d%ring tis period, tey ret%rn to teir omes in
te co%ntry, @ere teir deat is registered i! tey die0 5is circ%mstance a!!ects te earlier ages
still more and renders te 'ondon deat-rates !or tese age gro%ps completely 8al%eless as
indexes o! te ill-e!!ects o! ind%stry on ealt Bp0 3=C0
5e case o! te type-setters is similar to tat o! te tailors0 &n addition to lack o! 8entilation, to
poisoned air, etc0, tere is still nigt-@ork to be mentioned0 5eir reg%lar @orking-time is 1< to 13
o%rs, sometimes 1+ to 160
K:reat eat and !o%lness @ic begin @en te gas-
Hets are lit0 000 &t not in!reD%ently appens tat !%mes
!rom a !o%ndry, or !o%l odo%rs !rom macinery or
sinks, rise !rom te lo@er room, and aggra8ate te
e8ils o! te %pper one0 5e eated air o! te lo@er
rooms al@ays tends to eat te %pper by @arming te
!loor, and @en te rooms are lo@, and te
cons%mption o! gas great, tis is a serio%s e8il, and
6< ;apter 4
one only s%rpassed in te case @ere te steam-
boilers are placed in te lo@er room, and s%pply
%n@ised-!or eat to te @ole o%se0000 ?s a general
expression, it may be stated tat %ni8ersally te
8entilation is de!ecti8e, and D%ite ins%!!icient to
remo8e te eat and te prod%cts o! te comb%stion o!
gas in te e8ening and d%ring te nigt, and tat in
many o!!ices, and partic%larly in tose made !rom
d@elling-o%ses, te condition is most deplorable0 000
?nd in some o!!ices Bespecially tose o! @eekly
ne@spapersC tere @ill be @ork I @ork too, in @ic
boys bet@een 1< and 16 years o! age take eD%al part
o! or almost %ninterr%pted periods o! t@o days and a
nigt at a time# I @ile, in oter printing-o!!ices
@ic lay temsel8es o%t !or te doing o! "%rgent"
b%siness, $%nday gi8es no relaxation to te @orkman,
and is @orking-days become se8en instead o! six in
e8ery @eekL Bpp0 <6, <8C0
5e milliners and dress-makers a8e already attracted o%r attention in Aook & BKap0 4&&&, 3, $0
<2*N<21C /Englis edition: ;0 J, 3, pp0 <+2-++0 I 0d01 in respect to o8er@ork0 5eir @orksops
are described in o%r report by 7r0 3rd0 E8en i! better d%ring te day, tey become o8ereated,
!o%l, and %nealty d%ring te o%rs in @ic gas is b%rned0 7r0 3rd !o%nd in 32 sops o! te
better sort tat te a8erage n%mber o! c%bic !eet per @orker @as as !ollo@s:
K000 &n !o%r cases more tan +==, in !o%r oter cases
!rom 2== to +==, 000 in se8en oters !rom <== to <+=,
in !o%r oters !rom 1+= to <==, and in nine oters only
!rom 1== to 1+=0 5e largest o! tese allo@ances
@o%ld b%t be scanty !or contin%o%s @ork, %nless te
space @ere toro%gly @ell 8entilated# and, except
@it extraordinary 8entilation, its atmospere co%ld
not be tolerably @olesome d%ring gas-ligt0L
?nd ere is 7r0 3rd"s remark abo%t one o! te minor @orksops @ic e 8isited, operated !or te
acco%nt o! a middleman:
K3ne room area in c%bical !eet, 1,<8=# persons
present, 12# area to eac, in c%bical !eet, *10+0 5e
@omen ere @ere @eary-looking and sD%alid# teir
earnings @ere stated to be >s0 to 1+s0 a @eek, and teir
63 ;apter 4
tea0 000 6o%rs 8 a0 m0 to 8 p0 m0 5e small room into
@ic tese 12 persons @ere cro@ded @as ill-
8entilated0 5ere @ere t@o mo8able @indo@s and a
!ire-place, b%t te latter @as blocked %p and tere @as
no special 8entilation o! any kindL Bp0 <>C0
5e same report states @it re!erence to te o8er@ork o! milliners and dress-makers:
K000 5e o8er@ork o! te yo%ng @omen in !asionable
dress-making establisments does not, !or more tan
abo%t !o%r monts o! te year, pre8ail in tat
monstro%s degree @ic as on many occasions
excited momentary p%blic s%rprise and indignation#
b%t !or te indoor ands d%ring tese monts it @ill,
as a r%le, be o! !%ll 12 o%rs a day, and @ill, @en
tere is press%re, be, !or days togeter, o! 1> or e8en
18 o%rs0 ?t oter times o! te year te @ork o! te
indoor ands ranges probably !rom 1= to 12 o%rs#
and %ni!ormly te o%rs !or o%tdoor ands are 1< or
130 For mantle-makers, collar-makers, sirt-makers,
and 8ario%s oter classes o! needle@orkers Bincl%ding
persons @o @ork at te se@ing-macineC te o%rs
spent in te common @orkroom are !e@er I generally
not more tan 1= to 1< o%rs# b%t, says 7r0 3rd, te
reg%lar o%rs o! @ork are s%bHect to considerable
extension in certain o%ses at certain times, by te
practice o! @orking extra o%rs !or extra pay, and in
oter o%ses by te practice o! taking @ork a@ay
!rom o%ses o! b%siness, to be done a!ter o%rs at
ome, bot practices being, it may be added, o!ten
comp%lsoryL Bp0 <8C0
Pon $imon remarks in a !ootnote to tis page:
KMr0 )adcli!!e, 000 te 6onorary $ecretary o! te
Epidemiological $ociety, 000 appening to a8e
%n%s%al opport%nities !or D%estioning te yo%ng
@omen employed in !irst-class o%ses o! b%siness 000
as !o%nd tat in only one o%t o! t@enty girls
62 ;apter 4
examined @o called temsel8es "D%ite @ell" co%ld te
state o! ealt be prono%nced good# te rest exibiting
in 8ario%s degrees e8idences o! depressed pysical
po@er, ner8o%s exa%stion, and n%mero%s !%nctional
disorders tere%pon dependent0 6e attrib%tes tese
conditions in te !irst place to te lengt o! te o%rs
o! @ork I te minim%m o! @ic e estimates at 1<
o%rs a day o%t o! te season# and secondarily to 000
cro@ding and bad 8entilation o! @orkrooms, gas-
8apo%rs, ins%!!iciency or bad D%ality o! !ood, and
inattention to domestic com!ort0L
5e concl%sion arri8ed at by te cie! o! te Englis Aoard o! 6ealt is tat
Kit is practically impossible !or @orkpeople to insist
%pon tat @ic in teory is teir !irst sanitary rigt I
te rigt tat @ate8er @ork teir employer assembles
tem to do, sall, so !ar as depends %pon im, be, at
is cost, di8ested o! all needlessly %n@olesome
circ%mstances# 000 @ile @orkpeople are practically
%nable to exact tat sanitary H%stice !or temsel8es,
tey also Bnot@itstanding te pres%med intentions o!
te la@C cannot expect any e!!ect%al assistance !rom
te appointed administrators o! te -%isances
)emo8al ?ctsL Bp0 <*C0I K7o%btless tere may be
some small tecnical di!!ic%lty in de!ining te exact
line at @ic employers sall become s%bHect to
reg%lation0 A%t 000 in principle, te sanitary claim is
%ni8ersal0 ?nd in te interest o! myriads o! labo%ring
men and @omen, @ose li8es are no@ needlessly
a!!licted and sortened by te in!inite pysical
s%!!ering @ic teir mere employment engenders, &
@o%ld 8ent%re to express my ope, tat %ni8ersally
te sanitary circ%mstances o! labo%r may, at least so
!ar, be bro%gt @itin appropriate pro8isions o! la@,
tat te e!!ecti8e 8entilation o! all indoor @orkplaces
may be ens%red, and tat in e8ery nat%rally
6+ ;apter 4
insal%brio%s occ%pation te speci!ic ealt-
endangering in!l%ence may as !ar as practicable be
red%cedL Bp0 31C0
III. conom# In The Generation And
Transmission "f Po$er% And In &uildings
&n is 3ctober 18+< report '0 6orner D%otes a letter o! te !amo%s engineer Pames -asmyt o!
,atricro!t, te in8entor o! te steam-ammer, @ic, among oter tings, contains te !ollo@ing:
K0005e p%blic are little a@are o! te 8ast increase in
dri8ing po@er @ic as been obtained by s%c
canges o! system and impro8ements Bo! steam-
enginesC as & all%de to0 5e engine po@er o! tis
district B'ancasireC lay %nder te inc%b%s o! timid
and preH%diced traditions !or nearly !orty years, b%t
no@ @e are appily emancipated0 7%ring te last
!i!teen years, b%t more especially in te co%rse o! te
last !o%r years Bsince 1828C, some 8ery important
canges a8e taken place in te system o! @orking
condensing steam-engines0 000 5e res%lt 000 as been to
realise a m%c greater amo%nt o! d%ty or @ork
per!ormed by te identical engines, and tat again at a
8ery considerable red%ction o! te expendit%re o! !%el0
000 For a great many years a!ter te introd%ction o!
steam-po@er into te mills and man%!actories o! te
abo8e-named districts, te 8elocity o! @ic, it @as
considered proper to @ork condensing steam-engines
@as abo%t <<= !eet per min%te o! te piston# tat is to
say, an engine @it a +-!eet stroke @as restricted by
"r%le" to make << re8ol%tions o! te cranksa!t per
min%te0 Aeyond tis speed it @as not considered
pr%dent or desirable to @ork te engine# and as all te
mill gearing 000 @ere made s%itable to tis <<= !eet per
min%te speed o! piston, tis slo@ and abs%rdly
restricted 8elocity r%led te @orking o! s%c engines
!or many years0 6o@e8er, at lengt, eiter tro%g
!ort%nate ignorance o! te "r%le", or by better reasons
66 ;apter 4
on te part o! some bold inno8ator, a greater speed
@as tried, and as te res%lt @as igly !a8o%rable,
oters !ollo@ed te example, by, as it is termed,
"letting te engine a@ay", namely, by so modi!ying te
proportions o! te !irst motion @eels o! te mill
gearing as to permit te engine to r%n at 3== !eet and
%p@ards per min%te, @ile te mill gearing generally
@as kept at its !ormer speed0000 5is "letting te engine
a@ay"000 as led to te almost %ni8ersal "speeding" o!
engines, beca%se it @as pro8ed tat not only @as tere
a8ailable po@er gained !rom te identical engines, b%t
also as te iger 8elocity o! te engine yielded a
greater moment%m in te !ly-@eel te motion @as
!o%nd to be m%c more reg%lar0000 We 000 obtain more
po@er !rom a steam-engine by simply permitting its
piston to mo8e at a iger 8elocity Bpress%re o! steam
and 8ac%%m in te condenser remaining te sameC0000
5%s, !or example, s%ppose any gi8en engine yields
2= orse-po@er @en its piston is tra8elling at <==
!eet per min%te, i! by s%itable arrangement or
modi!ication @e can permit tis same engine to r%n at
s%c a speed as tat its piston @ill tra8el tro%g
space at 2== !eet per min%te Bpress%re o! steam and
8ac%%m, as be!ore said, remaining te sameC, @e sall
ten a8e H%st do%ble te po@er 000 and as te press%re
by steam and 8ac%%m is te same in bot cases, te
strain %pon te parts o! tis engine @ill be no greater
at 2== tan at <== !eet speed o! piston, so tat te risk
o! "break-do@n" does not materially increase @it te
increase o! speed0 ?ll te di!!erence is, tat @e sall
in s%c case cons%me steam at a rate proportional to
te speed o! piston, or nearly so# and tere @ill e
some small increase in te @ear and tear o! "te
brasses" or r%bbing-parts, b%t so sligt as to be
scarcely @ort notice0000 A%t in order to obtain
increase o! po@er !rom te same engine by permitting
6> ;apter 4
its piston to tra8el at a iger 8elocity it is reD%isite 000
to b%m more coal per o%r %nder te same boiler, or
employ boilers o! greater e8aporating capabilities,
i0e0, greater steam-generating po@ers0 5is
accordingly @as done, and boilers o! greater steam-
generating or @ater-e8aporating po@ers @ere s%pplied
to te old "speeded" engines, and in many cases near
1== per cent more @ork @as got o%t o! te identical
engines by means o! s%c canges as abo8e named0
?bo%t ten years ago te extraordinary economical
prod%ction o! po@er as realised by te engines
employed in te mining operations o! ;orn@all began
to attract attention# and as competition in te spinning
trade !orced man%!act%rers to look to "sa8ings" as te
cie! so%rce o! pro!its, te remarkable di!!erence in
te cons%mption o! coal per orsepo@er per o%r, as
indicated by te per!ormance o! te ;ornis engines,
as also te extraordinary economical per!ormance o!
Wool!"s do%ble-cylinder engines, began to attract
increased attention to te s%bHect o! economy o! !%el
in tis district, and as te ;ornis and do%ble-cylinder
engines ga8e a orse-po@er !or e8ery 3Z to 2 lbs o!
coal per o%r, @ile te generality o! cotton-mill
engines @ere cons%ming 8 or 1< po%nds per orse per
o%r, so remarkable a di!!erence ind%ced mill-o@ners
and engine-makers in tis district to endea8o%r to
realise, by te adoption o! similar means, s%c
extraordinary economical res%lts as @ere pro8ed to be
common in ;orn@all and France, @ere te ig
price o! coal ad compelled man%!act%rers to look
more sarply to s%c costly departments o! teir
establisments0 5e res%lt o! tis increased attention
to economy o! !%el as been most important in many
respects0 &n te !irst place, many boilers, te al! o!
@ose s%r!ace ad been in te good old times o! ig
pro!its le!t exposed D%ite naked to te cold air, began
68 ;apter 4
to get co8ered @it tick blankets o! !elt, and brick
and plaster, and oter modes and means @ereby to
pre8ent te escape o! tat eat !rom teir exposed
s%r!ace @ic ad cost so m%c !%el to maintain0
$team-pipes began to be "protected" in te same
manner, and te o%tside o! te cylinder o! te engine
!elted and cased in @it @ood in like manner0 -ext
came te %se o! "ig steam", namely, instead o!
a8ing te sa!ety-8al8e loaded so as to blo@ o!! at 2,
6, or 8 lbs to te sD%are inc, it @as !o%nd tat by
raising te press%re to 12 or <= lbs 000 a 8ery decided
economy o! !%el res%lted# in oter @ords, te @ork o!
te mill @as per!ormed by a 8ery notable red%ced
cons%mption o! coals, 000 and tose @o ad te means
and te boldness carried te increased press%re and
"expansion system" o! @orking to te !%ll extent, by
employing properly constr%cted boilers to s%pply
steam o! 3=, 2=, +=, 6=, and >= lbs to te sD%are inc#
press%res @ic @o%ld a8e !rigtened an engineer o!
te old scool o%t o! is @its0 A%t as te economic
res%lts o! so increasing te press%re o! steam000 soon
appeared in most %nmistakable V s0 d0 !orms, te %se
o! ig-press%re steam-boilers !or @orking
condensing engines became almost general0 ?nd tose
@o desired to go to te !%ll extent 000 soon adopted
te employment o! te Wool! engine in its !%ll
integrity, and most o! o%r mills lately b%ilt are @orked
by te Wool! engines, namely, tose on @ic tere
are t@o cylinders to eac engine, in one o! @ic te
ig-press%re steam !rom te boiler exerts or yields
po@er by its excess o! press%re o8er tat o! te
atmospere, @ic, instead o! te said ig-press%re
steam being let pass o!! at te end o! eac stroke !ree
into te atmospere, is ca%sed to pass into a lo@-
press%re cylinder o! abo%t !o%r times te area o! te
!ormer, and a!ter d%e expansion passes to te
6* ;apter 4
condenser, te economic res%lt obtained !rom engines
o! tis class is s%c tat te cons%mption o! !%el is at
te rate o! !rom 3Z to 2 lbs0 o! coal per orse per
o%r# @ile in te engines o! te old system te
cons%mption %sed to be on te a8erage !rom 1< to 12
lbs0 per orse per o%r0 Ay an ingenio%s arrangement,
te Wool! system o! do%ble cylinder or combined
lo@- and ig-press%re engine as been introd%ced
extensi8ely to already existing engines, @ereby teir
per!ormance as been increased bot as to po@er and
economy o! !%el0 5e same res%lt 000 as been in %se
tese eigt or ten years, by a8ing a ig-press%re
engine so connected @it a condensing engine as to
enable te @aste steam o! te !ormer to pass on to and
@ork te latter0 5is system is in many cases 8ery
con8enient0
K&t @o%ld not be 8ery easy to get an exact ret%rn as to
te increase o! per!ormance or @ork done by te
identical engines to @ic some or all o! tese
impro8ements a8e been applied# & am con!ident,
o@e8er, 000 tat !rom te same @eigt o! steam-
engine macinery @e are no@ obtaining at least +=
per cent more d%ty or @ork per!ormed on te a8erage,
and tat in many cases, te identical steam-engines
@ic in te days o! te restricted speed o! <<= !eet
per min%te yielded += orse-po@er, are no@ yielding
%p@ards o! 1==0 5e 8ery economical res%lts deri8ed
!rom te employment o! ig-press%re steam in
@orking condensing steam-engines, togeter @it te
m%c iger po@er reD%ired by mill extensions !rom
te same engines, as @itin te last tree years led to
te adoption o! t%b%lar boilers, yielding a m%c more
economical res%lt tan tose !ormerly employed in
generating steam !or mill engines0L B)eports o! &nsp0
o! Fact0, 3ctober 18+<, pp0 <3-<>0C
>= ;apter 4
Wat applies to po@er generation also applies to po@er transmission and @orking macinery0
K5e rapid strides @it @ic impro8ement in
macinery as ad8anced @itin tese !e@ years a8e
enabled man%!act%rers to increase prod%ction @ito%t
additional mo8ing po@er0 5e more economical
application o! labo%r as been rendered necessary by
te diminised lengt o! te @orking-day, and in most
@ell-reg%lated mills an intelligent mind is al@ays
considering in @at manner prod%ction can be
increased @it decreased expendit%re0 & a8e be!ore
me a statement, kindly prepared by a 8ery intelligent
gentleman in my district, so@ing te n%mber o!
ands employed, teir ages, te macines at @ork,
and te @ages paid !rom 182= to te present time0 &n
3ctober 182=, is !irm employed 6== ands, o! @om
<== @ere %nder 13 years o! age0 &n 3ctober last, 3+=
ands @ere employed, o! @om 6= only @ere %nder
13# te same n%mber o! macines, @itin 8ery !e@,
@ere at @ork, and te same s%m in @ages @as paid at
bot periods0 K B)edgra8e"s )eport in )eports o! &nsp0
o! Fact0, 3ct0 18+<, pp0 +8-+*0C
5ese impro8ements o! te macinery do not so@ teir !%ll e!!ect %ntil tey are %sed in ne@,
appropriately arranged !actories0
K?s regards te impro8ement made in macinery, &
may say in te !irst place tat a great ad8ance as
been made in te constr%ction o! mills adapted to
recei8e impro8ed macinery0000 &n te bottom room &
do%ble all my yarn, and %pon tat single !loor & sall
p%t <*,=== do%bling spindles0 & e!!ect a sa8ing o!
labo%r in te room and sed o! at least 1= per cent, not
so m%c !rom any impro8ement in te principle o!
do%bling yarn, b%t !rom a concentration o! macinery
%nder a single management# and & am enabled to dri8e
te said n%mber o! spindles by one single sa!t, a
sa8ing in sa!ting, compared @it @at oter !irms
a8e to %se to @ork te same n%mber o! spindles, o!
>1 ;apter 4
6= per cent, in some cases 8= per cent0 5ere is a large
sa8ing in oil, and sa!ting, and in grease0000 Wit
s%perior mill arrangements and impro8ed macinery,
at te lo@est estimate & a8e e!!ected a sa8ing in
labo%r o! 1= per cent, a great sa8ing in po@er, coal,
oil, tallo@, sa!ting and strapping0L BE8idence o! a
cotton spinner, )eports o! &nsp0 o! Fact0, 3ct0 1863,
pp0 1=*, 11=0C
IV. 'tilisation "f The !cretions "f Production
5e capitalist mode o! prod%ction extends te %tilisation o! te excretions o! prod%ction and
cons%mption0 Ay te !ormer @e mean te @aste o! ind%stry and agric%lt%re, slid by te latter
partly te excretions prod%ced by te nat%ral excange o! matter in te %man body and partly
te !orm o! obHects tat remains a!ter teir cons%mption0 &n te cemical ind%stry, !or instance,
excretions o! prod%ction are s%c by-prod%cts as are @asted in prod%ction on a smaller scale# iron
!ilings acc%m%lating in te man%!act%re o! macinery and ret%rning into te prod%ction o! iron as
ra@ material, etc0 Excretions o! cons%mption are te nat%ral @aste matter discarged by te
%man body, remains o! cloting in te !orm o! rags, etc0 Excretions o! cons%mption are o! te
greatest importance !or agric%lt%re0 $o !ar as teir %tilisation is concerned, tere is an enormo%s
@aste o! tem in te capitalist economy0 &n 'ondon, !or instance, tey !ind no better %se !or te
excretion o! !o%r and a al! million %man beings tan to contaminate te 5ames @it it at
ea8y expense0
)ising prices o! ra@ materials nat%rally stim%late te %tilisation o! @aste prod%cts0
5e general reD%irements !or te re-employment o! tese excretions are: large D%antities o! s%c
@aste, s%c as are a8ailable only in large-scale prod%ction# impro8ed macinery @ereby
materials, !ormerly %seless in teir pre8ailing !orm, are p%t into a state !it !or ne@ prod%ction#
scienti!ic progress, partic%larly o! cemistry, @ic re8eals te %se!%l properties o! s%c @aste0 &t
is tr%e tat great sa8ings o! tis sort are also obser8ed in small-scale agric%lt%re, as pre8ails in,
say, 'ombardy, so%tern ;ina, and Papan0 A%t on te @ole, te prod%cti8ity o! agric%lt%re
%nder tis system obtains !rom te prodigal %se o! %man labo%r-po@er, @ic is @iteld !rom
oter speres o! prod%ction0
5e so-called @aste plays an important role in almost e8ery ind%stry0 5%s, te Factory )eport !or
7ecember 1863 mentions as one o! te principal reasons @y te Englis and many o! te &ris
!armers do not like to gro@ !lax, or do so b%t rarely,
Kte great @aste 000 @ic as taken place at te little
@ater sc%tc mills 000 te @aste in cotton is
comparati8ely small, b%t in !lax 8ery large0 5e
e!!iciency o! @ater steeping and o! good macine
sc%tcing @ill red%ce tis disad8antage 8ery
considerably0000 Flax, sc%tced in &reland in a most
same!%l @ay, and a large percentage act%ally lost by
>< ;apter 4
it, eD%al to <8 or 3= per centL B)eports o! &nsp0 o!
Fact0, 7ec0 1863, pp0 13*, 12<C
@ereas all tis migt be a8oided tro%g te %se o! better macinery0 $o m%c to@ !ell by te
@ayside tat te !actory inspector reports:
K& a8e been in!ormed @it regard to some o! te
sc%tc mills in &reland, tat te @aste made at tem
as o!ten been %sed by te sc%tcers to b%rn on teir
!ires at ome, and yet it is 8ery 8al%ableL Bp0 12= o!
te abo8e reportC0
We sall speak o! cotton @aste later, @en @e deal @it te price !l%ct%ations o! ra@ materials0
5e @ool ind%stry @as sre@der tan te !lax man%!act%rers0
K&t @as once te common practice to decry te
preparation o! @aste and @oollen rags !or re-
man%!act%re, b%t te preH%dice as entirely s%bsided
as regards te soddy trade, @ic as become an
important branc o! te @oollen trade o! .orksire,
and do%btless te cotton @aste trade @ill be
recognised in te same manner as s%pplying an
admitted @ant0 5irty years since, @oollen rags, i0e0,
pieces o! clot, old clotes, etc0, o! noting b%t @ool,
@o%ld a8erage abo%t V2 2s0 per ton in price: @itin
te last !e@ years tey a8e become @ort V22 per
ton, and te demand !or tem as so increased tat
means a8e been !o%nd !or %tilising te rags o! !abrics
o! cotton and @ool mixed by destroying te cotton
and lea8ing te @ool intact, and no@ to%sands o!
operati8es are engaged in te man%!act%re o! soddy,
!rom @ic te cons%mer as greatly bene!ited in
being able to p%rcase clot o! a !air and a8erage
D%ality at a 8ery moderate price0L B)eports o! &nsp0 o!
Fact0, 3ct0 1863, p0 1=>0C
Ay te end o! 186< te reH%8enated soddy made %p as m%c as one-tird o! te entire
cons%mption o! @ool in Englis ind%stry0 B)eports o! &nsp0 o! Fact0, 3ctober 186<, p0 810C 5e
Kbig bene!itL !or te Kcons%merL is tat is soddy clotes @ear o%t in H%st one-tird o! te
pre8io%s time and t%rn treadbare in one-sixt o! tis time0
5e Englis silk ind%stry mo8ed along te same do@n@ard pat0 5e cons%mption o! gen%ine
ra@ silk decreased some@at bet@een 183* and 186<, @ile tat o! silk @aste do%bled0 &mpro8ed
>3 ;apter 4
macinery elped to man%!act%re a silk %se!%l !or many p%rposes !rom tis oter@ise rater
@ortless st%!!0
5e most striking example o! %tilising @aste is !%rnised by te cemical ind%stry0 &t %tilises not
only its o@n @aste, !or @ic it !inds ne@ %ses, b%t also tat o! many oter ind%stries0 For
instance, it con8erts te !ormerly almost %seless gas-tar into aniline dyes, aliEarin, and, more
recently, e8en into dr%gs0
5is economy o! te excretions o! prod%ction tro%g teir re-employment is to be disting%ised
!rom economy tro%g te pre8ention o! @aste, tat is to say, te red%ction o! excretions o!
prod%ction to a minim%m, and te immediate %tilisation to a maxim%m o! all ra@ and a%xiliary
materials reD%ired in prod%ction0
)ed%ction o! @aste depends in part on te D%ality o! te macinery in %se0 Economy in oil, soap,
etc0, depends on o@ @ell te mecanical parts are macined and polised0 5is re!ers to te
a%xiliary materials0 &n part, o@e8er, and tis is most important, it depends on te D%ality o! te
employed macines and tools @eter a larger or smaller portion o! te ra@ material is t%rned
into @aste in te prod%ction process0 Finally, tis depends on te D%ality o! te ra@ material itsel!0
5is, in t%rn, depends partly on te de8elopment o! te extracti8e ind%stry and agric%lt%re @ic
prod%ce te ra@ material Bstrictly speaking on te progress o! ci8ilisationC, and partly on te
impro8ement o! processes tro%g @ic ra@ materials pass be!ore tey enter into man%!act%re0
K,armentier as demonstrated tat te art o! grinding
grain as impro8ed 8ery materially in France since a
none too distant epoc, !or instance te time o! 'o%is
J&4, so tat te ne@ mills, compared to te old, can
make %p to al! as m%c more bread !rom te same
amo%nt o! grain0 5e ann%al cons%mption o! a
,arisian, indeed, as !irst been estimated at 2 setiers
o! grain, ten at 3, !inally at <, @ile no@adays it is
only 1X setiers, or abo%t 32< lbs per capita0000 &n te
,erce, @ere & a8e li8ed !or a long time, te cr%de
mills o! granite and trap rock millstones a8e been
mostly reb%ilt according to te r%les o! mecanics
@ic as made s%c rapid progress in te last 3=
years0 5ey a8e been pro8ided @it good millstones
!rom 'a FertF, a8e gro%nd te grain t@ice, te
milling sack as been gi8en a circ%lar motion, and te
o%tp%t o! !lo%r !rom te same amo%nt o! grain as
increased 1N60 5e enormo%s discrepancy bet@een te
daily grain cons%mption o! te )omans and o%rsel8es
is tere!ore easily explained0 &t is d%e simply to
imper!ect metods o! milling and bread-making0 5is
is te @ay & !eel & m%st explain a remarkable
>2 ;apter 4
obser8ation made by ,liny, J4&&&, ;0 <=, <: 00, "5e
!lo%r @as sold in )ome, depending on its D%ality, at
2=, 28 or *6 as per modi%s0 5ese prices, so ig in
proportion to te contemporaneo%s grain prices, are
d%e to te imper!ect state o! te mills o! tat period,
@ic @ere still in teir in!ancy, and te res%ltant
ea8y cost o! milling0L" B7%rea% de la Malle,
8conomie &oliti3ue des 9omains, ,aris, 182=, &, pp0
<8=-810C
V. conom# Through Inventions
5ese sa8ings in te application o! !ixed capital are, @e repeat, d%e to te employment o! te
conditions o! labo%r on a large scale# in sort, are d%e to te !act tat tese ser8e as conditions o!
directly social, or socialised labo%r or direct co-operation @itin te process o! prod%ction0 3n
te one and, tis is te indispensable reD%irement !or te %tilisation o! mecanical and cemical
in8entions @ito%t increasing te price o! te commodity, and tis is al@ays teconditio sine 3ua
non0 3n te oter and, only prod%ction on a large scale permits te sa8ings deri8ed !rom co-
operati8e prod%cti8e cons%mption0 Finally, it is only te experience o! te combined labo%rer
@ic disco8ers and re8eals te @ere and o@ o! sa8ing, te simplest metods o! applying te
disco8eries, and te @ays to o8ercome te practical !rictions arising !rom carrying o%t te teory
I in its application to te prod%ction process I etc0
&ncidentally, a distinction so%ld be made bet@een %ni8ersal labo%r and co-operati8e labo%r0 Aot
kinds play teir role in te process o! prod%ction, bot !lo@ one into te oter, b%t bot are also
di!!erentiated0 (ni8ersal labo%r is all scienti!ic labo%r, all disco8ery and all in8ention0 5is labo%r
depends partly on te co-operation o! te li8ing, and partly on te %tilisation o! te labo%rs o!
tose @o a8e gone be!ore0 ;o-operati8e labo%r, on te oter and, is te direct co-operation o!
indi8id%als0
5e !oregoing is corroborated by !reD%ent obser8ation, to @it:
1C 5e great di!!erence in te cost o! te !irst model o! a ne@ macine and tat o! its
reprod%ction Bregarding @ic, see (re /4he &hilosophy of Manufactures, $econd
edition, 'ondon, 18++0 I 0d01 and Aabbage /:n the 0conomy of Machinery and
Manufactures, 'ondon, 183<, pp0 <8=-810 I 0d01C0
<C 5e !ar greater cost o! operating an establisment based on a ne@ in8ention as
compared to later establisments arising e suis ossibus0 5is is so 8ery tr%e tat te trail-
blaEers generally go bankr%pt, and only tose @o later b%y te b%ildings, macinery,
etc0, at a ceaper price, make money o%t o! it0 &t is, tere!ore, generally te most
@ortless and miserable sort o! money-capitalists @o dra@ te greatest pro!it o%t o! all
ne@ de8elopments o! te %ni8ersal labo%r o! te %man spirit and teir social application
tro%g combined labo%r0
Chapter 6. The Efect of Price Fluctuation
I. (luctuations in the Price of )a$ *aterials%
and their +irect ,ects on the )ate of Pro-t
5e ass%mption in tis case, as in pre8io%s ones, is tat no cange takes place in te rate o!
s%rpl%s-8al%e0 &t is necessary to analyse te case in its p%re !orm0 6o@e8er, it migt be possible
!or a speci!ic capital, @ose rate o! s%rpl%s-8al%e remains %ncanged, to employ an increasing or
decreasing n%mber o! labo%rers, in conseD%ence o! contraction or expansion ca%sed by s%c
!l%ct%ations in te price o! ra@ materials as @e are to analyse ere0 &n tat case te D%antity o!
s%rpl%s-8al%e migt 8ary, @ile te rate o! s%rpl%s-8al%e remains te same0 .et tis so%ld also be
disregarded ere as a side-iss%e0 &! impro8ements o! macinery and canges in te price o! ra@
materials sim%ltaneo%sly in!l%ence eiter te n%mber o! labo%rers employed by a de!inite capital,
or te le8el o! @ages, one as b%t to p%t togeter 1C te e!!ect ca%sed by te 8ariations o! constant
capital on te rate o! pro!it, and <C te e!!ect ca%sed by 8ariations in @ages on te rate o! pro!it0
5e res%lt is ten obtained o! itsel!0
A%t in general, it so%ld be noted ere, as in te pre8io%s case, tat i! 8ariations take place, eiter
d%e to sa8ings in constant capital, or d%e to !l%ct%ations in te price o! ra@ materials, tey al@ays
a!!ect te rate o! pro!it, e8en i! tey lea8e te @age, ence te rate and amo%nt o! s%rpl%s-8al%e,
%nto%ced0 5ey cange te magnit%de o! ; in s" B8N;C, and t%s te 8al%e o! te @ole !raction0
&t is tere!ore immaterial, in tis case as @ell I in contrast to @at @e !o%nd in o%r analysis o!
s%rpl%s-8al%e I in @ic spere o! prod%ction tese 8ariations occ%r# @eter or not te
prod%ction brances a!!ected by tem prod%ce necessities !or labo%rers, or constant capital !or te
prod%ction o! s%c necessities0 5e ded%ctions made ere are eD%ally 8alid !or 8ariations
occ%rring in te prod%ction o! l%x%ry articles, and by l%x%ry articles @e ere mean all prod%ction
tat does not ser8e te reprod%ction o! labo%r-po@er0
5e ra@ materials ere incl%de a%xiliary materials as @ell, s%c as indigo, coal, gas, etc0
F%rtermore, so !ar as macinery is concerned %nder tis ead, its o@n ra@ material consists o!
iron, @ood, leater, etc0 &ts o@n price is tere!ore a!!ected by !l%ct%ations in te price o! ra@
materials %sed in its constr%ction0 5o te extent tat its price is raised tro%g !l%ct%ations, eiter
in te price o! te ra@ materials o! @ic it consists, or o! te a%xiliary materials cons%med in its
operation, te rate o! pro!it !alls pro tanto0 ?nd 8ice 8ersa0
&n te !ollo@ing analysis @e sall con!ine o%rsel8es to !l%ct%ations in te price o! ra@ materials,
not so !ar as tey go to make %p te ra@ materials o! macinery ser8ing as means o! labo%r or as
a%xiliary materials applied in its operation, b%t in so !ar as tey enter te process in @ic
commodities are prod%ced0 5ere is H%st one ting to be noted ere: te nat%ral @ealt in iron,
coal, @ood, etc0, @ic are te principal elements %sed in te constr%ction and operation o!
macinery, presents itsel! ere as a nat%ral !ertility o! capital and is a !actor determining te rate
o! pro!it irrespecti8e o! te ig or lo@ le8el o! @ages0
$ince te rate o! pro!it is sN;, or sNBc U 8C, it is e8ident tat e8ery ting ca%sing a 8ariation in te
magnit%de o! c, and tereby o! ;, m%st also bring abo%t a 8ariation in te rate o! pro!it, e8en i! s
and 8, and teir m%t%al relation, remain %naltered0 -o@, ra@ materials are one o! te principal
components o! constant capital0 E8en in ind%stries @ic cons%me no act%al ra@ materials, tese
enter te pict%re as a%xiliary materials or components o! macinery, etc0, and teir price
!l%ct%ations t%s accordingly in!l%ence te rate o! pro!it0 $o%ld te price o! ra@ material !all by
an amo%nt R d, ten sN;, or sNBc U 8C becomes sNB; - dC, or sNBBc - dC U 8C0 5%s, te rate o! pro!it
>6 ;apter 4&&
rises0 ;on8ersely, i! te price o! ra@ material rises, ten sN;, or sNBc U 8C, becomes sNB; U dC, or sN
BBc U dC U 8C, and te rate o! pro!it !alls0 3ter conditions being eD%al, te rate o! pro!it, tere!ore,
!alls and rises in8ersely to te price o! ra@ material0 5is so@s, among oter tings, o@
important te lo@ price o! ra@ material is !or ind%strial co%ntries, e8en i! !l%ct%ations in te price
o! ra@ materials are not accompanied by 8ariations in te sales spere o! te prod%ct, and t%s
D%ite aside !rom te relation o! demand to s%pply0 &t !ollo@s !%rtermore tat !oreign trade
in!l%ences te rate o! pro!it, regardless o! its in!l%ence on @ages tro%g te ceapening o! te
necessities o! li!e0 5e point is tat it a!!ects te prices o! ra@ or a%xiliary materials cons%med in
ind%stry and agric%lt%re0 &t is d%e to an as yet imper!ect %nderstanding o! te nat%re o! te rate o!
pro!it and o! its speci!ic di!!erence !rom te rate o! s%rpl%s-8al%e tat, on te one and,
economists Blike 5orrens /)0 5orrens, +n 0ssay on the &roduction of "ealth, 'ondon, 18<1, p0 <8
et seD0 I 0d01C @rongly explain te marked in!l%ence o! te prices o! ra@ material on te rate o!
pro!it, @ic tey note tro%g practical experience, and tat, on te oter, economists like
)icardo /70 )icardo, :n the &rinciples of &olitical 0conomy, and 4aation, 5ird edition,
'ondon, 18<1, pp0 131-1380 I 0d01, @o cling to general principles, do not recognise te
in!l%ence o!, say, @orld trade on te rate o! pro!it0
5is makes clear te great importance to ind%stry o! tis elimination or red%ction o! c%stoms
d%ties on ra@ materials0 5e rational de8elopment o! te protecti8e tari!! system made te %tmost
red%ction o! import d%ties on ra@ materials one o! its cardinal principles0 5is, and te abolition
o! te d%ty on corn, @as te main obHect o! te Englis !ree-traders, @o @ere primarily
concerned @it a8ing te d%ty on cotton li!ted as @ell0
5e %se o! !lo%r in te cotton ind%stry may ser8e as an ill%stration o! te importance o! a price
red%ction !or an article @ic is not strictly a ra@ material b%t an a%xiliary and at te same time
one o! te principal elements o! no%risment0 ?s !ar back as 183>, )0 60 :reg
1
calc%lated tat
te 1==,=== po@er-looms and <+=,=== and-looms ten operating in te cotton-mills o! :reat
Aritain ann%ally cons%med 21 million lbs o! !lo%r to smoot te @arp0 6e added a tird o! tis
D%antity !or bleacing and oter processes, and estimated te total ann%al 8al%e o! te !lo%r so
cons%med at V32<,=== !or te preceding ten years0 ? comparison @it !lo%r prices on te
continent so@ed tat te iger !lo%r price !orced %pon man%!act%rers by corn tari!!s alone
amo%nted to V1>=,=== per year0 :reg estimated te s%m at a minim%m o! V<==,=== !or 183> and
cited a !irm !or @ic te !lo%r price di!!erence amo%nted to V1,=== ann%ally0 ?s a res%lt,
Kgreat man%!act%rers, to%gt!%l, calc%lating men o!
b%siness, a8e said tat ten o%rs" labo%r @o%ld be
D%ite s%!!icient, i! te ;orn 'a@s @ere repealedL0
B)eports o! &nsp0 o! Fact0, 3ct0 1828, p0 *80C
5e ;orn 'a@s @ere repealed0 $o @ere te d%ties on cotton and oter ra@ materials0 A%t no
sooner ad tis been accomplised tan te opposition o! te man%!act%rers to te 5en 6o%rs" Aill
became more 8iolent tan e8er0 ?nd @en te ten-o%r !actory day ne8erteless became a la@
soon a!ter, te !irst res%lt @as a general attempt to red%ce @ages0
5e 8al%e o! ra@ and a%xiliary materials passes entirely and all at one time into te 8al%e o! te
prod%ct in te man%!act%re o! @ic tey are cons%med, @ile te elements o! !ixed capital
trans!er teir 8al%e to te prod%ct only grad%ally in proportion to teir @ear and tear0 &t !ollo@s
tat te price o! te prod%ct is in!l%enced !ar more by te price o! ra@ materials tan by tat o!
!ixed capital, alto%g te rate o! pro!it is determined by te total 8al%e o! te capital applied no
matter o@ m%c o! it is cons%med in te making o! te prod%ct0 A%t it is e8ident I alto%g @e
merely mention it in passing, since @e ere still ass%me tat commodities are sold at teir 8al%es,
so tat price !l%ct%ations ca%sed by competition do not as yet concern %s I tat te expansion or
contraction o! te market depends on te price o! te indi8id%al commodity and is in8ersely
>> ;apter 4&&
proportional to te rise or !all o! tis price0 &t act%ally de8elops, tere!ore, tat te price o! te
prod%ct does not rise in proportion to tat o! te ra@ material, and tat it does not !all in
proportion to tat o! ra@ material0 ;onseD%ently, te rate o! pro!it !alls lo@er in one instance, and
rises iger in te oter tan @o%ld a8e been te case i! prod%cts @ere sold at teir 8al%e0
F%rter, te D%antity and 8al%e o! te employed macinery gro@s @it te de8elopment o! labo%r
prod%cti8ity b%t not in te same proportion as tis prod%cti8ity, i0 e0, not in te proportion in
@ic tis macinery increases its o%tp%t0 &n tose brances o! ind%stry, tere!ore, @ic do
cons%me ra@ materials, i0 e0, in @ic te s%bHect o! labo%r is itsel! a prod%ct o! pre8io%s labo%r,
te gro@ing prod%cti8ity o! labo%r is expressed precisely in te proportion in @ic a larger
D%antity o! ra@ material absorbs a de!inite D%antity o! labo%r, ence in te increasing amo%nt o!
ra@ material con8erted in, say, one o%r into prod%cts, or processed into commodities0 5e 8al%e
o! ra@ material, tere!ore, !orms an e8er-gro@ing component o! te 8al%e o! te commodity-
prod%ct in proportion to te de8elopment o! te prod%cti8ity o! labo%r, not only beca%se it passes
@olly into tis latter 8al%e, b%t also beca%se in e8ery aliD%ot part o! te aggregate prod%ct te
portion representing depreciation o! macinery and te portion !ormed by te ne@ly added labo%r
I bot contin%ally decrease0 3@ing to tis !alling tendency, te oter portion o! te 8al%e
representing ra@ material increases proportionally, %nless tis increase is co%nterbalanced by a
proportionate decrease in te 8al%e o! te ra@ material arising !rom te gro@ing prod%cti8ity o!
te labo%r employed in its o@n prod%ction0
F%rter, ra@ and a%xiliary materials, H%st like @ages, !orm parts o! te circ%lating capital and
m%st, tere!ore, be contin%ally replaced in teir entirety tro%g te sale o! te prod%ct, @ile
only te depreciation is to be rene@ed in te case o! macinery, and !irst o! all in te !orm o! a
reser8e !%nd0 &t is, moreo8er, in no @ay essential !or eac indi8id%al sale to contrib%te its sare to
tis reser8e !%nd, so long as te total ann%al sales contrib%te teir ann%al sare0 5is so@s again
o@ a rise in te price o! ra@ material can c%rtail or arrest te entire process o! reprod%ction i! te
price realised by te sale o! te commodities so%ld not s%!!ice to replace all te elements o!
tese commodities0 3r, it may make it impossible to contin%e te process on te scale reD%ired by
its tecnical basis, so tat only a part o! te macinery @ill remain in operation, or all te
macinery @ill @ork !or only a !raction o! te %s%al time0
Finally, te expense inc%rred tro%g @aste 8aries in direct proportion to te price !l%ct%ations o!
te ra@ material, rising, @en tey rise and !alling @en tey !all0 A%t tere is a limit ere as
@ell0 5e Factory )eport !or ?pril 18+= maintained:
K3ne so%rce o! considerable loss arising !rom an
ad8ance in te price o! te ra@ material @o%ld ardly
occ%r to any one b%t a practical spinner, 8iE0, tat
!rom @aste0 & am in!ormed tat @en cotton ad8ances,
te cost to te spinner, o! te lo@er D%alities
especially, is increased in a ratio beyond te ad8ance
act%ally paid, beca%se te @aste made in spinning
coarse yarns is !%lly 1+ per cent# and tis rate, @ile it
ca%ses a loss o! Zd0 per lb0 on cotton at 3Zd0 per lb0,
brings %p te loss to 1d0 per lb0 @en cotton ad8ances
to >d0L B)eports o! &nsp0 o! Fact0, ?pril 18+=, p0 1>0C
A%t @en, as a res%lt o! te ?merican ;i8il War, te price o! cotton rose to a le8el %neD%alled in
almost 1== years, te report read di!!erently:
>8 ;apter 4&&
K5e price no@ gi8en !or @aste, and its re-
introd%ction in te !actory in te sape o! cotton
@aste, go some @ay to compensate !or te di!!erence
in te loss by @aste, bet@een $%rat cotton and
?merican cotton, abo%t 1<Z per cent0
K5e @aste in @orking $%rat cotton being <+ per cent,
te cost o! te cotton to te spinner is enanced one-
!o%rt be!ore e as man%!act%red it0 5e loss by
@aste %sed not to be o! m%c moment @en ?merican
cotton @as +d0 or 6d0 per lb0, !or it did not exceed `d0
per lb0, b%t it is no@ o! great importance @en %pon
e8ery lb0 o! cotton @ic costs <s0 tere is a loss by
@aste eD%al to 6d0L
<
B)eports o! &nsp0 o! Fact0, 3ct0
1863, p0 1=60C
II. Appreciation% +epreciation% )elease And Tie.
'p "f Capital
5e penomena analysed in tis capter reD%ire !or teir !%ll de8elopment te credit system and
competition on te @orld-market, te latter being te basis and te 8ital element o! capitalist
prod%ction0 5ese more de!inite !orms o! capitalist prod%ction can only be compreensi8ely
presented, o@e8er, a!ter te general nat%re o! capital is %nderstood0 F%rtermore, tey do not
come @itin te scope o! tis @ork and belong to its e8ent%al contin%ation0 -e8erteless te
penomena listed in te abo8e title may be disc%ssed in a general @ay at tis stage0 5ey are
interrelated, !irst @it one anoter and, secondly, also @it te rate and amo%nt o! pro!it0 5ey are
to be brie!ly disc%ssed ere i! only beca%se tey create te impression tat not only te rate, b%t
also te amo%nt o! pro!it I @ic is act%ally identical @it te amo%nt o! s%rpl%s-8al%e I co%ld
increase or decrease independently o! te mo8ements o! te D%antity or rate o! s%rpl%s-8al%e0
?re @e to consider release and tie-%p o! capital, on te one and, and its appreciation and
depreciation, on te oter, as di!!erent penomenaQ
5e D%estion is @at @e mean by release and tie-%p o! capitalQ ?ppreciation and depreciation are
sel!-explanatory0 ?ll tey mean is tat a gi8en capital increases or decreases in 8al%e as a res%lt o!
certain general economic conditions, !or @e are not disc%ssing te partic%lar !ate o! an indi8id%al
capital0 ?ll tey mean, tere!ore, is tat te 8al%e o! a capital in8ested in prod%ction rises or !alls,
irrespecti8e o! its sel!-expansion by 8irt%e o! te s%rpl%s-labo%r employed by it0
Ay tie-%p o! capital @e mean tat certain portions o! te total 8al%e o! te prod%ct m%st be
recon8erted into elements o! constant and 8ariable capital i! prod%ction is to proceed on te same
scale0 Ay release o! capital @e mean tat a portion o! te total 8al%e o! te prod%ct @ic ad to
be recon8erted into constant or 8ariable capital %p to a certain time, becomes disposable and
s%per!l%o%s, so%ld prod%ction contin%e on te pre8io%s scale0 5is release or tie-%p o! capital is
di!!erent !rom te release or tie-%p o! re8en%e0 &! te ann%al s%rpl%s-8al%e o! an indi8id%al capital
; is, let %s say, eD%al to x, ten a red%ction in te price o! commodities cons%med by te
capitalists @o%ld make x I a s%!!icient to proc%re te same enHoyments, etc0, as be!ore0 ? portion
o! te re8en%e R a is released, tere!ore, and may ser8e eiter to increase cons%mption or to be
>* ;apter 4&&
recon8erted into capital B!or te p%rpose o! acc%m%lationC0 ;on8ersely, i! x U a is needed to
contin%e to li8e as be!ore, ten tis standard o! li8ing m%st eiter be red%ced or a portion o! te
pre8io%sly acc%m%lated income R a, expended as re8en%e0
?ppreciation and depreciation may a!!ect eiter constant or 8ariable capital, or bot, and in te
case o! constant capital it may, in t%rn, a!!ect eiter te !ixed, or te circ%lating portion, or bot0
(nder constant capital @e m%st consider te ra@ and a%xiliary materials, incl%ding semi-!inised
prod%cts, all o! @ic @e ere incl%de %nder te term o! ra@ materials, macinery, and oter
!ixed capital0
&n te preceding analysis @e re!erred especially to 8ariations in te price, or te 8al%e, o! ra@
materials in respect to teir in!l%ence on te rate o! pro!it, and determined te general la@ tat
@it oter conditions being eD%al, te rate o! pro!it is in8ersely proportional to te 8al%e o! te
ra@ materials0 5is is absol%tely tr%e !or capital ne@ly in8ested in a b%siness enterprise, in @ic
te in8estment, i0 e0, te con8ersion o! money into prod%cti8e capital, is only H%st taking place0
A%t aside !rom tis capital, @ic is being ne@ly in8ested, a large portion o! te already
!%nctioning capital is in te spere o! circ%lation, @ile anoter portion is in te spere o!
prod%ction0 3ne portion is in te market in te sape o! commodities @aiting to be con8erted into
money# anoter is on and as money, in @ate8er !orm, @aiting to be recon8erted into elements
o! prod%ction# !inally, a tird portion is in te spere o! prod%ction, partly in its original !orm o!
means o! prod%ction s%c as ra@ and a%xiliary materials, semi-!inised prod%cts p%rcased in te
market, macinery and oter !ixed capital, and partly in te !orm o! prod%cts @ic are in te
process o! man%!act%re0 5e e!!ect o! appreciation or depreciation depends ere to a great extent
on te relati8e proportion o! tese component parts0 'et %s, !or te sake o! simplicity, lea8e aside
all !ixed capital and consider only tat portion o! constant capital @ic consists o! ra@ and
a%xiliary materials, and semi-!inised prod%cts, and bot !inised commodities in te market and
commodities still in te process o! prod%ction0
&! te price o! ra@ material, !or instance o! cotton, rises, ten te price o! cotton goods I bot
semi-!inised goods like yarn and !inised goods like cotton !abrics I man%!act%red @ile cotton
@as ceaper, rises also0 $o does te 8al%e o! te %nprocessed cotton eld in stock, and o! te
cotton in te process o! man%!act%re0 5e latter beca%se it comes to represent more labo%r-time in
retrospect and t%s adds more tan its original 8al%e to te prod%ct @ic it enters, and more tan
te capitalist paid !or it0
6ence, i! te price o! ra@ materials rises, and tere is a considerable D%antity o! a8ailable
!inised commodities in te market, no matter @at te stage o! teir man%!act%re, te 8al%e o!
tese commodities rises, tereby enancing te 8al%e o! te existing capital0 5e same is tr%e !or
te s%pply o! ra@ materials, etc0, in te ands o! te prod%cer0 5is appreciation o! 8al%e may
compensate, or more tan compensate, te indi8id%al capitalist, or e8en an entire separate spere
o! capitalist prod%ction, !or te drop in te rate o! pro!it attending a rise in te price o! ra@
materials0 Wito%t entering into te detailed e!!ects o! competition, @e migt state !or te sake o!
toro%gness tat 1C i! a8ailable s%pplies o! ra@ material are considerable, tey tend to co%nteract
te price increase @ic occ%rred at te place o! teir origin# <C i! te semi-!inised and !inised
goods press 8ery ea8ily %pon te market, teir price is tereby pre8ented !rom rising
proportionately to te price o! teir ra@ materials0
5e re8erse takes place @en te price o! ra@ material !alls0 3ter circ%mstances remaining te
same, tis increases te rate o! pro!it0 5e commodities in te market, te articles in te process
o! prod%ction, and te a8ailable s%pplies o! ra@ material, depreciate in 8al%e and tereby
co%nteract te attendant rise in te rate o! pro!it0
5e e!!ect o! price 8ariations !or ra@ materials is te more prono%nced, te smaller te s%pplies
a8ailable in te spere o! prod%ction and in te market at, say, te close o! a b%siness year, i0e0,
a!ter te ar8est in agric%lt%re, @en great D%antities o! ra@ materials are deli8ered ane@0
8= ;apter 4&&
We proceed in tis entire analysis !rom te ass%mption tat te rise or !all in prices expresses
act%al !l%ct%ations in 8al%e0 A%t since @e are ere concerned @it te e!!ects s%c price 8ariations
a8e on te rate o! pro!it, it matters little @at is at te bottom o! tem0 5e present statements
apply eD%ally i! prices rise or !all %nder te in!l%ence o! te credit system, competition, etc0, and
not on acco%nt o! !l%ct%ations in 8al%e0
$ince te rate o! pro!it eD%als te ratio o! te excess o8er te 8al%e o! te prod%ct to te 8al%e o!
te total capital ad8anced, a rise ca%sed in te rate o! pro!it by a depreciation o! te ad8anced
capital @o%ld be associated @it a loss in te 8al%e o! capital0 $imilarly, a drop ca%sed in te rate
o! pro!it by an appreciation o! te ad8anced capital migt possibly be associated @it a gain0
?s !or te oter portion o! constant capital, s%c as macinery and !ixed capital in general, te
appreciation o! 8al%e taking place in it @it respect mainly to b%ildings, real estate, etc0, cannot
be disc%ssed @ito%t te teory o! gro%nd-rent, and does not tere!ore belong in tis capter0 A%t
o! a general importance to te D%estion o! depreciation are:
5e contin%al impro8ements @ic lo@er te %se-8al%e, and tere!ore te 8al%e, o! existing
macinery, !actory b%ildings, etc0 5is process as a partic%larly dire e!!ect d%ring te !irst period
o! ne@ly introd%ced macinery, be!ore it attains a certain stage o! mat%rity, @en it contin%ally
becomes antiD%ated be!ore it as time to reprod%ce its o@n 8al%e0 5is is one o! te reasons !or
te !lagrant prolongation o! te @orking-time %s%al in s%c periods, !or alternating day and nigt-
si!ts, so tat te 8al%e o! te macinery may be reprod%ced in a sorter time @ito%t a8ing to
place te !ig%res !or @ear and tear too ig0 &!, on te oter and, te sort period in @ic te
macinery is e!!ecti8e Bits sort li!e 8is-O-8is te anticipated impro8ementsC is not compensated
in tis manner, it gi8es %p so m%c o! its 8al%e to te prod%ct tro%g moral depreciation tat it
cannot compete e8en @it and-labo%r0
3

?!ter macinery, eD%ipment o! b%ildings, and !ixed capital in general, attain a certain mat%rity, so
tat tey remain %naltered !or some lengt o! time at least in teir basic constr%ction, tere arises
a similar depreciation d%e to impro8ements in te metods o! reprod%cing tis !ixed capital0 5e
8al%e o! te macinery, etc0, !alls in tis case not so m%c beca%se te macinery is rapidly
cro@ded o%t and depreciated to a certain degree by ne@ and more prod%cti8e macinery, etc0, b%t
beca%se it can be reprod%ced more ceaply0 5is is one o! te reasons @y large enterprises
!reD%ently do not !lo%ris %ntil tey pass into oter ands, i0 e0, a!ter teir !irst proprietors a8e
been bankr%pted, and teir s%ccessors, @o b%y tem ceaply, tere!ore begin !rom te o%tset
@it a smaller o%tlay o! capital0
&t leaps to te eye, partic%larly in te case o! agric%lt%re, tat te ca%ses @ic raise or lo@er te
price o! a prod%ct, also raise or lo@er te 8al%e o! capital, since te latter consists to a large
degree o! tis prod%ct, @eter as grain, cattle, etc0 B)icardo /70 )icardo, :n the &rinciples of
&olitical 0conomy, and 4aation, 5ird edition, 'ondon, 18<1, ;apter &&0 I 0d01C0
5ere is still 8ariable capital to be considered0
&nasm%c as te 8al%e o! labo%r-po@er rises beca%se tere is a rise in te 8al%e o! te means o!
s%bsistence reD%ired !or its reprod%ction, or !alls beca%se tere is a red%ction in teir 8al%e I and
te appreciation and depreciation o! 8ariable capital are really noting more tan expressions o!
tese t@o cases I a drop in s%rpl%s-8al%e corresponds to s%c appreciation and an increase in
s%rpl%s-8al%e to s%c depreciation, pro8ided te lengt o! te @orking-day remains te same0 A%t
oter circ%mstances I te release and tie-%p o! capital I may also be associated @it s%c cases,
and since @e a8e not analysed tem so !ar, @e sall brie!ly mention tem no@0
&! @ages !all in conseD%ence o! a depreciation in te 8al%e o! labo%r-po@er B@ic may e8en be
attended by a rise in te real price o! labo%rC, a portion o! te capital iterto in8ested in @ages is
released0 4ariable capital is set !ree0 &n te case o! ne@ in8estments o! capital, tis as simply te
81 ;apter 4&&
e!!ect o! its operating @it a iger rate o! s%rpl%s-8al%e0 &t takes less money tan be!ore to set in
motion te same amo%nt o! labo%r, and in tis @ay te %npaid portion o! labo%r increases at te
expense o! te paid portion0 A%t in te case o! already in8ested capital, not only does te rate o!
s%rpl%s-8al%e rise b%t a portion o! te capital pre8io%sly in8ested in @ages is also released0 (ntil
tis time it @as tied %p and !ormed a reg%lar portion @ic ad to be ded%cted !rom te proceeds
!or te prod%ct and ad8anced !or @ages, acting as 8ariable capital i! te b%siness @ere to contin%e
on its !ormer scale0 -o@ tis portion is set !ree and may be %sed as a ne@ in8estment, be it to
extend te same b%siness or to operate in some oter spere o! prod%ction0
'et %s ass%me, !or instance, tat V+== per @eek @ere reD%ired at !irst to employ +== labo%rers,
and tat no@ only V2== are needed !or te same p%rpose0 &! te D%antity o! 8al%e prod%ced in
eiter case R V1,===, te amo%nt o! @eekly s%rpl%s-8al%e in te !irst case R V+== and te rate o!
s%rpl%s-8al%e +==N+== R 1==T0 A%t a!ter te @age red%ction te D%antity o! s%rpl%s-8al%e V1,===
- V2== R V6==, and its rate 6==N2== R 1+=T0 ?nd tis increase in te rate o! s%rpl%s-8al%e is te
only e!!ect !or one @o starts a ne@ enterprise in tis spere o! prod%ction @it a 8ariable capital
o! V2== and a corresponding constant capital0 A%t @en tis takes place in a b%siness already in
operation, te depreciation o! te 8ariable capital does not only increase te D%antity o! s%rpl%s-
8al%e !rom V+== to V6==, and te rate o! s%rpl%s-8al%e !rom 1== to 1+=T, b%t releases V1== o!
te 8ariable capital !or te !%rter exploitation o! labo%r0 6ence, te same amo%nt o! labo%r is
exploited to greater ad8antage, and, @at is more, te release o! V1== makes it possible to exploit
more labo%rers tan be!ore at te iger rate @it te same 8ariable capital o! V+==0
-o@ te re8erse sit%ation0 $%ppose, @it +== employed labo%rers, te original proportion in
@ic te prod%ct is di8ided R 2==8 U 6==s R 1,===, making te rate o! s%rpl%s-8al%e R 1+=T0 &n
tat case, te labo%rer recei8es V2N+ , or 16 sillings per @eek0 $o%ld +== labo%rers cost V+==
per @eek, d%e to an appreciation o! 8ariable capital, eac one o! tem @ill recei8e a @eekly @age
R V1, and V2== can employ only 2== labo%rers0 &! te same n%mber o! labo%rers as be!ore is p%t
to @ork, tere!ore, @e a8e +==8 U +==s R 1,===0 5e rate o! s%rpl%s-8al%e @o%ld !all !rom 1+= to
1==T, @ic is X0 &n te case o! ne@ capital te only e!!ect @o%ld be tis lo@er rate o! s%rpl%s-
8al%e0 3ter conditions being eD%al, te rate o! pro!it @o%ld also a8e !allen accordingly,
alto%g not in te same proportion0 For instance, i! c R <,===, @e a8e in te one case <,===c U
2==8 U 6==s R 3,===0 5e rate o! s%rpl%s-8al%e R 1+=T, te rate o! pro!it R 6==N<,2== R <+T0 &n
te second case, <,===c U +==8 U +==s R 3,===0 5e rate o! s%rpl%s-8al%e R 1==T, te rate o! pro!it
R +==N<,+== R <=T0 &n te case o! already in8ested capital, o@e8er, tere @o%ld be a d%al e!!ect0
3nly 2== labo%rers co%ld be employed @it a V2== 8ariable capital, and tat at a rate o! s%rpl%s-
8al%e o! 1==T0 5ey @o%ld tere!ore prod%ce an aggregate s%rpl%s-8al%e o! only V2==0
F%rtermore, since a constant capital o! V<,=== reD%ires +== labo%rers !or its operation, 2==
labo%rers can p%t into motion only a constant capital o! V1,6==0 For prod%ction to contin%e on te
same scale, so tat 1N+ o! te macinery does not stand idle, V1== m%st be added to te 8ariable
capital in order to employ +== labo%rers as be!ore0 ?nd tis can be accomplised only by tying %p
iterto disposable capital, so tat part o! te acc%m%lation intended to extend prod%ction ser8es
merely to stop a gap, or a portion reser8ed !or re8en%e is added to te old capital0 5en a 8ariable
capital increased by V1== prod%ces V1== less s%rpl%s-8al%e0 More capital is reD%ired to employ
te same n%mber o! labo%rers, and at te same time te s%rpl%s-8al%e prod%ced by eac labo%rer
is red%ced0
5e ad8antages res%lting !rom a release and te disad8antages res%lting !rom a tie-%p o! 8ariable
capital bot exist only !or capital already engaged and reprod%cing itsel! %nder certain gi8en
conditions0 For ne@ly in8ested capital te ad8antages on te one and, and te disad8antages on
te oter, are con!ined to an increase or drop in te rate o! s%rpl%s-8al%e, and to a corresponding,
i! in no @ay proportionate, cange in te rate o! pro!it0
8< ;apter 4&&
5e release and tie-%p o! 8ariable capital, H%st analysed, is te res%lt o! a depreciation or
appreciation o! te elements o! 8ariable capital, tat is, o! te cost o! reprod%cing labo%r-po@er0
A%t 8ariable capital co%ld also be released i!, @it te @age rate %ncanged, !e@er labo%rers @ere
reD%ired d%e to te de8elopment o! labo%r prod%cti8ity to set in motion te same amo%nt o!
constant capital0 &n like manner, tere may re8ersely be a tie-%p o! additional 8ariable capital i!
more labo%rers are reD%ired !or te same D%antity o! constant capital d%e to a drop in prod%cti8ity0
&!, on te oter and, a portion o! capital !ormerly employed as 8ariable capital is employed in te
!orm o! constant capital, so tat merely a di!!erent distrib%tion exists bet@een te components o!
te same capital, tis as an in!l%ence on bot te rate o! s%rpl%s-8al%e and te rate o! pro!it, b%t
does not belong %nder te eading o! tie-%p and release o! capital, @ic is ere being disc%ssed0
We a8e already seen tat constant capital may also be tied %p or released by te appreciation or
depreciation o! its component elements0 ?side !rom tis, it can be tied %p only i! te prod%cti8e
po@er o! labo%r increases Bpro8ided a portion o! te 8ariable is not con8erted into constant
capitalC, so tat te same amo%nt o! labo%r creates a greater prod%ct and tere!ore sets in motion a
larger constant capital0 5e same may occ%r %nder certain circ%mstances i! prod%cti8ity
decreases, !or instance in agric%lt%re, so tat te same D%antity o! labo%r reD%ires more means o!
prod%ction, s%c as seeds or man%re, drainage, etc0, in order to prod%ce te same o%tp%t0 ;onstant
capital may be released @ito%t depreciation i! impro8ements, %tilisation o! te !orces o! -at%re,
etc0, enable a constant capital o! smaller 8al%e to tecnically per!orm te same ser8ices as @ere
!ormerly per!ormed by a constant capital o! greater 8al%e0
We a8e seen in Aook && /Englis edition: 4ol0 &&, ,art &&&0 I 0d01 tat once commodities a8e
been con8erted into money, or sold, a certain portion o! tis money m%st be recon8erted into te
material elements o! constant capital, and in te proportions reD%ired by te tecnical nat%re o!
te partic%lar spere o! prod%ction0 &n tis respect, te most important element in all brances I
aside !rom @ages, i0 e0, 8ariable capital I is ra@ material, incl%ding a%xiliary material, @ic is
partic%larly important in s%c lines o! prod%ction as do not in8ol8e ra@ materials in te strict
sense o! te term, !or instance in mining and te extracti8e ind%stries in general0 5at portion o!
te price @ic is to make good te @ear and tear o! macinery enters te acco%nts cie!ly
nominally so long as te macinery is at all in an operating condition0 &t does not greatly matter
@eter it is paid !or and replaced by money one day or te next, or at any oter stage o! te
period o! t%rno8er o! te capital0 &t is D%ite di!!erent in te case o! te ra@ material0 &! te price o!
ra@ material rises, it may be impossible to make it good !%lly o%t o! te price o! te commodities
a!ter @ages are ded%cted0 4iolent price !l%ct%ations tere!ore ca%se interr%ptions, great collisions,
e8en catastropes, in te process o! reprod%ction0 &t is especially agric%lt%ral prod%ce proper, i0 e0,
ra@ materials taken !rom organic nat%re, @ic I lea8ingaside te credit system !or te present I
is s%bHect to s%c !l%ct%ations o! 8al%e in conseD%ence o! canging yields, etc0 7%e to
%ncontrollable nat%ral conditions, !a8o%rable or %n!a8o%rable seasons, etc0, te same D%antity o!
labo%r may be represented in 8ery di!!erent D%antities o! %se-8al%es, and a de!inite D%antity o!
tese %se-8al%es may tere!ore a8e 8ery di!!erent prices0 &! te 8al%e x is represented by 1== lbs
o! te commodity a, ten te price o! one lb0 o! a R xN1==# i! it is represented by 1,=== lbs o! a,
te price o! one lb0 o! a R xN1,===, etc0 5is is tere!ore one o! te elements o! tese !l%ct%ations
in te price o! ra@ materials0 ? second element, mentioned at tis point only !or te sake o!
completeness I since competition and te credit system are still o%tside te scope o! o%r analysis
I is tis: &t is, in te nat%re o! tings tat 8egetable and animal s%bstances @ose gro@t and
prod%ction are s%bHect to certain organic la@s and bo%nd %p @it de!inite nat%ral time periods,
cannot be s%ddenly a%gmented in te same degree as, !or instance, macines and oter !ixed
capital, or coal, ore, etc0, @ose reprod%ction can, pro8ided te nat%ral conditions do not cange,
be rapidly accomplised in an ind%strially de8eloped co%ntry0 &t is tere!ore D%ite possible, and
%nder a de8eloped system o! capitalist prod%ction e8en ine8itable, tat te prod%ction and
increase o! te portion o! constant capital consisting o! !ixed capital, macinery, etc0, so%ld
83 ;apter 4&&
considerably o%tstrip te portion consisting o! organic ra@ materials, so tat demand !or te latter
gro@s more rapidly tan teir s%pply, ca%sing teir price to rise0 )ising prices act%ally ca%se 1C
tese ra@ materials to be sipped !rom greater distances, since te mo%nting prices s%!!ice to
co8er greater !reigt rates# <C an increase in teir prod%ction, @ic circ%mstance, o@e8er, @ill
probably not, !or nat%ral reasons, m%ltiply te D%antity o! prod%cts %ntil te !ollo@ing year# 3C te
%se o! 8ario%s pre8io%sly %n%sed s%bstit%tes and greater %tilisation o! @aste0 Wen tis rise o!
prices begins to exert a marked in!l%ence on prod%ction and s%pply it indicates in most cases tat
te t%rning point as been reaced at @ic demand drops on acco%nt o! te protracted rise in te
price o! te ra@ material and o! all commodities o! @ic it is an element, ca%sing a reaction in
te price o! ra@ material0 ?side !rom te con8%lsions @ic tis ca%ses in 8ario%s !orms tro%g
depreciation o! capital, tere are also oter circ%mstances, @ic @e sall mention sortly0
A%t so m%c is already e8ident !rom te !oregoing: 5e greater te de8elopment o! capitalist
prod%ction, and, conseD%ently, te greater te means o! s%ddenly and permanently increasing tat
portion o! constant capital consisting o! macinery, etc0, and te more rapid te acc%m%lation
Bpartic%larly in times o! prosperityC, so m%c greater te relati8e o8er-prod%ction o! macinery
and oter !ixed capital, so m%c more !reD%ent te relati8e %nder-prod%ction o! 8egetable and
animal ra@ materials, and so m%c more prono%nced te pre8io%sly described rise o! teir prices
and te attendant reaction0 ?nd so m%c more !reD%ent are te con8%lsions ca%sed as tey are by
te 8iolent price !l%ct%ations o! one o! te main elements in te process o! reprod%ction0
&!, o@e8er, a collapse o! tese ig prices occ%rs beca%se teir rise ca%sed a drop in demand on
te one and, and, on te oter, an expansion o! prod%ction in one place and in anoter
importation !rom remote and pre8io%sly less resorted to, or entirely ignored, prod%ction areas,
and, in bot cases, a s%pply o! ra@ materials exceeding te demand I partic%larly at te old ig
prices I ten te res%lt may be considered !rom di!!erent points o! 8ie@0 5e s%dden collapse o!
te price o! ra@ materials cecks teir reprod%ction, and te monopoly o! te original prod%cing
co%ntries, @ic enHoy te most !a8o%rable conditions o! prod%ction, is tereby restored I
possibly @it certain limitations, b%t restored ne8erteless0 5r%e, d%e to te impet%s it as ad,
reprod%ction o! ra@ material proceeds on an extended scale, especially in tose co%ntries @ic
more or less possess a monopoly o! tis prod%ction0 A%t te basis on @ic prod%ction carries on
a!ter te extension o! macinery, etc0, and @ic, a!ter some !l%ct%ations, is to ser8e as te ne@
normal basis, te ne@ point o! depart%re, is 8ery m%c extended by te de8elopments in te
preceding cycle o! t%rno8er0 &n te meantime, te barely increased reprod%ction again experiences
considerable impediments in some o! te secondary so%rces o! s%pply0 For instance, it is easily
demonstrated on te basis o! te export tables tat in te last tirty years B%p to 186+C te
prod%ction o! cotton in &ndia increases @ene8er tere as been a drop in ?merican prod%ction,
and s%bseD%ently it drops again more or less permanently0 7%ring te period in @ic ra@
materials become dear, ind%strial capitalists Hoin ands and !orm associations to reg%late
prod%ction0 5ey did so a!ter te rise o! cotton prices in 1828 in Mancester, !or example, and
similarly in te case o! !lax prod%ction in &reland0 A%t as soon as te immediate imp%lse is o8er
and te general principle o! competition to Kb%y in te ceapest marketL Binstead o! stim%lating
prod%ction in te co%ntries o! origin, as te associations attempt to do, @ito%t regard to te
immediate price at @ic tese may appen at tat time to be able to s%pply teir prod%ctC I as
soon as te principle o! competition again reigns s%preme, te reg%lation o! te s%pply is le!t once
again to KpricesL0 ?ll to%gt o! a common, all-embracing and !ar-sigted control o! te
prod%ction o! ra@ materials gi8es @ay once more to te !ait tat demand and s%pply @ill
m%t%ally reg%late one anoter0 ?nd it m%st be admitted tat s%c control is on te @ole
irreconcilable @it te la@s o! capitalist prod%ction, and remains !or e8er a pio%s @is, or is
limited to exceptional co-operation in times o! great stress and con!%sion0
2
5e s%perstition o! te
capitalists in tis respect is so deep tat in teir reports e8en !actory inspectors again and again
tro@ %p teir ands in astonisment0 5e alternation o! good and bad years nat%rally also
82 ;apter 4&&
pro8ides !or ceaper ra@ materials0 ?side !rom te direct e!!ect tis as on raising te demand,
tere is also te added stim%l%s o! te pre8io%sly mentioned in!l%ence on te rate o! pro!it0 5e
a!oresaid process o! prod%ction o! ra@ materials being grad%ally o8ertaken by te prod%ction o!
macinery, etc0, is ten repeated on a larger scale0 ?n act%al impro8ement o! ra@ materials
satis!ying not only te desired D%antity, b%t also te D%ality desired, s%c as cotton !rom &ndia o!
?merican D%ality, @o%ld reD%ire a prolonged, reg%larly gro@ing and steady E%ropean demand
Bregardless o! te economic conditions %nder @ic te &ndian prod%cer labo%rs in is co%ntryC0
?s it is, o@e8er, te spere o! prod%ction o! ra@ materials is, by !its, !irst s%ddenly enlarged,
and ten again 8iolently c%rtailed0 ?ll tis, and te spirit o! capitalist prod%ction in general, may
be 8ery @ell st%died in te cotton sortage o! 1861-6+, !%rter caracterised as it @as by te !act
tat a ra@ material, one o! te principal elements o! reprod%ction, @as !or a time entirely
%na8ailable0 5o be s%re, te price may also rise in te e8ent o! an ab%ndant s%pply, pro8ided te
conditions !or tis ab%ndance are more knotty0 3r, tere may be an act%al sortage o! ra@
material0 &t @as tis last sit%ation @ic originally pre8ailed in te cotton crisis0
5e closer @e approac o%r o@n time in te istory o! prod%ction, te more reg%larly do @e !ind,
especially in te essential lines o! ind%stry, te e8er-rec%rring alternation bet@een relati8e
appreciation and te s%bseD%ent res%lting depreciation o! ra@ materials obtained !rom organic
nat%re0 Wat @e a8e H%st analysed @ill be ill%strated by te !ollo@ing examples taken !rom
reports o! !actory inspectors0
5e moral o! istory, also to be ded%ced !rom oter obser8ations concerning agric%lt%re, is tat
te capitalist system @orks against a rational agric%lt%re, or tat a rational agric%lt%re is
incompatible @it te capitalist system Balto%g te latter promotes tecnical impro8ements in
agric%lt%reC, and needs eiter te and o! te small !armer li8ing by is o@n labo%r or te control
o! associated prod%cers0
6ere@it !ollo@ te ill%strations re!erred to abo8e, taken !rom te Englis Factory )eports0
K5e state o! trade is better# b%t te cycle o! good and
bad times diminises as macinery increases, and te
canges !rom te one to te oter appen o!tener, as
te demand !or ra@ materials increases @it it000 ?t
present, con!idence is not only restored a!ter te panic
o! 18+>, b%t te panic itsel! seems to be almost
!orgotten0 Weter tis impro8ement @ill contin%e or
not depends greatly %pon te price o! ra@ materials0
5ere appear to me e8idences already, tat in some
instances te maxim%m as been reaced, beyond
@ic teir man%!act%re becomes grad%ally less and
less pro!itable, till it ceases to be so altogeter0 &! @e
take, !or instance, te l%crati8e years in te @orsted
trade o! 182* and 18+=, @e see tat te price o!
Englis combing @ool stood at 1s0 1d0, and o!
?%stralian at bet@een 1s0 <d0 and 1s0 +d0 per lb0, and
8+ ;apter 4&&
tat on te a8erage o! te ten years !rom 1821 to
18+=, bot incl%si8e, te a8erage price o! Englis
@ool ne8er exceeded 1s0 <d0 and o! ?%stralian @ool
1s0 +d0 per lb0 A%t tat in te commencement o! te
disastro%s year o! 18+>, te price o! ?%stralian @ool
began @it 1s0 11d0, !alling to 1s0 6d0 in 7ecember,
@en te panic @as at its eigt, b%t as grad%ally
risen again to 1s0 *d0 tro%g 18+8, at @ic it no@
stands# @ilst tat o! Englis @ool, commencing @it
1s0 8d0, and rising in ?pril and $eptember 18+> to 1s0
*d0, !alling in Pan%ary 18+8 to 1s0 <d0, as since risen
to 1s0 +d0, @ic is 3d0 per lb0 iger tan te a8erage
o! te ten years to @ic & a8e re!erred000 5is so@s,
& tink, one o! tree tings I eiter tat te
bankr%ptcies @ic similar prices occasioned in 18+>
are !orgotten# or tat tere is barely te @ool gro@n
@ic te existing spindles are capable o! cons%ming#
or else, tat te prices o! man%!act%red articles are
abo%t to be permanently iger000 ?nd as in past
experience & a8e seen spindles and looms m%ltiply
bot in n%mbers and speed in an incredibly sort
space o! time, and o%r exports o! @ool to France
increase in an almost eD%al ratio, and as bot at ome
and abroad te age o! seep seems to be getting less
and less, o@ing to increasing pop%lations and to @at
te agric%lt%ralists call "a D%ick ret%rn in stock", so &
a8e o!ten !elt anxio%s !or persons @om, @ito%t
tis kno@ledge, & a8e seen embarking skill and
capital in %ndertakings, @olly reliant !or teir
s%ccess on a prod%ct @ic can only be increased
according to organic la@s0 000 5e same state o! s%pply
and demand o! all ra@ materials 000 seems to acco%nt
!or many o! te !l%ct%ations in te cotton trade d%ring
past periods, as @ell as !or te condition o! te
Englis @ool market in te a%t%mn o! 18+>, @it its
86 ;apter 4&&
o8er@elming conseD%ences0L
+
B)0 Aaker in )eports
o! &nsp0 o! Fact0, 3ct0 18+8, pp0 +6-610C
5e alcyon days o! te West-)iding @orsted ind%stry, o! .orksire, @ere 182*-+=0 5is ind%stry
employed <*,<26 persons in 1838# 3>,=== persons in 1823# 28,=*> in 182+# and >2,8*1 in 18+=0
5e same district ad <,>68 mecanical looms in 1838# 11,2+8 in 1821# 16,8>= in 1823# 1*,1<1 in
182+ and <*,+3* in 18+=0 B)eports o! &nsp0 o! Fact0, 18+=, p0 6=0C 5is prosperity o! te carded
@ool ind%stry excited certain !orebodings as early as 3ctober 18+=0 &n is report !or ?pril 18+1,
$%b-&nspector Aaker said in regard to 'eeds and Arad!ord:
K5e state o! trade is, and as been !or some time,
8ery %nsatis!actory0 5e @orsted spinners are !ast
losing te pro!its o! 18+=, and, in te maHority o!
cases, te man%!act%rers are not doing m%c good0 &
belie8e, at tis moment, tere is more @oollen
macinery standing tan & a8e almost e8er kno@n at
one time, and te !lax spinners are also t%rning o!!
ands and stopping !rames0 5e cycles o! trade, in
!act, in te textile !abrics, are no@ extremely
%ncertain, and & tink @e sall sortly !ind to be
tr%e 000 tat tere is no comparison made bet@een te
prod%cing po@er o! te spindles, te D%antity o! ra@
material, and te gro@t o! te pop%lationL Bp0 +<C0
5e same is tr%e o! te cotton ind%stry0 &n te cited report !or 3ctober 18+8, @e read:
K$ince te o%rs o! labo%r in !actories a8e been
!ixed, te amo%nts o! cons%mption, prod%ce, and
@ages in all textile !abrics a8e been red%ced to a r%le
o! tree0 000 & D%ote !rom a recent lect%re deli8ered
by 000 te present Mayor o! Alackb%rn, Mr0 Aaynes, on
te cotton trade, @o by s%c means as red%ced te
cotton statistics o! is o@n neigbo%rood to te
closest approximation: I
K"Eac real and mecanical orse-po@er @ill dri8e
2+= sel!-acting m%le spindles @it preparation, or <==
trostle spindles, or 1+ looms !or 2= inces clot, @it
@inding, @arping, and siEing0 Eac orse-po@er in
spinning @ill gi8e employment to <Z operati8es, b%t
in @ea8ing to 1= persons, at @ages a8eraging !%ll 1=s0
6d0 a @eek to eac person0 000 5e a8erage co%nts o!
8> ;apter 4&&
yarn sp%n and @o8en are !rom 3=s0 to 3<s0 t@ist, and
32s0 to 36s0 @e!t yarns# and taking te spinning
prod%ction at 13 o%nces per spindle per @eek, @ill
gi8e 8<2,>== lbs yarn sp%n per @eek, reD%iring
*>=,=== lbs or <,3== bales o! cotton, at a cost o!
V<8,3==000 5e total cotton cons%med in tis district
B@itin a !i8e-mile radi%s ro%nd Alackb%rnC per @eek
is 1,+3=,=== lbs, or 3,6+= bales, at a cost o! V22,6<+000
5is is one-eigteent o! te @ole cotton spinning o!
te (nited Kingdom, and one-sixt o! te @ole
po@er-loom @ea8ing0"
K5%s @e see tat, according to Mr0 Aaynes"s calc%lations, te total n%mber o! cotton spindles in
te (nited Kingdom is <8,8==,===, and s%pposing tese to be al@ays @orking !%ll time, tat te
ann%al cons%mption o! cotton o%gt to be 1,23<,=8=,=== lbs0 A%t as te import o! cotton, less te
export in 18+6 and 18+>, @as only 1,=<<,+>6,83< lbs, tere m%st necessarily be a de!iciency o!
s%pply eD%al to 2=*,+=3,168 lbs0 Mr0 Aaynes, o@e8er, @o as been good eno%g to
comm%nicate @it me on tis s%bHect, tinks tat an ann%al cons%mption o! cotton based %pon te
D%antity %sed in te Alackb%rn district @o%ld be liable to be o8ercarged, o@ing to te di!!erence,
not only in te co%nts sp%n, b%t in te excellence o! te macinery0 6e estimates te total ann%al
cons%mption o! cotton in te (nited Kingdom at 1,===,===,=== lbs0 A%t i! e is rigt, and tere
really is an excess o! s%pply eD%al to <<,+>6,83< lbs, s%pply and demand seem to be nearly
balanced already, @ito%t taking into consideration tose additional spindles and looms @ic
Mr0 Aaynes speaks o! as getting ready !or @ork in is o@n district, and, by parity o! reasoning,
probably in oter districts alsoL Bpp0 +*, 6=C0
III. General Illustration. The Cotton Crisis "f
/01/.12
Preli+inar) 8istor). 1845!6&
;<=>0 5e golden age o! cotton ind%stry0 ,rice o! cotton 8ery lo@0
'0 6orner says on tis point:
KFor te last eigt years & a8e not kno@n so acti8e a
state o! trade as as pre8ailed d%ring te last s%mmer
and a%t%mn, partic%larly in cotton spinning0
5ro%go%t te al!-year & a8e been recei8ing
notices e8ery @eek o! ne@ in8estments o! capital in
!actories, eiter in te !orm o! ne@ mills being b%ilt,
o! te !e@ tat @ere %ntenanted !inding occ%piers, o!
88 ;apter 4&&
enlargements o! existing mills, o! ne@ engines o!
increased po@er, and o! man%!act%ring macinery0L
B)eports o! &nsp0 o! Fact0, 3ct0 182+, p0 130C
;<=?0 5e complaints begin:
KFor a considerable time past & a8e eard !rom te
occ%piers o! cotton mills 8ery general complaints o!
te depressed state o! teir trade000 !or @itin te last
six @eeks se8eral mills a8e beg%n to @ork sort
time, %s%ally eigt o%rs a day instead o! t@el8e# tis
appears to be on te increase000 5ere as been a great
ad8ance in te price o! te ra@ material000 tere as
been not only no ad8ance in te man%!act%red
articles, b%t 000 prices are lo@er tan tey @ere be!ore
te rise in cotton began0 From te great increase in te
n%mber o! cotton mills @itin te last !o%r years,
tere m%st a8e been, on te one and, a greatly
increased demand !or te ra@ material, and, on te
oter, a greatly increased s%pply in te market o! te
man%!act%red articles# ca%ses tat m%st conc%rrently
a8e operated against pro!its, s%pposing te s%pply o!
te ra@ material and te cons%mption o! te
man%!act%red article to a8e remained %naltered# b%t,
o! co%rse, in te greater ratio by te late sort s%pply
o! cotton, and te !alling o!! in te demand !or te
man%!act%red articles in se8eral markets, bot ome
and !oreign0 B)eports o! &nsp0 o! Fact0, 3ct0 1826, p0
1=0C
5e rising demand !or ra@ materials nat%rally @ent and in and @it a market !looded @it
man%!act%res0 Ay te @ay, te expansion o! ind%stry at tat time and te s%bseD%ent stagnation
@ere not con!ined to te cotton districts0 5e carded @ool district o! Arad!ord ad only 318
!actories in 1836 and 2*= in 18260 5ese !ig%res do not by any means express te act%al gro@t
o! prod%ction, since te existing !actories @ere also considerably enlarged0 5is @as partic%larly
tr%e o! te !lax spinning-mills0
K?ll a8e contrib%ted more or less, d%ring te last ten
years, to te o8erstocking o! te market, to @ic a
8* ;apter 4&&
great part o! te present stagnation o! trade m%st be
attrib%ted000 5e depression000 nat%rally res%lts !rom
s%c rapid increase o! mills and macinery0L B)eports
o! &nsp0 o! Fact0, 3ct0 1826, p0 3=0C
;<=@0 &n 3ctober, a money panic0 7isco%nt 8T0 5is @as preceded by te debacle o! te rail@ay
s@indle and te East &ndian spec%lation in accommodation bills0 A%t:
KMr0 Aaker enters into 8ery interesting details
respecting te increased demand, in te last !e@ years,
!or cotton, @ool, and !lax, o@ing to te great
extension o! tese trades0 6e considers te increased
demand !or tese ra@ materials, occ%rring, as it as,
at a period @en te prod%ce as !allen m%c belo@
an a8erage s%pply, as almost s%!!icient, e8en @ito%t
re!erence to te monetary derangement, to acco%nt !or
te present state o! tese brances0 5is opinion is
!%lly con!irmed, by my o@n obser8ations, and
con8ersation @it persons @ell acD%ainted @it trade0
5ose se8eral brances @ere all in a 8ery depressed
state, @ile disco%nts @ere readily obtained at and
%nder + per cent0 5e s%pply o! ra@ silk as, on te
contrary, been ab%ndant, te prices moderate, and te
trade, conseD%ently, 8ery acti8e, till 000 te last t@o or
tree @eeks, @en tere is no do%bt te monetary
derangement as a!!ected not only te persons
act%ally engaged in te man%!act%re, b%t more
extensi8ely still, te man%!act%rers o! !ancy goods,
@o @ere great c%stomers to te tro@ster0 ?
re!erence to p%blised ret%rns so@s tat te cotton
trade ad increased nearly <> per cent in te last tree
years0 ;otton as conseD%ently increased, in ro%nd
n%mbers, !rom 2d0 to 6d0 per lb0, @ile t@ist, in
conseD%ence o! te increased s%pply, is yet only a
!raction abo8e its !ormer price0 5e @oollen trade
began its increase in 1836, since @ic .orksire as
increased its man%!act%re o! tis article 2= per cent,
b%t $cotland exibits a yet greater increase0 5e
*= ;apter 4&&
increase o! te @orsted trade
6
is still larger0
;alc%lations gi8e a res%lt o! %p@ards o! >2 per cent
increase @itin te same period0 5e cons%mption o!
ra@ @ool as tere!ore been immense0 Flax as
increased since 183* abo%t <+ per cent in England, <<
per cent in $cotland, and nearly *= per cent in &reland
>
# te conseD%ence o! tis, in connexion @it bad
crops, as been tat te ra@ material as gone %p V1=
per ton, @ile te price o! yarn as !allen 6d0 a
b%ndle0L B)eports o! &nsp0 o! Fact0, 3ct0 182>, pp0 3=-
310C
;<=A0 $ince late in 1828 b%siness re8i8ed0
K5e price o! !lax @ic as been so lo@ as to almost
g%arantee a reasonable pro!it %nder any !%t%re
circ%mstances, as ind%ced te man%!act%rers to carry
on teir @ork 8ery steadily0000 5e @oollen
man%!act%rers @ere exceedingly b%sy !or a @ile in
te early part o! te year0000 & !ear tat consignments o!
@oollen goods o!ten take te place o! real demand,
and tat periods o! apparent prosperity, i0 e0, o! !%ll
@ork, are not al@ays periods o! legitimate demand0 &n
some monts te @orsted as been exceedingly good,
in !act !lo%rising0000 ?t te commencement o! te
period re!erred to, @ool @as exceedingly lo@# @at
@as bo%gt by te spinners @as @ell bo%gt, and no
do%bt in considerable D%antities0 Wen te price o!
@ool rose @it te spring @ool sales, te spinner ad
te ad8antage, and te demand !or man%!act%red
goods becoming considerable and imperati8e, tey
kept it0 K B)eports o! &nsp0 o! Fact0, ?pril 182*, p0 2<0C
K&! @e look at te 8ariations in te state o! trade,
@ic a8e occ%rred in te man%!act%ring districts o!
te kingdom !or a period no@ o! bet@een tree and
!o%r years, & tink @e m%st admit te existence o! a
great dist%rbing ca%se some@ere 000 b%t may not te
*1 ;apter 4&&
immensely prod%cti8e po@er o! increased macinery
a8e added anoter element to te same ca%seQL
B)eports o! &nsp0 o! Fact0, ?pril 182*, pp0 2<, 230C
&n -o8ember 1828, and in May and s%mmer o! 182*, rigt %p to 3ctober, b%siness !lo%rised0
K5e @orsted st%!! o! trade, o! @ic Arad!ord and
6ali!ax are te great i8es o! ind%stry, as been te
one most acti8e# tis trade as ne8er be!ore reaced
anyting like te extent, to @ic it as no@ attained0
$pec%lation, and %ncertainty as to te probable s%pply
o! cotton @ool, a8e e8er ad te e!!ect o! ca%sing
greater excitement, and more !reD%ent alterations in
te state o! tat branc o! man%!act%re, tan any
oter0 5ere is 000 at present an acc%m%lation in stock
o! te coarser kinds o! cotton goods, @ic creates
anxiety on te part o! te smaller spinners, and is
already acting to teir detriment, a8ing ca%sed
se8eral o! tem to @ork teir mills sort time0 K
B)eports o! &nsp0 o! Fact0, 3ct0 182*, pp0 62-6+0C
;<>B0 ?pril0 A%siness contin%ed brisk0 5e exception:
K5e great depression in a part o! te cotton trade 000
attrib%table to te scarcity in te s%pply o! te ra@
material more especially adapted to te branc
engaged in spinning lo@ n%mbers o! cotton yarns, or
man%!act%ring ea8y cotton goods0 ? !ear is
entertained tat te increased macinery b%ilt recently
!or te @orsted trade, may be !ollo@ed @it a similar
reaction0 Mr0 Aaker comp%tes tat in te year 182*
alone te @orsted looms a8e increased teir prod%ce
2= per cent, and te spindles <+ or 3= per cent, and
tey are still increasing at te same rate0 K B)eports o!
&nsp0 o! Fact0, ?pril 18+=, p0 +20C
;<>B0 3ctober0
K5e ig price o! ra@ cotton contin%es 000 to ca%se a
considerable depression in tis branc o!
*< ;apter 4&&
man%!act%re, especially in tose descriptions o! goods
in @ic te ra@ material constit%tes a considerable
part o! te cost o! prod%ction0000 5e great ad8ance in
te price o! ra@ silk as like@ise ca%sed a depression
in many brances o! tat man%!act%re0L B)eports0 o!
&nsp0 o! Fact0, 3ct0 18+=, p0 120C
?nd on pages 31 and 33 o! te same report @e learn tat te ;ommittee o! te )oyal $ociety !or
te ,romotion and &mpro8ement o! te :ro@t o! Flax in &reland predicted tat te ig price o!
!lax, togeter @it te lo@ le8el o! prices !or oter agric%lt%ral prod%cts, ens%red a considerable
increase in !lax prod%ction in te ens%ing year0
;<>C0 ?pril0 :reat prosperity0 '0 6orner says in is report:
K?t no period d%ring te last se8enteen years tat &
a8e been o!!icially acD%ainted @it te
man%!act%ring districts in 'ancasire a8e & kno@n
s%c general prosperity# te acti8ity in e8ery branc is
extraordinary0L B)eports o! &nsp0 o! Fact0, ?pril 18+3,
p0 1*0C
;<>C0 3ctober0 7epression in te cotton ind%stry0 K38er-prod%ction0L B)eports o! &nsp0 o! Fact0,
3ct0 18+3, p0 1+0C
;<>=0 ?pril0
K5e @oollen trade, alto%g not brisk, as gi8en !%ll
employment to all te !actories engaged %pon tat
!abric, and a similar remark applies to te cotton
!actories0 5e @orsted trade generally as been in an
%ncertain and %nsatis!actory condition d%ring te
@ole o! te last al!-year0 5e man%!act%re o! !lax
and emp are more likely to be serio%sly impeded, by
reason o! te diminised s%pplies o! te ra@ materials
!rom )%ssia d%e to te ;rimean @ar0L B)eports o!
&nsp0 o! Fact0, ?pril 18+2, p0 3>0C
;<>A0
K5e trade in te $cottis !lax districts still contin%es
depressed I te ra@ material being scarce, as @ell as
ig in price# and te in!erior D%ality o! te last year"s
crop in te Aaltic, !rom @ence come o%r principal
s%pplies, @ill a8e an inH%rio%s e!!ect on te trade o!
te district# H%te, o@e8er, @ic is grad%ally
*3 ;apter 4&&
s%perseding !lax in many o! te coarser !abrics, is
neiter %n%s%ally ig in price, nor scarce in
D%antity 000 abo%t one-al! o! te macinery in 7%ndee
is no@ employed in H%te spinning0L B)eports o! &nsp0
o! Fact0, ?pril 18+*, p0 1*0C I K3@ing to te ig
price o! te ra@ material, !lax spinning is still !ar !rom
rem%nerating, and @ile all te oter mills are going
!%ll time, tere are se8eral instances o! te stoppage
o! !lax macinery0000 P%te spinning is 000 in a rater
more satis!actory state, o@ing to te recent decline in
te price o! material, @ic as no@ !allen to a 8ery
moderate point0L B)eports o! &nsp0 o! Fact0, 3ct0 18+*,
p0 <=0C
1861!64. %+erican Civil 9ar. Cotton *a+ine. The 2reatest
E:a+le of an Interrution in the Pro#uction Process through
Scarcit) an# -earness of $a( ,aterial
;<?B0 ?pril0
KWit respect to te state o! trade, & am appy to be
able to in!orm yo% tat, not@itstanding te ig
price o! ra@ material, all te textile man%!act%res,
@it te exception o! silk, a8e been !airly b%sy
d%ring te past al!-year0000 &n some o! te cotton
districts ands a8e been ad8ertised !or, and a8e
migrated titer !rom -or!olk and oter r%ral
co%nties0 5ere appears to be, in e8ery branc o!
trade, a great scarcity o! ra@ material0 &t is 000 te @ant
o! it alone, @ic keeps %s @itin bo%nds0 &n te
cotton trade, te erection o! ne@ mills, te !ormation
o! ne@ systems o! extension, and te demand !or
ands, can scarcely, & tink, a8e been at any time
exceeded0 E8ery@ere tere are ne@ mo8ements in
searc o! ra@ material0L B)eports o! &nsp0 o! Fact0,
?pril 186=, p0 +>0C
*2 ;apter 4&&
;<?B0 3ctober0
K5e state o! trade in te cotton, @oollen, and !lax
districts as been good# indeed in &reland, it is stated to
a8e been "8ery good" !or no@ more tan a year# and
tat it @o%ld a8e been still better, b%t !or te ig
price o! ra@ material0 5e !lax spinners appear to be
looking @it more anxiety tan e8er to te opening
o%t o! &ndia by rail@ays, and to te de8elopment o! its
agric%lt%re, !or a s%pply o! !lax @ic may be
commens%rate @it teir @ants0L B)eports o! &nsp0 o!
Fact0, 3ct0 186=, p0 3>0C
;<?;0 ?pril0
K5e state o! trade is at present depressed0000 ? !e@
cotton mills are r%nning sort time, and many silk
mills are only partially employed0 )a@ material is
ig0 &n almost e8ery branc o! textile man%!act%re it
is abo8e te price at @ic it can be man%!act%red !or
te masses o! te cons%mers0L B)eports o! &nsp0 o!
Fact0, ?pril 1861, p0 330C
&t ad become e8ident tat in 186= te cotton ind%stry ad o8erprod%ced0 5e e!!ect o! tis made
itsel! !elt d%ring te next !e@ years0
K&t as taken bet@een t@o and tree years to absorb
te o8er-prod%ction o! 186= in te markets o! te
@orld0L B)eports o! &nsp0 o! Fact0, 7ecember 1863, p0
1<>0C K5e depressed state o! te markets !or cotton
man%!act%res in te East, early in 186=, ad a
corresponding e!!ect %pon te trade o! Alackb%rn, in
@ic 3=,=== po@er-looms are %s%ally employed
almost excl%si8ely in te prod%ction o! clot to be
cons%med in te East0 5ere @as conseD%ently b%t a
limited demand !or labo%r !or many monts prior to
te e!!ects o! te cotton blockade being !elt0000
Fort%nately tis preser8ed many o! te spinners and
man%!act%rers !rom being in8ol8ed in te common
r%in0 $tocks increased in 8al%e so long as tey @ere
*+ ;apter 4&&
eld, and tere ad been conseD%ently noting like
tat alarming depreciation in te 8al%e o! property
@ic migt not %nreasonably a8e been looked !or
in s%c a crisis0L B)eports o! &nsp0 o! Fact0, 3ct0 186<,
pp0 <*, 310C
;<?;0 3ctober0
K5rade as been !or some time in a 8ery depressed
state0 &t is not improbable indeed tat d%ring te
@inter monts many establisments @ill be !o%nd to
@ork 8ery sort time0 5is migt, o@e8er, a8e been
anticipated 000 irrespecti8e o! te ca%ses @ic a8e
interr%pted o%r %s%al s%pplies o! cotton !rom ?merica
and o%r exports, sort time m%st a8e been kept
d%ring te ens%ing @inter in conseD%ence o! te great
increase o! prod%ction d%ring te last tree years, and
te %nsettled state o! te &ndian and ;inese markets0L
B)eports o! &nsp0 o! Fact0, 3ct0 1861, p0 1*0C
Cotton "aste. 0ast Dndian Cotton )Surat*. Dnfluence on the "ages of ,abourers. Dmprovement of
Machinery. +dding Starch 'lour and Mineral Substitutes to Cotton. 0ffect of Starch 'lour Si#ing
on ,abourers. Manufacturers of 'iner Earn Grades. Manufacturers5 'raud
K? man%!act%rer @rites to me t%s: "?s to estimates o!
cons%mption per spindle, & do%bt i! yo% take
s%!!iciently into calc%lation te !act tat @en cotton
is ig in price, e8ery spinner o! ordinary yarns Bsay
%p to 2=s0C Bprincipally 1<s0 to 3<s0C @ill raise is
co%nts as m%c as e can, tat is, @ill spin 16s0 @ere
e %sed to spin 1<s0, or <<s0 in te place o! 16s0, and
so on# and te man%!act%rer %sing tese !ine yarns
@ill make is clot te %s%al @eigt by te addition o!
so m%c more siEe0 5e trade is a8ailing itsel! o! tis
reso%rce at present to an extent @ic is e8en
discreditable0 & a8e eard on good a%tority o!
ordinary export sirting @eiging 8 lbs @ic @as
made o! +[ lbs0 cotton and <` lbs siEe0000 &n clots o!
oter descriptions as m%c as += per cent siEe is
sometimes added# so tat a man%!act%rer may and
*6 ;apter 4&&
does tr%ly boast tat e is getting ric by selling clot
!or less money per po%nd tan e paid !or te mere
yarn o! @ic tey are composed0L" B)eports o! &nsp0
o! Fact0, ?pril 1862, p0 <>0C
K& a8e also recei8ed statements tat te @ea8ers
attrib%te increased sickness to te siEe @ic is %sed
in dressing te @arps o! $%rat cotton, and @ic is not
made o! te same material as !ormerly, 8iE0, !lo%r0
5is s%bstit%te !or !lo%r is said, o@e8er, to a8e te
8ery important ad8antage o! increasing greatly te
@eigt o! te clot man%!act%red, making 1+ lbs o!
te ra@ material to @eig <= lbs @en @o8en into
clot0L B)eports o! &nsp0 o! Fact0, 3ct0 18630 5is
s%bstit%te @as gro%nd talc%m, called ;ina clay, or
gyps%m, called Frenc calk0C K5e earnings o! te
@ea8ers Bmeaning te operati8esC are m%c red%ced
!rom te employment o! s%bstit%tes !or !lo%r as siEing
!or @arps0 5is siEing, @ic gi8es @eigt to te yarn,
renders it ard and brittle0 Eac tread o! te @arp in
te loom passes tro%g a part o! te loom called "a
eald", @ic consists o! strong treads to keep te
@arp in its proper place, and te ard state o! te @arp
ca%ses te treads o! te eald to break !reD%ently#
and it is said to take a @ea8er !i8e min%tes to tie %p
te treads e8ery time tey break# and a @ea8er as to
piece tese ends at least ten times as o!ten as
!ormerly, t%s red%cing te prod%cti8e po@ers o! te
loom in te @orking-o%rs0 K BDbid0, pp0 2<-230C
K&n ?ston, $talybridge, Mossley, 3ldam, etc0, te
red%ction o! te time as been !%lly one-tird, and te
o%rs are lessening e8ery @eek0000 $im%ltaneo%sly
@it tis dimin%tion o! time tere is also a red%ction
o! @ages in many departments0L B)eports o! &nsp0 o!
Fact0, 3ct0 1861, pp0 1<-130C
Early in 1861 tere @as a strike among te mecanical @ea8ers in some parts o! 'ancasire0
$e8eral man%!act%rers ad anno%nced a @age red%ction o! + to >0+T0 5e operati8es insisted tat
*> ;apter 4&&
te @age scale remain te same @ile @orking-o%rs @ere red%ced0 5is @as not granted, and a
strike @as called0 ? mont later, te operati8es ad to gi8e in0 A%t ten tey got bot0
K&n addition to te red%ction o! @ages to @ic te
operati8es at last consented, many mills are no@
r%nning sort time0L B)eports o! &nsp0 o! Fact0, ?pril
1861, p0 <3:C
;<?F0 ?pril0
K5e s%!!erings o! te operati8es since te date o! my
last report a8e greatly increased# b%t at no period o!
te istory o! man%!act%res, a8e s%!!erings so
s%dden and so se8ere been borne @it so m%c silent
resignation and so m%c patient sel!-respect0L
B)eports o! &nsp0 o! Fact0, ?pril 186<, p0 1=0C K5e
proportionate n%mber o! operati8es @olly o%t o!
employment at tis date appears not to be m%c larger
tan it @as in 1828, @en tere @as an ordinary panic
o! s%!!icient conseD%ences to excite alarm amongst
te man%!act%rers, so m%c as to @arrant te
collection o! similar statistics o! te state o! te cotton
trade as are no@ iss%ed @eekly0000 &n May 1828, te
proportion o! cotton operati8es o%t o! @ork in
Mancester o%t o! te @ole n%mber %s%ally
employed @as 1+ per cent, on sort time 1< per cent,
@ilst >= per cent @ere in !%ll @ork0 3n te <8t o!
May o! te present year, o! te @ole n%mber o!
persons %s%ally employed 1+ per cent @ere o%t o!
@ork, 3+ per cent @ere on sort time, and 2* per cent
@ere @orking !%ll time0000 &n some oter places,
$tockport !or example, te a8erages o! sort time and
o! non-employment are iger, @ilst tose o! !%ll
time are lessL, beca%se coarser n%mbers are sp%n tere
tan in Mancester Bp0 16C0
;<?F0 3ctober0
K& !ind by te last ret%rn to ,arliament tat tere @ere
<,88> cotton !actories in te (nited Kingdom in 1861,
<,1=* o! tem being in my district B'ancasire and
*8 ;apter 4&&
;esireC0 & @as a@are tat a 8ery large proportion o!
te <,1=* !actories in my district @ere small
establisments, gi8ing employment to !e@ persons,
b%t & a8e been s%rprised to !ind o@ large tat
proportion is0 &n 3*<, or 1* per cent, te steam-engine
or @ater@eel is %nder 1= orse-po@er# in 32+, or 16
per cent, te orsepo@er is abo8e 1= and %nder <=#
and in 1,3>< te po@er is <= orses and more0000 ?
8ery large proportion o! tese small man%!act%rers I
being more tan a tird o! te @ole n%mber I @ere
operati8es temsel8es at no distant period# tey are
men @ito%t command o! capital0 5e br%nt o! te
b%rden ten @o%ld a8e to be borne by te remaining
t@o-tirds0L B)eports o! &nsp0 o! Fact0, 3ct0 186<, pp0
18, 1*0C
?ccording to te same report, 2=,126, or 1103T, o! te cotton employees in 'ancasire and
;esire @ere ten @orking !%ll time# 132,>6>, or 38T, @ere @orking sort time# and 1>*,><1,
or +=0>T, @ere %nemployed0 ?!ter ded%cting te ret%rns !rom Mancester and Aolton, @ere
mainly !ine grades @ere sp%n, a line relati8ely little a!!ected by te cotton !amine, te matter
looks still more %n!a8o%rable# namely, !%lly employed 80+T, partly employed 38T, and
%nemployed +30+T Bpp0 1* and <=C0
KWorking %p good or bad cotton makes a material
di!!erence to te operati8e0 &n te earlier part o! te
year, @en man%!act%rers @ere endea8o%ring to keep
teir mills at @ork by %sing %p all te moderately
priced cotton tey co%ld obtain, m%c bad cotton @as
bro%gt into mills in @ic good cotton @as
ordinarily %sed, and te di!!erence to te operati8es in
@ages @as so great tat many strikes took place on
te gro%nd tat tey co%ld not make a !air day"s @ages
at te old rates0000 &n some cases, alto%g @orking
!%ll time, te di!!erence in @ages !rom @orking bad
cotton @as as m%c as one-al!L Bp0 <>C0
;<?C0 ?pril0
K7%ring te present year tere @ill not be !%ll
employment !or m%c more tan one-al! o! te
** ;apter 4&&
cotton operati8es in te co%ntry0L B)eports o! &nsp0 o!
Fact0, ?pril 1863, p0 120C
K? 8ery serio%s obHection to te %se o! $%rat cotton, as
man%!act%rers are no@ compelled to %se it, is tat te
speed o! te macinery m%st be greatly red%ced in te
processes o! man%!act%re0 For some years past e8ery
e!!ort as been made to increase te speed o!
macinery, in order to make te same macinery
prod%ce more @ork# and te red%ction o! te speed
becomes tere!ore a D%estion @ic a!!ects te
operati8e as @ell as te man%!act%rer# !or te cie!
part o! te operati8es are paid by te @ork done# !or
instance, spinners are paid per lb0 !or te yarn sp%n,
@ea8ers per piece !or te n%mber o! pieces @o8en#
and e8en @it te oter classes o! operati8es paid by
te @eek tere @o%ld be a dimin%tion o! @ages in
consideration o! te less amo%nt o! goods prod%ced0
From inD%iries & a8e made, and statements placed in
my ands, o! te earnings o! cotton operati8es d%ring
te present year, & !ind tere is a dimin%tion a8eraging
<= per cent %pon teir !ormer earnings, in some
instances te dimin%tion as been as m%c as += per
cent, calc%lated %pon te same rate o! @ages as
pre8ailed in 1861L Bp0 13C0 K0005e s%m earned
depends %pon 000 te nat%re o! te material operated
%pon0000 5e position o! te operati8es in regard to te
amo%nt o! teir earnings is 8ery m%c better no@
B3ctober 1863C tan it @as tis time last year0
Macinery as impro8ed, te material is better
%nderstood, and te operati8es are able better to
o8ercome te di!!ic%lties tey ad to contend @it at
!irst0 & remember being in a se@ing scool Ba carity
instit%tion !or %nemployedC at ,reston last spring,
@en t@o yo%ng @omen, @o ad been sent to @ork
at a @ea8ing sed te day be!ore, %pon te
1== ;apter 4&&
representation o! te man%!act%rer tat tey co%ld
earn 2s0 per @eek, ret%rned to te scool to be
readmitted, complaining tat tey co%ld not a8e
earned 1s0 per @eek0 & a8e been in!ormed o! "sel!-
acting minders" 000 men @o manage a pair o! sel!-
acting m%les, earning at te end o! a !ortnigt"s !%ll
@ork 8s0 11d0, and tat !rom tis s%m @as ded%cted
te rent o! te o%se, te man%!act%rer, o@e8er,
ret%rning al! te rent as a gi!t0 B6o@ genero%sSC 5e
minders took a@ay te s%m o! 6s0 11d0 &n many places
te sel!-acting minders ranged !rom +s0 to *s0 per
@eek, and te @ea8ers !rom <s0 to 6s0 per @eek in te
last monts o! 186<0000 ?t te present time a m%c
more ealty state o! tings exists, alto%g tere is
still a great decrease in te earnings in most
districts0000 5ere are se8eral ca%ses @ic a8e
tended to te red%ction o! earnings, besides te
sorter staple o! te $%rat cotton and its dirty
condition# !or instance, it is no@ te practice to mix
"@aste" largely @it $%rat, @ic conseD%ently
increases te di!!ic%lties o! te spinner or minder0 5e
treads, !rom teir sortness o! !ibre, are more liable
to break in te dra@ing o%t o! te m%le and in te
t@isting o! te yarn, and te m%le cannot be kept so
contin%o%sly in motion0000 5en, !rom te great
attention reD%ired in @atcing te treads in @ea8ing,
many @ea8ers can only mind one loom, and 8ery !e@
can mind more tan t@o looms0000 5ere as been a
direct red%ction o! +, >Z and 1= per cent %pon te
@ages o! te operati8es0000 &n te maHority o! cases te
operati8e as to make te best o! is material, and to
earn te best @ages e can at te ordinary rates0000
?noter di!!ic%lty te @ea8ers a8e sometimes to
contend @it is, tat tey are expected to prod%ce
@ell-!inised clot !rom in!erior materials, and are
1=1 ;apter 4&&
s%bHect to !ine !or te !la@s in teir @ork0L B)eports
o! &nsp0 o! Fact0, 3ct0 1863, pp0 21-230C
Wages @ere miserable, e8en @ere @ork @as !%ll time0 5e cotton @orkers @illingly o!!ered
temsel8es !or all p%blic @orks s%c as drainage, road-b%ilding, stone-breaking and street-pa8ing,
in @ic tey @ere employed, to get teir keep !rom te a%torities Balto%g tis practically
amo%nted to assistance to te man%!act%rer0 $ee Aook &, $0 +*8N+8* /Englis edition: pp0 +>2->+0
I 0d01C0 5e @ole bo%rgeoisie stood g%ard o8er te labo%rers0 Were te @orst dog"s @ages
o!!ered, and a labo%rer re!%sed to accept tem, te )elie! ;ommittee @o%ld strike im !rom its
lists0 &t @as in a @ay a golden age !or te man%!act%rers, !or te labo%rers ad eiter to star8e or
@ork at a price most pro!itable !or te bo%rgeois0 5e )elie! ;ommittees acted as @atc-dogs0 ?t
te same time, te man%!act%rers acted in secret agreement @it te go8ernment to inder
emigration as m%c as possible, partly to retain in readiness te capital in8ested in te !les and
blood o! te labo%rers, and partly to sa!eg%ard te o%se-rent sD%eeEed o%t o! te labo%rers0
K5e )elie! ;ommittees acted @it great strictness
%pon tis point0 &! @ork @as o!!ered, te operati8es to
@om it @as proposed @ere str%ck o!! te lists, and
t%s compelled to accept te o!!er0 Wen tey
obHected to accept @ork000 te ca%se as been tat teir
earnings @o%ld a8e been merely nominal, and te
@ork exceedingly se8ere0L B)eports o! &nsp0 o! Fact0,
3ct0 1863, p0 *>0C
5e operati8es @ere @illing to per!orm any @ork gi8en to tem %nder te ,%blic Works ?ct0
K5e principle %pon @ic ind%strial employments
@ere organised 8aried considerably in di!!erent to@ns,
b%t in tose places e8en in @ic te o%tdoor @ork
@as not absol%tely a labo%r test te manner in @ic
labo%r @as rem%nerated by its being paid !or eiter at
te exact rate o! relie!, or closely approximating te
rate, it became in !act a labo%r testL Bp0 6*C0 K5e
,%blic Works ?ct o! 1863 @as intended to remedy
tis incon8enience, and to enable te operati8e to earn
is day"s @ages as an independent labo%rer0 5e
p%rpose o! tis ?ct @as tree-!old: !irstly, to enable
local a%torities to borro@ money o! te ExceD%er
'oan ;ommissioners B@it consent o! te ,resident o!
te ;entral )elie! ;ommitteeC# secondly, to !acilitate
te impro8ement o! te to@ns o! te cotton districts#
1=< ;apter 4&&
tirdly, to pro8ide @ork and rem%nerati8e @ages to
te %nemployed operati8es0L
'oans to te amo%nt o! V883,>== ad been granted %nder tis ?ct %p to te end o! 3ctober 1863
Bp0 >=C0 5e @orks %ndertaken @ere mainly canalisation, road-b%ilding, street-pa8ing, @ater-
@orks reser8oirs, etc0
Mr0 6enderson, president o! te committee in Alackb%rn, @rote @it re!erence to tis to !actory
inspector )edgra8e:
K-oting in my experience, d%ring te present period
o! s%!!ering and distress, as str%ck me more !orcibly
or gi8en me more satis!action, tan te ceer!%l
alacrity @it @ic te %nemployed operati8es o! tis
district a8e accepted o! te @ork o!!ered to tem
tro%g te adoption o! te ,%blic Works ?ct, by te
;orporation o! Alackb%rn0 ? greater contrast tan tat
presented bet@een te cotton spinner as a skilled
@orkman in a !actory, and as a labo%rer in a se@er 12
or 18 !eet deep, can scarcely be concei8ed0L
B7epending on te siEe o! is !amily, e earned 2 to 1<s0 per @eek, tis enormo%s amo%nt
pro8iding sometimes !or a !amily o! eigt0 5e to@ns-men deri8ed a do%ble pro!it !rom tis0 &n
te !irst place, tey sec%red money to impro8e teir smoky and neglected cities at exceptionally
lo@ interest rates0 &n te second place, tey paid te labo%rers !ar less tan te reg%lar @age0C
K?cc%stomed as e ad been to a temperat%re all b%t
tropical, to @ork at @ic agility and delicacy o!
manip%lation a8ailed im in!initely more tan
m%sc%lar strengt and to do%ble and sometimes treble
te rem%neration @ic it is possible !or im no@ to
obtain, is ready acceptance o! te pro!!ered
employment in8ol8ed an amo%nt o! sel!-denial and
consideration te exercise o! @ic is most creditable0
&n Alackb%rn te men a8e been tested at almost
e8ery 8ariety o! o%tdoor @ork# in exca8ating a sti!!
ea8y clay soil to a considerable dept, in draining, in
stone-breaking, in road-making, and in exca8ating !or
street se@ers to a dept o! 12, 16, and sometimes <=
!eet0 &n many cases @ile t%s employed tey are
standing in m%d and @ater to te dept o! 1= or 1<
inces, and in all tey are exposed to a climate @ic,
1=3 ;apter 4&&
!or cilly %midity is not s%rpassed & s%ppose, e8en i!
it is eD%alled, by tat o! any district in EnglandL Bpp0
*1-*<C0 K5e cond%ct o! te operati8es as been
almost blameless, and teir readiness to accept and
make te best o! o%tdoor labo%rL Bp0 6*C0
;<?=0 ?pril0
K;omplaints are occasionally made in di!!erent
districts at te scarcity o! ands, b%t tis de!iciency is
cie!ly !elt in partic%lar departments, as, !or instance
o! @ea8ers0000 5ese complaints a8e teir origin as
m%c !rom te lo@ rate o! @ages @ic te ands can
earn o@ing to te in!erior D%alities o! yarn %sed, as
!rom any positi8e scarcity o! @ork-people e8en in tat
partic%lar department0 -%mero%s di!!erences a8e
taken place d%ring te past mont bet@een te
masters o! partic%lar mills and teir operati8es in
respect o! te @ages0 $trikes, & am sorry to say, are
b%t too !reD%ently resorted to0 000 5e e!!ect o! te
,%blic Works ?ct is !elt as a competition by te mill-
o@ners0 5e local committee at Aac%p as s%spended
operations, !or alto%g all te mills are not r%nning,
yet a scarcity o! ands as been experienced0L
B)eports o! &nsp0 o! Fact0, ?pril 1862, pp0 *, 1=0C
&t @as indeed ig time !or te man%!act%rers0 7%e to te ,%blic Works ?ct te demand !or
labo%r gre@ so strong tat many a !actory and @as earning 2 to + sillings daily in te D%arries
o! Aac%p0 ?nd so te p%blic @orks @ere grad%ally s%spended I tis ne@ edition o! te +teliers
nationau o! 1828, b%t tis time instit%ted in te interests o! te bo%rgeoisie0
Experiments in corpore vili
K?lto%g & a8e gi8en te act%al earnings o! te
operati8es B!%lly employedC in se8eral mills, it does
not !ollo@ tat tey earn te same amo%nt @eek by
@eek0 5e operati8es are s%bHect to great !l%ct%ation,
!rom te constant experimentalising o! te
man%!act%rers %pon di!!erent kinds and proportions o!
cotton and @aste in te same mill, te "mixings" as it is
called, being !reD%ently canged# and te earnings o!
1=2 ;apter 4&&
te operati8es rise and !all @it te D%ality o! te
cotton mixings# sometimes tey a8e been @itin 1+
per cent o! !ormer earnings, and ten in a @eek or
t@o, tey a8e !allen !rom += to 6= per cent0L
&nspector )edgra8e, @o makes tis report, ten proceeds to cite @age !ig%res taken !rom act%al
practice, o! @ic te !ollo@ing examples may s%!!ice:
?, @ea8er, !amily o! 6, employed 2 days a @eek, 6s0 80+d0# A, t@ister, employed 20+ days a @eek,
6s0# ;, @ea8er, !amily o! 2, employed + days a @eek, +s0 1d0# 7, sl%bber, !amily o! 6, employed 2
days a @eek, >s0 1=d0# E, @ea8er, !amily o! >, employed 3 days a @eek, +s0, etc0 )edgra8e
contin%es:
K5e abo8e ret%rns are deser8ing o! consideration, !or
tey so@ tat @ork @o%ld become a mis!ort%ne in
many a !amily, as it not merely red%ces te income,
b%t brings it so lo@ as to be %tterly ins%!!icient to
pro8ide more tan a small portion o! te absol%te
@ants, @ere it not tat s%pplemental relie! is granted
to operati8es @en te @ages o! te !amily do not
reac te s%m tat @o%ld be gi8en to tem as relie!, i!
tey @ere all %nemployed0L B)eports o! &nsp0 o! Fact0,
3ct0 1863, pp0 +=-+30C
K&n no @eek since te +t o! P%ne last @as tere more
tan t@o days se8en o%rs and a !e@ min%tes
employment !or all te @orkers0L BDbid0, p0 1<10C
From te beginning o! te crisis to Marc <+, 1863, nearly tree million po%nds sterling @ere
expended by te g%ardians, te ;entral )elie! ;ommittee, and te Mansion 6o%se ;ommittee0
BDbid0, p0 130C
K&n a district in @ic te !inest yarn is sp%n 000 te
spinners s%!!er an indirect red%ction o! 1+ per cent in
conseD%ence o! te cange !rom $o%t $ea &sland to
Egyptian cotton0 &n an extensi8e district, in many
parts o! @ic @aste is largely %sed as a mixt%re @it
$%rat 000 te spinners a8e ad a red%ction o! + per
cent, and a8e lost !rom <= to 3= per cent in addition,
tro%g @orking $%rat and @aste0 5e @ea8ers are
red%ced !rom 2 looms to < looms0 &n 186=, tey
a8eraged +s0 >d0 per loom, in 1863, only 3s0 2d0 5e
!ines, @ic !ormerly 8aried !rom 3d0 to 6d0 B!or te
1=+ ;apter 4&&
@ea8erC on ?merican, no@ r%n %p to !rom 1s0 to 3s0
6d0L
&n one district, @ere Egyptian cotton @as %sed @it an admixt%re o! East &ndian
Kte a8erage o! te m%le spinners, @ic @as in 186=
18s0 to <+s0, no@ a8erages !rom 1=s0 to 18s0 per @eek,
ca%sed, in addition to in!erior cotton, by te red%ction
o! te speed o! te m%le to p%t an extra amo%nt o!
t@ist in te yarn, @ic in ordinary times @o%ld be
paid !or according to listL Bpp0 23, 22C0 K?lto%g te
&ndian cotton may a8e been @orked to pro!it by te
man%!act%rer, it @ill be seen Bsee te @age list on p0
+3C tat te operati8es are s%!!erers compared @it
1861, and i! te %se o! $%rat be con!irmed, te
operati8es @ill @ant to earn te @ages o! 1861, @ic
@o%ld serio%sly a!!ect te pro!its o! te man%!act%rer,
%nless e obtain compensation eiter in te price o!
te ra@ cotton or o! is prod%ctsL Bp0 1=+C0
(ouse19ent0
K5e rent is !reD%ently ded%cted !rom te @ages o!
operati8es, e8en @en @orking sort time, by te
man%!act%rers @ose cottages tey may be
occ%pying0 -e8erteless te 8al%e o! tis class o!
property as diminised, and o%ses may be obtained
at a red%ction o! !rom <+ to += per cent %pon te rent
o! te o%ses in ordinary times# !or instance, a cottage
@ic @o%ld a8e cost 3s0 6d0 per @eek can no@ be
ad !or <s0 2d0 per @eek, and sometimes e8en !or
lessL Bp0 +>C0
0migration0 5e employers @ere nat%rally opposed to emigration o! labo%rers, beca%se, on te
one and,
Klooking !or@ard to te reco8ery o! te cotton trade
!rom its present depression, tey keep @itin teir
reac te means @ereby teir mills can be @orked in
te most ad8antageo%s mannerL0 3n te oter and,
Kmany man%!act%rers are o@ners o! te o%ses in
@ic operati8es employed in teir mills reside, and
1=6 ;apter 4&&
some %nD%estionably expect to obtain a portion o! te
back rent o@ingL Bp0 *6C0
Mr0 Aernall 3sborne said in a speec to is parliamentary constit%ents on 3ctober <<, 1862, tat
te labo%rers o! 'ancasire ad bea8ed like te ancient pilosopers I B$toicsC0 -ot like seepQ
Chapter 7. Supplementary Remarks
$%ppose, as is ass%med in tis part, te amo%nt o! pro!it in any partic%lar spere o! prod%ction
eD%als te s%m o! te s%rpl%s-8al%e prod%ced by te total capital in8ested in tat spere0 E8en
ten te bo%rgeois @ill not consider is pro!it as identical @it s%rpl%s-8al%e, i0 e0, @it %npaid
s%rpl%s-labo%r, and, to be s%re, !or te !ollo@ing reasons:
1C &n te process o! circ%lation e !orgets te process o! prod%ction0 6e tinks tat s%rpl%s-8al%e
is made @en e realises te 8al%e o! commodities, @ic incl%des realisation o! teir s%rpl%s-
8al%e0 /? blank space @ic !ollo@s in te man%script, indicates tat Marx intended to d@ell in
greater detail on tis point0 I '. 0.1
<C ?ss%ming a %ni!orm degree o! exploitation, @e a8e seen tat regardless o! all modi!ications
originating in te credit system, regardless o! te capitalists" e!!orts to o%t@it and ceat one
anoter, and, lastly, regardless o! any !a8o%rable coice o! te market I te rate o! pro!it may
di!!er considerably, depending on te lo@ or ig prices o! ra@ materials and te experience o!
te b%yer, on te relati8e prod%cti8ity, e!!iciency and ceapness o! te macinery, on te greater
or lesser e!!iciency o! te aggregate arrangement in te 8ario%s stages o! te prod%cti8e process,
elimination o! @aste, te simplicity and e!!iciency o! management and s%per8ision, etc0 &n sort,
gi8en te s%rpl%s-8al%e !or a certain 8ariable capital, it still depends 8ery m%c on te indi8id%al
b%siness ac%men o! te capitalist, or o! is managers and salesmen, @eter tis same s%rpl%s-
8al%e is expressed in a greater or smaller rate o! pro!it, and accordingly yields a greater or smaller
amo%nt o! pro!it0 'et te same s%rpl%s-8al%e o! V1,===, te prod%ct o! V1,=== in @ages, obtain in
enterprise ? !or a constant capital o! V*,===, and in enterprise A !or V11,===0 &n case ? @e a8e p"
R 1,===N1=,=== or 1=T0 &n case A @e a8e p" R 1,===N1<,===, or 8XT0 5e total capital prod%ces
relati8ely more pro!it in enterprise ? tan in A, beca%se o! a iger rate o! pro!it, alto%g te
8ariable capital ad8anced in bot cases R V1,=== and te s%rpl%s-8al%e prod%ced by eac like@ise
R V1,===, so tat in bot cases tere exists te same degree o! exploitation o! te same n%mber o!
labo%rers0 5is di!!erence in te presentation o! te same mass o! s%rpl%s-8al%e, or te di!!erence
in te rates o! pro!it, and tere!ore in te pro!it itsel!, @ile te exploitation o! labo%r is te same,
may also be d%e to oter ca%ses0 $till, it may also be d%e @olly to a di!!erence in te b%siness
ac%men @it @ic bot establisments are r%n0 ?nd tis circ%mstance misleads te capitalist,
con8inces im tat is pro!its are not d%e to exploiting labo%r, b%t, at least in part, to oter
independent circ%mstances, and partic%larly is indi8id%al acti8ity0
5e analyses in tis !irst part demonstrate te incorrectness o! te 8ie@ B)odbert%s /Sociale
Griefe an von Hirchmann, Dritter GriefI "iderlegung der 9icardo5schen ,ehre von der
Grundrente und Gegrndung einer neuen 9ententheorie, Aerlin, 18+1, $0 1<+0 I 0d01C according
to @ic Bas distinct !rom gro%nd-rent, in @ic case, !or example, te area o! real estate remains
te same and yet te rent risesC a cange in te magnit%de o! an indi8id%al capital is s%pposed to
a8e no in!l%ence on te ratio o! pro!it to capital, and t%s on te rate o! pro!it, beca%se i! te
mass o! pro!it so%ld gro@, so does te mass o! capital %pon @ic it is calc%lated, and 8ice
8ersa0
5is is tr%e only in t@o cases0 First, @en I ass%ming tat all oter circ%mstances, especially te
rate o! s%rpl%s-8al%e, remain %ncanged I tere is a cange in te 8al%e o! tat commodity @ic
is a money-commodity0 B5e same occ%rs in a merely nominal cange o! 8al%e, te rise or !all o!
more tokens o! 8al%e, oter conditions being eD%al0C 'et te total capital R V1==, and te pro!it R
V<=, te rate o! pro!it being R <=T0 $o%ld gold !all by al!, or do%ble, te same capital
1=8 ;apter 4&&
pre8io%sly @ort only V1==, @ill be @ort V<== i! it !alls and te pro!it @ill be @ort V2=, i0 e0, it
@ill be expressed in so m%c money instead o! te !ormer V<=# i! it rises, te capital o! V1== @ill
be @ort only V+=, and te pro!it @ill be represented by a prod%ct, @ose 8al%e @ill be V1=0 A%t
in eiter case <==:2= R +=:1= R 1==:<= R <=T0 &n all tese examples tere @o%ld, o@e8er, a8e
been no act%al cange in te magnit%de o! capital-8al%e, and only in te money-expression o! te
same 8al%e and te same s%rpl%s-8al%e0 For tis reason sN;, or te rate o! pro!it, co%ld not be
a!!ected0
&n te second case tere is an act%al cange o! magnit%de in te 8al%e, b%t %naccompanied by a
cange in te ratio o! 8 to c# in oter @ords, @it a constant rate o! s%rpl%s-8al%e te relation o!
capital in8ested in labo%r-po@er B8ariable capital considered as an index o! te amo%nt o! labo%r-
po@er set in motionC to te capital in8ested in means o! prod%ction remains te same0 (nder
tese circ%mstances, no matter @eter @e a8e ;, or n;, or ;Nn, e0g0, 1,===, or <,===, or +==,
and te rate o! pro!it being <=T, te pro!it R <== in te !irst case, R 2== in te second, and R 1==
in te tird0 A%t <==:1,=== R 2==:<,=== R 1==:+== R <=T0 5at is to say, te rate o! pro!it is
%ncanged, beca%se te composition o! capital remains te same and is not a!!ected by te cange
in magnit%de0 5ere!ore, an increase or decrease in te amo%nt o! pro!it so@s merely an increase
or decrease in te magnit%de o! te in8ested capital0
&n te !irst case tere is, tere!ore, b%t te appearance o! a cange in te magnit%de o! te
employed capital, @ile in te second case tere is an act%al cange in magnit%de, b%t no cange
in te organic composition o! te capital, i0 e0, in te relati8e proportions o! its 8ariable and
constant portions0 A%t @it te exception o! tese t@o cases, a cange in te magnit%de o! te
employed capital is eiter te result o! a preceding cange in te 8al%e o! one o! its components,
and tere!ore o! a cange in te relati8e magnit%de o! tese components Bas long as te s%rpl%s-
8al%e itsel! does not cange @it te 8ariable capitalC# or, tis cange o! magnit%de Bas in labo%r-
processes on a large scale, introd%ction o! ne@ macinery, etc0C is te cause o! a cange in te
relati8e magnit%de o! its t@o organic components0 &n all tese cases, oter circ%mstances
remaining te same, a cange in te magnit%de o! te employed capital m%st tere!ore be
accompanied sim%ltaneo%sly by a cange in te rate o! pro!it0
? rise in te rate o! pro!it is al@ays d%e to a relati8e or absol%te increase o! te s%rpl%s-8al%e in
relation to its cost o! prod%ction, i0 e0, to te ad8anced total capital, or to a decrease in te
di!!erence bet@een te rate o! pro!it and te rate o! s%rpl%s-8al%e0
Fl%ct%ations in te rate o! pro!it may occ%r irrespecti8e o! canges in te organic components o!
te capital, or o! te absol%te magnit%de o! te capital, tro%g a rise or !all in te 8al%e o! te
!ixed or circ%lating ad8anced capital ca%sed by an increase or a red%ction o! te @orking-time
reD%ired !or its reprod%ction, tis increase or red%ction taking place independently o! te already
existing capital0 5e 8al%e o! e8ery commodity I t%s also o! te commodities making %p te
capital I is determined not by te necessary labo%r-time contained in it, b%t by te social labo%r-
time reD%ired !or its reprod%ction0 5is reprod%ction may take place %nder %n!a8o%rable or %nder
propitio%s circ%mstances, distinct !rom te conditions o! original prod%ction0 &!, %nder altered
conditions, it takes do%ble or, con8ersely, al! te time, to reprod%ce te same material capital,
and i! te 8al%e o! money remains %ncanged, a capital !ormerly @ort V1== @o%ld be @ort
V<==, or V+= respecti8ely0 $o%ld tis appreciation or depreciation a!!ect all parts o! capital
%ni!ormly, ten te pro!it @o%ld also be accordingly expressed in do%ble, or al!, te amo%nt o!
money0 A%t i! it in8ol8es a cange in te organic composition o! te capital, i! te ratio o! te
8ariable to te constant portion o! capital rises or !alls, ten, oter circ%mstances remaining te
same, te rate o! pro!it @ill rise @it a relati8ely rising 8ariable capital and !all @it a relati8ely
!alling one0 &! only te money-8al%e o! te ad8anced capital rises or !alls Bin conseD%ence o! a
1=* ;apter 4&&
cange in te 8al%e o! moneyC, ten te money-expression o! te s%rpl%s-8al%e rises, or !alls, in
te same proportion0 5e rate o! pro!it remains %ncanged0
Part II. Conversion of Proft into
Average Proft
Chapter 8. Diferent Compositions of Capitals in
Diferent Branches of Production and
Resulting Diferences in Rates of Proft
&n te preceding part @e demonstrated, among oter tings, tat te rate o! pro!it may 8ary I rise
or !all I @ile te rate o! s%rpl%s-8al%e remains te same0 &n te present capter @e ass%me tat
te intensity o! labor exploitation, and tere!ore te rate o! s%rpl%s-8al%e and te lengt o! te
@orking-day, are te same in all te speres o! prod%ction into @ic te social labor o! a gi8en
co%ntry is di8ided0 ?dam $mit as already compreensi8ely so@n tat te n%mero%s
di!!erences in te exploitation o! labor in 8ario%s speres o! prod%ction balance one anoter by
means o! all kinds o! existing compensations, or compensations accepted as s%c on te basis o!
c%rrent preH%dice, so tat tey are merely e8anescent distinctions and are o! no moment in a st%dy
o! te general relations0 3ter di!!erences, !or instance tose in te @age scale, rest largely on te
di!!erence bet@een simple and complicated labor mentioned in te beginning o! Aook & Bp0 1*C,
and a8e noting to do @it te intensity o! exploitation in te di!!erent speres o! prod%ction,
alto%g tey render te lot o! te laborer in tose speres 8ery %neD%al0 For instance, i! te labor
o! a goldsmit is better paid tan tat o! a day-laborer, te !ormer"s s%rpl%s-labor prod%ces
proportionately more s%rpl%s-8al%e tan te latter"s0 ?nd alto%g te eD%aliEing o! @ages and
@orking-days, and tereby o! te rates o! s%rpl%s-8al%e, among di!!erent speres o! prod%ction,
and e8en among di!!erent in8estments o! capital in te same spere o! prod%ction, is cecked by
all kinds o! local obstacles, it is ne8erteless taking place more and more @it te ad8ance o!
capitalist prod%ction and te s%bordination o! all economic conditions to tis mode o! prod%ction0
5e st%dy o! s%c !rictions, @ile important to any special @ork on @ages, may be dispensed
@it as incidental and irrele8ant in a general analysis o! capitalist prod%ction0 &n a general
analysis o! tis kind it is %s%ally al@ays ass%med tat te act%al conditions correspond to teir
conception, or, @at is te same, tat act%al conditions are represented only to te extent tat tey
are typical o! teir o@n general case0
5e di!!erence in te rates o! s%rpl%s-8al%e in di!!erent co%ntries, and conseD%ently te national
di!!erences in te degree o! exploitation o! labor, are immaterial !or o%r present analysis0 Wat
@e @ant to so@ in tis part is precisely te @ay in @ic a general rate o! pro!it takes sape in
any gi8en co%ntry0 &t is e8ident, o@e8er, tat a comparison o! te 8ario%s national rates o! pro!it
reD%ires only a collation o! te pre8io%sly st%died @it tat @ic is ere to be st%died0 First one
so%ld consider te di!!erences in te national rates o! s%rpl%s-8al%e, and ten, on te basis o!
tese gi8en rates, a comparison so%ld be made o! te di!!erences in te national rates o! pro!it0
&n so !ar as tose di!!erences are not d%e to di!!erences in te national rates o! s%rpl%s-8al%e, tey
m%st be d%e to circ%mstances in @ic te s%rpl%s-8al%e is ass%med, H%st as in te analysis o! tis
capter, to be %ni8ersally te same, i0 e0, constant0
111 ;apter 4&&&
We demonstrated in te preceding capter tat, ass%ming te rate o! s%rpl%s-8al%e to be constant,
te rate o! pro!it obtaining !or a gi8en capital may rise or !all in conseD%ence o! circ%mstances
@ic raise or lo@er te 8al%e o! one or te oter portion o! constant capital, and so a!!ect te
proportion bet@een te 8ariable and constant components o! capital0 We !%rter obser8ed tat
circ%mstances @ic prolong or red%ce te time o! t%rno8er o! an indi8id%al capital may similarly
in!l%ence te rate o! pro!it0 $ince te mass o! te pro!it is identical @it te mass o! te s%rpl%s-
8al%e, and @it te s%rpl%s-8al%e itsel!, it @as also seen tat te mass o! te pro!it I as distinct
!rom te rate o! pro!it I is not a!!ected by te a!orementioned !l%ct%ations o! 8al%e0 5ey only
modi!y te rate in @ic a gi8en s%rpl%s-8al%e, and tere!ore a pro!it o! a gi8en magnit%de,
express temsel8es# in oter @ords, tey modi!y only te relati8e magnit%de o! pro!it, i0 e0, its
magnit%de compared @it te magnit%de o! te ad8anced capital0 &nasm%c as capital @as tied %p
or released by s%c !l%ct%ations o! 8al%e, it @as not only te rate o! pro!it, b%t te pro!it itsel!,
@ic @as likely to be a!!ected in tis indirect manner0 6o@e8er, tis as ten al@ays applied
only to s%c capital as @as already in8ested, and not to ne@ in8estments0 Aesides, te increase or
red%ction o! pro!it al@ays depended on te extent to @ic te same capital co%ld, in
conseD%ence o! s%c !l%ct%ation o! 8al%e, set in motion more or less labor# in oter @ords, it
depended on te extent to @ic te same capital co%ld, @it te rate o! s%rpl%s-8al%e remaining
te same, obtain a larger or smaller amo%nt o! s%rpl%s-8al%e0 Far !rom contradicting te general
r%le, or !rom being an exception to it, tis seeming exception @as really b%t a special case in te
application o! te general r%le0
&t @as seen in te preceding part tat, te degree o! exploitation remaining constant, canges in
te 8al%e o! te component parts o! constant capital and in te time o! t%rno8er o! capital are
attended by canges in te rate o! pro!it0 5e ob8io%s concl%sion is tat te rates o! pro!it in
di!!erent speres o! prod%ction existing side by side a8e to di!!er @en, oter circ%mstances
remaining %ncanged, te time o! t%rno8er o! capitals employed in te di!!erent speres di!!ers,
or @en te 8al%e-relation o! te organic components o! tese capitals di!!ers in te 8ario%s
brances o! prod%ction0 Wat @e pre8io%sly regarded as canges occ%rring s%ccessi8ely @it one
and te same capital is no@ to be regarded as sim%ltaneo%s di!!erences among capital in8estments
existing side by side in di!!erent speres o! prod%ction0
&n tese circ%mstances @e sall a8e to analyEe: 1C te di!!erence in te organic composition o!
capitals, and <C te di!!erence in teir period o! t%rno8er0
5e premise in tis entire analysis is nat%rally tat by speaking o! te composition or t%rno8er o!
a capital in a certain line o! prod%ction @e al@ays mean te a8erage normal proportions o! capital
in8ested in tis spere, and generally te a8erage in te total capital employed in tat partic%lar
spere, and not te accidental di!!erences o! te indi8id%al capitals0
$ince it is !%rter ass%med tat te rate o! s%rpl%s-8al%e and te @orking-day are constant, and
since tis ass%mption also implies constant @ages, a certain D%antity o! 8ariable capital represents
a de!inite D%antity o! labor-po@er set in motion, and tere!ore a de!inite D%antity o! materialiEed
labor0 &!, tere!ore, V1== represent te @eekly @age o! 1== laborers, indicating 1== act%al labor-
po@ers, ten n times V1== indicate te labo%r-po@ers o! n times 1== laborers, and V1==Nn tose
o! 1==Nn laborers0 5e 8ariable capital t%s ser8es ere Bas is al@ays te case @en te @age is
gi8enC as an index o! te amo%nt o! labor set in motion by a de!inite total capital0 7i!!erences in
te magnit%de o! te employed 8ariable capitals ser8e, tere!ore, as indexes o! te di!!erence in
te amo%nt o! employed labor-po@er0 &! V1== indicate 1== laborers per @eek, and represent 6,===
@orking-o%rs at 6= @orking-o%rs per @eek, ten V<== represent 1<,===, and V+= only 3,===
@orking-o%rs0
Ay composition o! capital @e mean, as stated in Aook &, te proportion o! its acti8e and passi8e
components, i0 e0, o! 8ariable and constant capital0 5@o proportions enter into consideration %nder
tis eading0 5ey are not eD%ally important, alto%g tey may prod%ce similar e!!ects %nder
certain circ%mstances0
11< ;apter 4&&&
5e !irst proportion rests on a tecnical basis, and m%st be regarded as gi8en at a certain stage o!
de8elopment o! te prod%cti8e !orces0 ? de!inite D%antity o! labor-po@er represented by a de!inite
n%mber o! laborers is reD%ired to prod%ce a de!inite D%antity o! prod%cts in, say, one day, and I
@at is sel!-e8ident I tereby to cons%me prod%cti8ely, i0 e0, to set in motion, a de!inite D%antity
o! means o! prod%ction, macinery, ra@ materials, etc0 ? de!inite n%mber o! laborers corresponds
to a de!inite D%antity o! means o! prod%ction, and ence a de!inite D%antity o! li8ing labor to a
de!inite D%antity o! labor materialiEed in means o! prod%ction0 5is proportion di!!ers greatly in
di!!erent speres o! prod%ction, and !reD%ently e8en in di!!erent brances o! one and te same
ind%stry, alto%g it may by coincidence be entirely or approximately te same in entirely
separate lines o! ind%stry0
5is proportion !orms te tecnical composition o! capital and is te real basis o! its organic
composition0
6o@e8er, it is also possible tat tis !irst proportion may be te same in di!!erent lines o!
ind%stry, pro8ided 8ariable capital is merely an index o! labor-po@er and constant capital merely
an index o! te mass o! means o! prod%ction set in motion by tis labor-po@er0 For instance,
certain @ork in copper and iron may reD%ire te same ratio o! labor-po@er to mass o! means o!
prod%ction0 A%t since copper is more expensi8e tan iron, te 8al%e-relation bet@een 8ariable and
constant capital is di!!erent in eac case, and ence also te 8al%e-composition o! te t@o total
capitals0 5e di!!erence bet@een te tecnical composition and te 8al%e composition is
mani!ested in eac branc o! ind%stry in tat te 8al%e-relation o! te t@o portions o! capital may
8ary @ile te tecnical composition is constant, and te 8al%e-relation may remain te same
@ile te tecnical composition 8aries0 5e latter case @ill, o! co%rse, be possible only i! te
cange in te ratio o! te employed masses o! means o! prod%ction and labor-po@er is
compensated by a re8erse cange in teir 8al%es0
5e 8al%e-composition o! capital, inasm%c as it is determined by, and re!lects, its tecnical
composition, is called te organic composition o! capital0
&n te case o! 8ariable capital, tere!ore, @e ass%me tat it is te index o! a de!inite D%antity o!
labor-po@er, or o! a de!inite n%mber o! laborers, or a de!inite D%antity o! li8ing labor set in
motion0 We a8e seen in te preceding part tat a cange in te magnit%de o! te 8al%e o!
8ariable capital migt e8ent%ally indicate noting b%t a iger or lo@er price o! te same mass o!
labor0 A%t ere, @ere te rate o! s%rpl%s-8al%e and te @orking-day are taken to be constant, and
te @ages !or a de!inite @orking period are gi8en, tis is o%t o! te D%estion0 3n te oter and, a
di!!erence in te magnit%de o! te constant capital may like@ise be an index o! a cange in te
mass o! means o! prod%ction set in motion by a de!inite D%antity o! labor-po@er0 A%t it may also
stem !rom a di!!erence in 8al%e bet@een te means o! prod%ction set in motion in one spere and
tose o! anoter0 Aot points o! 8ie@ m%st tere!ore be examined ere0
Finally, @e m%st take note o! te !ollo@ing essential !acts:
'et V1== be te @eekly @age o! 1== laborers0 'et te @eekly @orking-o%rs R 6=0 F%rtermore,
let te rate o! s%rpl%s-8al%e R 1==T0 &n tis case, te laborers @ork 3= o! te 6= o%rs !or
temsel8es and 3= o%rs gratis !or te capitalist0 &n !act, te V1== o! @ages represent H%st te 3=
@orking-o%rs o! 1== laborers, or altogeter 3,=== @orking-o%rs, @ile te oter 3,=== o%rs
@orked by te laborers are incorporated in te V1== o! s%rpl%s-8al%e, or in te pro!it pocketed by
te capitalist0 ?lto%g te @age o! V1== does not, tere!ore, express te 8al%e in @ic te
@eekly labor o! te 1== laborers is materialiEed, it indicates ne8erteless Bsince te lengt o! te
@orking-day and te rate o! s%rpl%s-8al%e are gi8enC tat tis capital sets in motion 1== laborers
!or 6,=== @orking-o%rs0 5e capital o! V1== indicates tis, !irst, beca%se it indicates te n%mber
o! laborers set in motion, @it V1 R 1 laborer per @eek, ence V1== R 1== laborers# and, secondly,
beca%se, since te rate o! s%rpl%s-8al%e is gi8en as 1==T, eac o! tese laborers per!orms t@ice
as m%c @ork as is contained in is @ages, so tat V1, i0 e0, is @age, @ic is te expression o!
113 ;apter 4&&&
al! a @eek o! labor, act%ates a @ole @eek"s labor, H%st as V1== sets in motion 1== @eeks o!
labor, alto%g it contains only +=0 ? 8ery essential distinction is t%s to be made in regard to
8ariable capital laid o%t in @ages0 &ts 8al%e as te s%m o! @ages, i0 e0, as a certain amo%nt o!
materialised labo%r, is to be disting%ised !rom its 8al%e as a mere index o! te mass o! li8ing
labo%r @ic it sets in motion0 5e latter is al@ays greater tan te labo%r @ic it incorporates,
and is, tere!ore, represented by a greater 8al%e tan tat o! te 8ariable capital0 5is greater
8al%e is determined, on te one and, by te n%mber o! labo%rers set in motion by te 8ariable
capital and, on te oter, by te D%antity o! s%rpl%s-labo%r per!ormed by tem0
&t !ollo@s !rom tis manner o! looking %pon 8ariable capital tat:
Wen a capital in8ested in prod%ction spere ? expends only 1== in 8ariable capital !or eac >==
o! total capital, lea8ing 6== !or constant capital, @ile a capital in8ested in prod%ction spere A
expends 6== !or 8ariable and only 1== !or constant capital, ten capital ? o! >== sets in motion
only 1== o! labo%r-po@er, or, in te terms o! o%r pre8io%s ass%mption, 1== @eeks o! labo%r, or
6,=== o%rs o! li8ing labo%r, @ile te same amo%nt o! capital A @ill set in motion 6== @eeks o!
labo%r, or 36,=== o%rs o! li8ing labo%r0 5e capital in ? @o%ld ten appropriate only += @eeks o!
labo%r, or 3,=== o%rs o! s%rpl%s-labo%r, @ile te same amo%nt o! capital in A @o%ld appropriate
3== @eeks o! labo%r, or 18,=== o%rs0 4ariable capital is not only te index o! te labo%r
embodied in it0 Wen te rate o! s%rpl%s-8al%e is kno@n it is also an index o! te amo%nt o!
labo%r set in motion o8er and abo8e tat embodied in itsel!, i0 e0, o! s%rpl%s-labo%r0 ?ss%ming te
same intensity o! exploitation, te pro!it in te !irst case @o%ld be 1==N>== R 1N> R 12 <N>T, and
in te second case, 6==N>== R 6N> R 8+ +N>T, or a six-!old rate o! pro!it0 &n tis case, te pro!it
itsel! @o%ld act%ally be six times as great, 6== in A as against 1== in ?, beca%se te same capital
set in motion six times as m%c li8ing labo%r, @ic at te same le8el o! exploitation means six
times as m%c s%rpl%s 8al%e, and t%s six times as m%c pro!it0
A%t i! te capital in8ested in ? @ere not >== b%t V>,===, @ile tat in8ested in A @ere only V>==,
and te organic composition o! bot @ere to remain te same, ten te capital in ? @o%ld employ
V1,=== o! te V>,=== as 8ariable capital, tat is, 1,=== labo%rers per @eek R 6=,=== o%rs o! li8ing
labo%r, o! @ic 3=,=== @o%ld be s%rpl%s-labo%r0 .et eac V>== o! te capital in ? @o%ld
contin%e to set in motion only 1N6 as m%c li8ing labo%r, and ence only 1N6 as m%c s%rpl%s-
labo%r, as te capital in A, and @o%ld prod%ce only 1N6 as m%c pro!it0 &! @e consider te rate o!
pro!it, ten in ? 1===N>=== R 1==N>== R 12 <N>T, as compared @it 6==N>==, or 8+ +N>T, in A0
5aking eD%al amo%nts o! capital, te rates o! pro!it di!!er beca%se, o@ing to te di!!erent masses
o! li8ing labo%r set in motion, te masses o! s%rpl%s-8al%e, and t%s o! pro!it, di!!er, alto%g te
rates o! s%rpl%s-8al%e are te same0
We get practically te same res%lt i! te tecnical conditions are te same in bot speres o!
prod%ction, b%t te 8al%e o! te elements o! te employed constant capital is greater or smaller in
te one tan in te oter0 'et %s ass%me tat bot in8est V1== as 8ariable capital and tere!ore
employ 1== labo%rers per @eek to set in motion te same D%antity o! macinery and ra@
materials0 A%t let te latter be more expensi8e in A tan in ?0 For instance, let te V1== o!
8ariable capital set in motion V<== o! constant capital in ?, and V2== in A0 Wit te same rate o!
s%rpl%s-8al%e, o! 1==T, te s%rpl%s-8al%e prod%ced is in eiter case eD%al to V1==0 6ence, te
pro!it is also eD%al to V1== in bot0 A%t te rate o! pro!it in ? is 1==NB<==c U 1==8C R X R 33XT,
@ile in A it is 1==NB2==c U 1==8C R 1N+ R <=T0 &n !act, i! @e select a certain aliD%ot part o! te
total capital in eiter case, @e !ind tat in e8ery V1== o! A only V<=, or 1N+, constit%te 8ariable
capital, @ile in e8ery V1== o! ? V33X, or X, !orm 8ariable capital0 A prod%ces less pro!it !or
eac V1==, beca%se it sets in motion less li8ing labo%r tan ?0 5e di!!erence in te rates o! pro!it
t%s resol8es itsel! once more, in tis case, into a di!!erence o! te masses o! pro!it, beca%se o!
te masses o! s%rpl%s-8al%e, prod%ced by eac 1== o! in8ested capital0
5e di!!erence bet@een tis second example and te !irst is H%st tis: 5e eD%alisation bet@een ?
and A in te second case @o%ld reD%ire only a cange in te 8al%e o! te constant capital o! eiter
112 ;apter 4&&&
? or A, pro8ided te tecnical basis remained te same0 A%t in te !irst case te tecnical
composition itsel! is di!!erent in te t@o speres o! prod%ction and @o%ld a8e to be completely
canged to acie8e an eD%alisation0
5e di!!erent organic composition o! 8ario%s capitals is t%s independent o! teir absol%te
magnit%de0 &t is al@ays b%t a D%estion o! o@ m%c o! e8ery 1== is 8ariable and o@ m%c
constant capital0
;apitals o! di!!erent magnit%de, calc%lated in percentages, or, @at amo%nts to te same in tis
case, capitals o! te same magnit%de operating !or te same @orking-time and @it te same
degree o! exploitation may prod%ce 8ery m%c di!!erent amo%nts o! pro!it, beca%se o! s%rpl%s-
8al%e, !or te reason tat a di!!erence in te organic composition o! capital in di!!erent speres o!
prod%ction implies a di!!erence in teir 8ariable part, t%s a di!!erence in te D%antities o! li8ing
labo%r set in motion by tem, and tere!ore also a di!!erence in te D%antities o! s%rpl%s-labo%r
appropriated by tem0 ?nd tis s%rpl%s-labo%r is te s%bstance o! s%rpl%s-8al%e, and t%s o!
pro!it0 &n di!!erent speres o! prod%ction eD%al portions o! te total capital comprise %neD%al
so%rces o! s%rpl%s-8al%e, and te sole so%rce o! s%rpl%s-8al%e is li8ing labo%r0 ?ss%ming te same
degree o! labo%r exploitation, te mass o! labo%r set in motion by a capital o! 1==, and
conseD%ently te mass o! s%rpl%s-labo%r appropriated by it, depend on te magnit%de o! its
8ariable component0 &! a capital, consisting in per cent o! *=cU 1=8, prod%ced as m%c s%rpl%s-
8al%e, or pro!it, at te same degree o! exploitation as a capital consisting o! 1=c U *=8, it @o%ld be
as plain as day tat te s%rpl%s-8al%e, and t%s 8al%e in general, m%st a8e an entirely di!!erent
so%rce tan labo%r, and tat political economy @o%ld ten be depri8ed o! e8ery rational basis0 &!
@e are to ass%me all te time tat V1 stands !or te @eekly @age o! a labo%rer @orking 6= o%rs,
and tat te rate o! s%rpl%s-8al%e is 1==T, ten it is e8ident tat te total 8al%e prod%ct o! one
labo%rer in a @eek, is V<0 5en labo%rers @o%ld ten prod%ce no more tan V<=0 ?nd since V1= o!
te V<= replace te @ages, te ten labo%rers cannot prod%ce more s%rpl%s-8al%e tan V1=0 3n te
oter and, *= labo%rers, @ose total prod%ct is V18=, and @ose @ages amo%nt to V*=, @o%ld
prod%ce a s%rpl%s-8al%e o! V*=0 5e rate o! pro!it in te !irst case @o%ld t%s be 1=T, and in te
oter *=T 0 &! tis @ere not so, ten 8al%e and s%rpl%s-8al%e @o%ld be someting else tan
materialised labo%r0 $ince capitals in di!!erent speres o! prod%ction 8ie@ed in percentages I or
as capitals o! eD%al magnit%de I are di8ided di!!erently into 8ariable and constant capital, setting
in motion %neD%al D%antities o! li8ing labo%r and prod%cing di!!erent s%rpl%s-8al%es, and
tere!ore pro!its, it !ollo@s tat te rate o! pro!it, @ic consists precisely o! te ratio o! s%rpl%s-
8al%e to total capital in per cent, m%st also di!!er0
-o@, i! capitals in di!!erent speres o! prod%ction, calc%lated in per cent, i0 e0, capitals o! eD%al
magnit%de, prod%ce %neD%al pro!its in conseD%ence o! teir di!!erent organic composition, ten it
!ollo@s tat te pro!its o! %neD%al capitals in di!!erent speres o! prod%ction cannot be
proportional to teir respecti8e magnit%des, or tat pro!its in di!!erent speres o! prod%ction are
not proportional to te magnit%de o! te respecti8e capitals in8ested in tem0 For i! pro!its @ere
to gro@ pro rata to te magnit%de o! in8ested capital, it @o%ld mean tat in per cent te pro!its
@o%ld be te same, so tat in di!!erent speres o! prod%ction capitals o! eD%al magnit%de @o%ld
a8e eD%al rates o! pro!it, in spite o! teir di!!erent organic composition0 &t is only in te same
spere o! prod%ction, @ere @e a8e a gi8en organic composition o! capital, or in di!!erent
speres @it te same organic composition o! capital, tat te amo%nts o! pro!its are directly
proportional to te amo%nts o! in8ested capitals0 5o say tat te pro!its o! %neD%al capitals are
proportional to teir magnit%des @o%ld only mean tat capitals o! eD%al magnit%de yield eD%al
pro!its, or tat te rate o! pro!it is te same !or all capitals, @ate8er teir magnit%de and organic
composition0
5ese statements old good on te ass%mption tat te commodities are sold at teir 8al%es0 5e
8al%e o! a commodity is eD%al to te 8al%e o! te constant capital contained in it, pl%s te 8al%e o!
te 8ariable capital reprod%ced in it, pl%s te increment I te s%rpl%s-8al%e prod%ced I o! tis
11+ ;apter 4&&&
8ariable capital0 ?t te same rate o! s%rpl%s-8al%e, its D%antity e8idently depends on te D%antity
o! te 8ariable capital0 5e 8al%e o! te prod%ct o! an indi8id%al capital o! 1== is, in one case, *=c
U 1=8 U 1=s R 11=# and in te oter, 1=c U *=8 U *=s R l*=0 &! te commodities go at teir 8al%es,
te !irst prod%ct is sold at 11=, o! @ic 1= represent s%rpl%s-8al%e, or %npaid labo%r, and te
second at 1*=, o! @ic *= represent s%rpl%s-8al%e, or %npaid labo%r0
5is is partic%larly important in comparing rates o! pro!it in di!!erent co%ntries0 'et %s ass%me
tat te rate o! s%rpl%s-8al%e in one E%ropean co%ntry is 1==T, so tat te labo%rer @orks al! o!
te @orking-day !or imsel! and te oter al! !or is employer0 'et %s !%rter ass%me tat te
rate o! pro!it in an ?sian co%ntry is <+T, so tat te labo%rer @orks 2N+ o! te @orking-day !or
imsel!, and 1N+ !or is employer0 'et 82c U l68 be te composition o! te national capital in te
E%ropean co%ntry, and 16c U 828 in te ?sian co%ntry, @ere little macinery, etc0, is %sed, and
@ere a gi8en D%antity o! labo%r-po@er cons%mes relati8ely little ra@ material prod%cti8ely in a
gi8en time0 5en @e a8e te !ollo@ing calc%lation:
&n te E%ropean co%ntry te 8al%e o! te prod%ct R 82c U 168 U 16s R 116# rate o! pro!it R 16N1== R
16T0
&n te ?sian co%ntry te 8al%e o! te prod%ct R 16c U 828 U <1s R 1<1# rate o! pro!it R <1N1== R
<1T0
5e rate o! pro!it in te ?sian co%ntry is t%s more tan <+T iger tan in te E%ropean co%ntry,
alto%g te rate o! s%rpl%s-8al%e in te !ormer is one-!o%rt tat o! te latter0 Men like ;arey,
Aastiat, and tutti 3uanti, @o%ld arri8e at te 8ery opposite concl%sion0
Ay te @ay, di!!erent national rates o! pro!it are mostly based on di!!erent national rates o!
s%rpl%s-8al%e0 A%t in tis capter @e compare %neD%al rates o! pro!it deri8ed !rom te same rate
o! s%rpl%s-8al%e0
?side !rom di!!erences in te organic composition o! capitals, and tere!ore aside !rom te
di!!erent masses o! labo%r I and conseD%ently, oter circ%mstances remaining te same, !rom
di!!erent masses o! s%rpl%s-labo%r set in motion by capitals o! te same magnit%de in di!!erent
speres o! prod%ction, tere is yet anoter so%rce o! ineD%ality in rates o! pro!it0 5is is te
di!!erent period o! t%rno8er o! capital in di!!erent speres o! prod%ction0 We a8e seen in ;apter
&4 tat, oter conditions being eD%al, te rates o! pro!it o! capitals o! te same organic
composition are in8ersely proportional to teir periods o! t%rno8er0 We a8e also seen tat te
same 8ariable capital t%rned o8er in di!!erent periods o! time prod%ces di!!erent D%antities o!
ann%al s%rpl%s-8al%e0 5e di!!erence in te periods o! t%rno8er is tere!ore anoter reason @y
capitals o! eD%al magnit%de in di!!erent speres o! prod%ction do not prod%ce eD%al pro!its in
eD%al periods, and @y, conseD%ently, te rates o! pro!it in tese di!!erent speres di!!er0
?s !ar as te ratio o! te !ixed and circ%lating capital in te composition o! capitals is concerned,
o@e8er, it does not in itsel! a!!ect te rate o! pro!it in te least0 &t can a!!ect te rate o! pro!it
only i! in one case, tis di!!erence in composition coincides @it a di!!erent ratio o! te 8ariable
and constant parts, so tat te di!!erence in te rate o! pro!it is d%e to tis latter di!!erence, and
not to te di!!erent ratio o! !ixed and circ%lating capital# and, in te oter case, i! te di!!erence in
te ratio o! te !ixed and circ%lating parts o! capital is responsible !or a di!!erence in te period o!
t%rno8er in @ic a certain pro!it is realised0 &! capitals are di8ided into !ixed and circ%lating
capital in di!!erent proportions, tis @ill nat%rally al@ays in!l%ence te period o! t%rno8er and
ca%se di!!erences in it0 A%t tis does not imply tat te period o! t%rno8er, in @ic te same
capitals realise certain pro!its, is di!!erent0 For instance, ? may contin%ally a8e to con8ert te
greater part o! its prod%ct into ra@ materials, etc0, @ile A may %se te same macinery, etc0, !or a
longer time, and may need less ra@ material, b%t bot ? and A, being occ%pied in prod%ction,
al@ays a8e a part o! teir capital engaged, te one in ra@ materials, i0 e0, in circ%lating capital,
and te oter in macinery, etc0, or in !ixed capital0 ? contin%ally con8erts a portion o! its capital
!rom te !orm o! commodities into tat o! money, and te latter again into te !orm o! ra@
116 ;apter 4&&&
material, @ile A employs a portion o! its capital !or a longer time as an instr%ment o! labo%r
@ito%t any s%c con8ersions0 &! bot o! tem employ te same amo%nt o! labo%r, tey @ill
indeed sell D%antities o! prod%cts o! %neD%al 8al%e in te co%rse o! te year, b%t bot D%antities o!
prod%cts @ill contain eD%al amo%nts o! s%rpl%s-8al%e, and teir rates o! pro!it, calc%lated on te
entire capital in8ested, @ill be te same, alto%g teir composition o! !ixed and circ%lating
capital, and teir periods o! t%rno8er, are di!!erent0 Aot capitals realise eD%al pro!its in eD%al
periods, alto%g teir periods o! t%rno8er are di!!erent0
1
5e di!!erence in te period o! t%rno8er
is in itsel! o! no importance, except so !ar as it a!!ects te mass o! s%rpl%s-labo%r appropriated and
realised by te same capital in a gi8en time0 &!, tere!ore, a di!!erent di8ision into !ixed and
circ%lating capital does not necessarily imply a di!!erent period o! t%rno8er, @ic @o%ld in its
t%rn imply a di!!erent rate o! pro!it, it is e8ident tat i! tere is any s%c di!!erence in te rates o!
pro!it, it is not d%e to a di!!erent ratio o! !ixed to circ%lating capital as s%c, b%t rater to te !act
tat tis di!!erent ratio indicates an ineD%ality in te periods o! t%rno8er a!!ecting te rate o!
pro!it0
&t !ollo@s, tere!ore, tat te di!!erent composition o! constant capital in respect to its !ixed and
circ%lating portions in 8ario%s brances o! prod%ction as in itsel! no bearing on te rate o! pro!it,
since it is te ratio o! 8ariable to constant capital @ic decides tis D%estion, @ile te 8al%e o!
te constant capital, and tere!ore also its magnit%de in relation to te 8ariable is entirely
%nrelated to te !ixed or circ%lating nat%re o! its components0 .et it may be !o%nd I and tis o!ten
leads to incorrect concl%sions I tat @ere8er !ixed capital is considerably ad8anced tis b%t
expresses te !act tat prod%ction is on a large scale, so tat constant capital greatly o%t@eigs te
8ariable, or tat te li8ing labo%r-po@er it employs is small compared to te mass o! te means o!
prod%ction @ic it operates0
We a8e t%s demonstrated tat di!!erent lines o! ind%stry a8e di!!erent rates o! pro!it, @ic
correspond to di!!erences in te organic composition o! teir capitals and, @itin indicated limits,
also to teir di!!erent periods o! t%rno8er# gi8en te same time o! t%rno8er, te la@ Bas a general
tendencyC tat pro!its are related to one anoter as te magnit%des o! te capitals, and tat,
conseD%ently, capitals o! eD%al magnit%de yield eD%al pro!its in eD%al periods, applies only to
capitals o! te same organic composition, e8en @it te same rate o! s%rpl%s-8al%e0 5ese
statements old good on te ass%mption @ic as been te basis o! all o%r analyses so !ar,
namely tat te commodities are sold at teir 8al%es0 5ere is no do%bt, on te oter and, tat
aside !rom %nessential, incidental and m%t%ally compensating distinctions, di!!erences in te
a8erage rate o! pro!it in te 8ario%s brances o! ind%stry do not exist in reality, and co%ld not
exist @ito%t abolising te entire system o! capitalist prod%ction0 &t @o%ld seem, tere!ore, tat
ere te teory o! 8al%e is incompatible @it te act%al process, incompatible @it te real
penomena o! prod%ction, and tat !or tis reason any attempt to %nderstand tese penomena
so%ld be gi8en %p0
&t !ollo@s !rom te !irst part o! tis 8ol%me tat te cost-prices o! prod%cts in di!!erent speres o!
prod%ction are eD%al i! eD%al portions o! capital a8e been ad8anced !or teir prod%ction,
o@e8er di!!erent te organic composition o! s%c capitals0 5e distinction bet@een 8ariable and
constant capital escapes te capitalist in te cost-price0 ? commodity !or @ose prod%ction e
m%st ad8ance V1== costs im H%st as m%c, @eter e in8ests *=c U 1=8, or 1=c U *=80 &t costs im
V1== in eiter case I no more and no less0 5e cost-prices are te same !or eD%al capitals in
di!!erent speres, no matter o@ m%c te prod%ced 8al%es and s%rpl%s-8al%es may di!!er0 5e
eD%ality o! cost-prices is te basis !or competition among in8ested capitals, @ereby an a8erage
pro!it is bro%gt abo%t0
Chapter 9. Formation of a General Rate of Proft
(Average Rate of Proft) and Transformation of
the Values of Commodities into Prices of
Production
5e organic composition o! capital depends at any gi8en time on t@o circ%mstances: !irst, on te
tecnical relation o! labo%r po@er employed to te mass o! te means o! prod%ction employed#
secondly, on te price o! tese means o! prod%ction0 5is composition, as @e a8e seen, m%st be
examined on te basis o! percentage ratios0 We express te organic composition o! a certain
capital consisting 2N+ o! constant and 1N+ o! 8ariable capital, by te !orm%la 8=c U <=80 &t is
!%rtermore ass%med in tis comparison tat te rate o! s%rpl%s-8al%e is %ncangeable0 'et it be
any rate picked at random# say, 1==T0 5e capital o! 8=c U <=8 ten prod%ces a s%rpl%s-8al%e o!
<=s, and tis yields a rate o! pro!it o! <=T on te total capital0 5e magnit%de o! te act%al 8al%e
o! its prod%ct depends on te magnit%de o! te !ixed part o! te constant capital, and on te
portion @ic passes !rom it tro%g @ear and tear into te prod%ct0 A%t since tis circ%mstance
as absol%tely no bearing on te rate o! pro!it, and ence, in te present analysis, @e sall
ass%me, !or te sake o! simplicity, tat te constant capital is e8ery@ere %ni!ormly and entirely
trans!erred to te ann%al prod%ct o! te capitals0 &t is !%rter ass%med tat te capitals in te
di!!erent speres o! prod%ction ann%ally realise te same D%antities o! s%rpl%s-8al%e proportionate
to te magnit%de o! teir 8ariable parts0 For te present, tere!ore, @e disregard te di!!erence
@ic may be prod%ced in tis respect by 8ariations in te d%ration o! t%rno8ers0 5is point @ill
be disc%ssed later0
'et %s take !i8e di!!erent speres o! prod%ction, and let te capital in eac a8e a di!!erent organic
composition as !ollo@s:
;apitals )ate o!
$%rpl%s-
4al%e
$%rpl%s-
4al%e
4al%e
o!
,rod%ct
)ate
o!
,ro!it
&0 8=c U
<=8
1==T <= 1<= <=T
&&0 >=c U
3=8
1==T 3= 13= 3=T
&&&0 6=c
U 2=8
1==T 2= 12= 2=T
&40 8+c
U 1+8
1==T 1+ 11+ 1+T
118 ;apter &J
40 *+c U
+8
1==T + 1=+ +T
6ere, in di!!erent speres o! prod%ction @it te same degree o! exploitation, @e !ind
considerably di!!erent rates o! pro!it corresponding to te di!!erent organic composition o! tese
capitals0
5e s%m total o! te capitals in8ested in tese !i8e speres o! prod%ction R +==# te s%m total o!
te s%rpl%s-8al%e prod%ced by tem R 11=# te aggregate 8al%e o! te commodities prod%ced by
tem R 61=0 &! @e consider te +== as a single capital, and capitals & to 4 merely as its component
parts Bas, say, di!!erent departments o! a cotton mill, @ic as di!!erent ratios o! constant to
8ariable capital in its carding, preparatory spinning, spinning, and @ea8ing sops, and in @ic
te a8erage ratio !or te !actory as a @ole as still to be calc%latedC, te mean composition o!
tis capital o! +== @o%ld R 3*=c U 11=8, or, in per cent, R >8c U <<80 $o%ld eac o! te capitals o!
1== be regarded as 1N+ o! te total capital, its composition @o%ld eD%al tis a8erage o! >8c U <<8#
!or e8ery 1== tere @o%ld be an a8erage s%rpl%s-8al%e o! <<# t%s, te a8erage rate o! pro!it
@o%ld R <<T, and, !inally, te price o! e8ery !i!t o! te total prod%ct prod%ced by te +== @o%ld
R 1<<0 5e prod%ct o! eac !i!t o! te ad8anced total capital @o%ld ten a8e to be sold at 1<<0
A%t to a8oid entirely erroneo%s concl%sions it m%st not be ass%med tat all cost-prices R 1==0
Wit 8=c U <=8 and a rate o! s%rpl%s-8al%e R 1==T, te total 8al%e o! commodities prod%ced by
capital & R 1== @o%ld be 8=c U <=8 U <=s R 1<=, pro8ided te entire constant capital @ent into te
ann%al prod%ct0 -o@, tis may %nder certain circ%mstances be te case in some speres o!
prod%ction0 A%t ardly in cases @ere te proportion o! c : 8 R 2 : 10 We m%st, tere!ore,
remember in comparing te 8al%es prod%ced by eac 1== o! te di!!erent capitals, tat tey @ill
di!!er in accordance @it te di!!erent composition o! c as to its !ixed and circ%lating parts, and
tat, in t%rn, te !ixed portions o! eac o! te di!!erent capitals depreciate slo@ly or rapidly as te
case may be, t%s trans!erring %neD%al D%antities o! teir 8al%e to te prod%ct in eD%al periods o!
time0 A%t tis is immaterial to te rate o! pro!it0 -o matter @eter te 8=c gi8e %p a 8al%e o! 8=,
or +=, or +, to te ann%al prod%ct, and te ann%al prod%ct conseD%ently R 8=c U <=8 U <=s R 1<=, or
+=c U <=8 U <=s R *=, or +8 U <=8 U <=s R 2+# in all tese cases te red%ndance o! te prod%ct"s
8al%e o8er its cost-price R <=, and in calc%lating te rate o! pro!it tese <= are related to te
capital o! 1== in all o! tem0 5e rate o! pro!it o! capital &, tere!ore, is <=T in e8ery case0 5o
make tis still plainer, @e let di!!erent portions o! constant capital go into te 8al%e o! te prod%ct
o! te same !i8e capitals in te !ollo@ing table:
;apitals )ate o!
$%rpl%s-
4al%e
$%rpl%s-
4al%e
)ate
o!
,ro!it
(sed
%p c
4al%e o!
commodities
;ost-
,rice

&0 8=c U
<=8
1==T <= <=T += *= >=
&&0 >=c U
3=8
1==T 3= 3=T +1 111 81
&&&0 6=c
U 2=8
1==T 2= 2=T +1 131 *1
&40 8+c 1==T 1+ 1+T 2= >= ++
11* ;apter &J
U 1+8
40 *+c U
+8
1==T + +T 1= <= 1+
3*=c U
11=8
I 11= 11=T I I I 5otal
>8c U
<<8
I << <<T I I I ?8erage
&! @e no@ again consider capitals & to 4 as a single total capital, @e sall see tat, in tis case as
@ell, te composition o! te s%ms o! tese !i8e capitals R +== R 3*=c U 11=8, so tat @e get te
same a8erage composition R >8c U <<8, and, similarly, te a8erage s%rpl%s-8al%e remains <<0 &! @e
di8ide tis s%rpl%s-8al%e %ni!ormly among capitals & to 4, @e get te !ollo@ing commodity-
prices:
;apitals $%rpl%s-
4al%e
4al%e o!
;ommodities
;ost-,rice o!
;ommodities
,rice o!
;ommodities
)ate
o!
,ro!it
7e8iation
o!
,rice !rom
4al%e
&0 8=c U
<=8
<= *= >= *< <<T U<
&&0 >=c U
3=8
3= 111 81 1=3 <<T -8
&&&0 6=c
U 2=8
2= 131 *1 113 <<T -18
&40 8+c
U 1+8
1+ >= ++ >> <<T U>
40 *+c U
+8
+ <= 1+ 3> <<T U1>
5aken togeter, te commodities are sold at < U > U 1> R <6 abo8e, and 8 U 18 R <6 belo@ teir
8al%e, so tat te de8iations o! price !rom 8al%e balance o%t one anoter tro%g te %ni!orm
distrib%tion o! s%rpl%s-8al%e, or tro%g addition o! te a8erage pro!it o! << per 1== %nits o!
ad8anced capital to te respecti8e cost-prices o! te commodities & to 40 3ne portion o! te
commodities is sold abo8e its 8al%e in te same proportion in @ic te oter is sold belo@ it0
?nd it is only te sale o! te commodities at s%c prices tat enables te rate o! pro!it !or capitals
& to 4 to be %ni!ormly <<T, regardless o! teir di!!erent organic composition0 5e prices @ic
obtain as te a8erage o! te 8ario%s rates o! pro!it in te di!!erent speres o! prod%ction added to
te cost-prices o! te di!!erent speres o! prod%ction, constit%te te prices o! prod%ction0 5ey
a8e as teir prereD%isite te existence o! a general rate o! pro!it, and tis, again, pres%pposes tat
te rates o! pro!it in e8ery indi8id%al spere o! prod%ction taken by itsel! a8e pre8io%sly been
red%ced to H%st as many a8erage rates0 5ese partic%lar rates o! pro!it R sNc in e8ery spere o!
1<= ;apter &J
prod%ction, and m%st, as occ%rs in ,art & o! tis book, be ded%ced o%t o! te 8al%es o! te
commodities0 Wito%t s%c ded%ction te general rate o! pro!it Band conseD%ently te price o!
prod%ction o! commoditiesC remains a 8ag%e and senseless conception0 6ence, te price o!
prod%ction o! a commodity is eD%al to its cost-price pl%s te pro!it, allotted to it in per cent, in
accordance @it te general rate o! pro!it, or, in oter @ords, to its cost-price pl%s te a8erage
pro!it0
3@ing to te di!!erent organic compositions o! capitals in8ested in di!!erent lines o! prod%ction,
and, ence, o@ing to te circ%mstance tat I depending on te di!!erent percentage @ic te
8ariable part makes %p in a total capital o! a gi8en magnit%de I capitals o! eD%al magnit%de p%t
into motion 8ery di!!erent D%antities o! labo%r, tey also appropriate 8ery di!!erent D%antities o!
s%rpl%s-labo%r or prod%ce 8ery di!!erent D%antities o! s%rpl%s-8al%e0 ?ccordingly, te rates o!
pro!it pre8ailing in te 8ario%s brances o! prod%ction are originally 8ery di!!erent0 5ese
di!!erent rates o! pro!it are eD%aliEed by competition to a single general rate o! pro!it, @ic is te
a8erage o! all tese di!!erent rates o! pro!it0 5e pro!it accr%ing in accordance @it tis general
rate o! pro!it to any capital o! a gi8en magnit%de, @ate8er its organic composition, is called te
a8erage pro!it0 5e price o! a commodity, @ic is eD%al to its cost-price pl%s te sare o! te
ann%al a8erage pro!it on te total capital in8ested Bnot merely cons%medC in its prod%ction tat
!alls to it in accordance @it te conditions o! t%rno8er, is called its price o! prod%ction0 5ake, !or
example, a capital o! +==, o! @ic 1== is !ixed capital, and let 1=T o! tis @ear o%t d%ring one
t%rno8er o! te circ%lating capital o! 2==0 'et te a8erage pro!it !or te period o! t%rno8er be
1=T0 &n tat case te cost-price o! te prod%ct created d%ring tis t%rno8er @ill be 1=c !or @ear
pl%s 2== Bc U 8C circ%lating capital R 21=, and its price o! prod%ction @ill be 21= cost-price pl%s
B1=T pro!it on +==C += R 26=0
5%s, alto%g in selling teir commodities te capitalists o! te 8ario%s speres o! prod%ction
reco8er te 8al%e o! te capital cons%med in teir prod%ction, tey do not sec%re te s%rpl%s-
8al%e, and conseD%ently te pro!it, created in teir o@n spere by te prod%ction o! tese
commodities0 Wat tey sec%re is only as m%c s%rpl%s-8al%e, and ence pro!it, as !alls, @en
%ni!ormly distrib%ted, to te sare o! e8ery aliD%ot part o! te total social capital !rom te total
social s%rpl%s-8al%e, or pro!it, prod%ced in a gi8en time by te social capital in all speres o!
prod%ction0 E8ery 1== o! an in8ested capital, @ate8er its composition, dra@s as m%c pro!it in a
year, or any oter period o! time, as !alls to te sare o! e8ery 1==, te -t part o! te total
capital, d%ring te same period0 $o !ar as pro!its are concerned, te 8ario%s capitalists are H%st so
many stockolders in a stock company in @ic te sares o! pro!it are %ni!ormly di8ided per
1==, so tat pro!its di!!er in te case o! te indi8id%al capitalists only in accordance @it te
amo%nt o! capital in8ested by eac in te aggregate enterprise, i0 e0, according to is in8estment
in social prod%ction as a @ole, according to te n%mber o! is sares0 5ere!ore, te portion o!
te price o! commodities @ic replaces te elements o! capital cons%med in te prod%ction o!
tese commodities, te portion, tere!ore, @ic @ill a8e to be %sed to b%y back tese cons%med
capital-8al%es, i0 e0, teir cost-price, depends entirely on te o%tlay o! capital @itin te respecti8e
speres o! prod%ction0 A%t te oter element o! te price o! commodities, te pro!it added to tis
cost-price, does not depend on te amo%nt o! pro!it prod%ced in a gi8en spere o! prod%ction by a
gi8en capital in a gi8en period o! time0 &t depends on te mass o! pro!it @ic !alls as an a8erage
!or any gi8en period to eac indi8id%al capital as an aliD%ot part o! te total social capital in8ested
in social prod%ction0
Wen a capitalist sells is commodities at teir price o! prod%ction, tere!ore, e reco8ers money
in proportion to te 8al%e o! te capital cons%med in teir prod%ction and sec%res pro!it in
proportion to tis ad8anced capital as te aliD%ot part in te total social capital0 6is cost-prices are
speci!ic0 A%t te pro!it added to tem is independent o! is partic%lar spere o! prod%ction, being
a simple a8erage per 1== %nits o! in8ested capital0
1<1 ;apter &J
'et %s ass%me tat te !i8e di!!erent in8estments & to 4 o! te !oregoing ill%stration belong to one
man0 5e D%antity o! 8ariable and constant capital cons%med per 1== o! te in8ested capital in
eac o! te departments & to 4 in te prod%ction o! commodities & to 4 @o%ld, needless to say,
make %p a part o! teir price, since at least tis price is reD%ired to reco8er te ad8anced and
cons%med portions o! te capital0 5ese cost-prices @o%ld tere!ore be di!!erent !or eac class o!
te commodities & to 4, and @o%ld as s%c be set di!!erently by te o@ner0 A%t as regards te
di!!erent D%antities o! s%rpl%s-8al%e, or pro!it, prod%ced by & to 4, tey migt easily be regarded
by te capitalist as pro!it on is ad8anced aggregate capital, so tat eac 1== %nits @o%ld get teir
de!inite aliD%ot part0 6ence, te cost-prices o! te commodities prod%ced in te 8ario%s
departments & to 4 @o%ld be di!!erent# b%t tat portion o! teir selling price deri8ed !rom te
pro!it added per 1== capital @o%ld be te same !or all tese commodities0 5e aggregate price o!
te commodities & to 4 @o%ld tere!ore eD%al teir aggregate 8al%e, i0 e0, te s%m o! te cost-
prices & to 4 pl%s te s%m o! te s%rpl%s-8al%es, or pro!its, prod%ced in & to 40 &t @o%ld ence
act%ally be te money-expression o! te total D%antity o! past and ne@ly applied labo%r
incorporated in commodities & to 40 ?nd in te same @ay te s%m o! te prices o! prod%ction o!
all commodities prod%ced in society I te totality o! all brances o! prod%ction I is eD%al to te
s%m o! teir 8al%es0
5is statement seems to con!lict @it te !act tat %nder capitalist prod%ction te elements o!
prod%cti8e capital are, as a r%le, bo%gt on te market, and tat !or tis reason teir prices incl%de
pro!it @ic as already been realised, ence, incl%de te price o! prod%ction o! te respecti8e
branc o! ind%stry togeter @it te pro!it contained in it, so tat te pro!it o! one branc o!
ind%stry goes into te cost-price o! anoter0 A%t i! @e place te s%m o! te cost-prices o! te
commodities o! an entire co%ntry on one side, and te s%m o! its s%rpl%s-8al%es, or pro!its, on te
oter, te calc%lation m%st e8idently be rigt0 For instance, take a certain commodity ?0 &ts cost-
price may contain te pro!its o! A, ;, 7, etc0, H%st as te cost-prices o! A, ;, 7, etc0, may contain
te pro!its o! ?0 -o@, as @e make o%r calc%lation te pro!it o! ? @ill not be incl%ded in its cost-
price, nor @ill te pro!its o! A, ;, 7, etc0, be incl%ded in teirs0 -obody e8er incl%des is o@n
pro!it in is cost-price0 &! tere are, tere!ore, n speres o! prod%ction, and i! eac makes a pro!it
amo%nting to p, ten teir aggregate cost-price R k - np0 ;onsidering te calc%lation as a @ole
@e see tat since te pro!its o! one spere o! prod%ction pass into te cost-price o! anoter, tey
are tere!ore incl%ded in te calc%lation as constit%ents o! te total price o! te end-prod%ct, and
so cannot appear a second time on te pro!it side0 &! any do appear on tis side, o@e8er, ten
only beca%se te commodity in D%estion is itsel! an %ltimate prod%ct, @ose price o! prod%ction
does not pass into te cost-price o! some oter commodity0
&! te cost-price o! a commodity incl%des a s%m R p, @ic stands !or te pro!its o! te prod%cers
o! te means o! prod%ction, and i! a pro!it R p1 is added to tis cost-price, te aggregate pro!it , R
p U p10 5e aggregate cost-price o! te commodity, considered @ito%t te pro!it portions, is ten
its o@n cost-price min%s ,0 'et tis cost-price be k0 5en, ob8io%sly, k U p R k U p U p10 &n dealing
@it s%rpl%s-8al%es, @e a8e seen in Aook & tat te prod%ct o! e8ery capital may be so treated,
as to%g a part o! it replaces only capital, @ile te oter part represents only s%rpl%s-8al%e0 &n
applying tis approac to te aggregate prod%ct o! society, @e m%st make some recti!ications0
'ooking %pon society as a @ole, te pro!it contained in, say, te price o! !lax cannot appear
t@ice I not bot as a portion o! te linen price and as te pro!it o! te !lax0
5ere is no di!!erence bet@een s%rpl%s-8al%e and pro!it, as long as, e0g0, ?"s s%rpl%s-8al%e passes
into A"s constant capital0 &t is, a!ter all, D%ite immaterial to te 8al%e o! te commodities, @eter
te labo%r contained in tem is paid or %npaid0 5is merely so@s tat A pays !or ?"s s%rpl%s-
8al%e0 ?"s s%rpl%s-8al%e cannot be entered t@ice in te total calc%lation0
A%t te di!!erence is tis: ?side !rom te !act tat te price o! a partic%lar prod%ct, let %s say tat
o! capital A, di!!ers !rom its 8al%e beca%se te s%rpl%s-8al%e realised in A may be greater or
smaller tan te pro!it added to te price o! te prod%cts o! A, te same circ%mstance applies also
1<< ;apter &J
to tose commodities @ic !orm te constant part o! capital A, and indirectly also its 8ariable
part, as te labo%rers" necessities o! li!e0 $o !ar as te constant portion is concerned, it is itsel!
eD%al to te cost-price pl%s te s%rpl%s-8al%e, ere tere!ore eD%al to cost-price pl%s pro!it, and
tis pro!it may again be greater or smaller tan te s%rpl%s-8al%e !or @ic it stands0 ?s !or te
8ariable capital, te a8erage daily @age is indeed al@ays eD%al to te 8al%e prod%ced in te
n%mber o! o%rs te labo%rer m%st @ork to prod%ce te necessities o! li!e0 A%t tis n%mber o!
o%rs is in its t%rn obsc%red by te de8iation o! te prices o! prod%ction o! te necessities o! li!e
!rom teir 8al%es0 6o@e8er, tis al@ays resol8es itsel! to one commodity recei8ing too little o!
te s%rpl%s-8al%e @ile anoter recei8es too m%c, so tat te de8iations !rom te 8al%e @ic
are embodied in te prices o! prod%ction compensate one anoter0 (nder capitalist prod%ction, te
general la@ acts as te pre8ailing tendency only in a 8ery complicated and approximate manner,
as a ne8er ascertainable a8erage o! ceaseless !l%ct%ations0
$ince te general rate o! pro!it is !ormed by taking te a8erage o! te 8ario%s rates o! pro!it !or
eac 1== o! capital in8ested in a de!inite period, e0g0, a year, it !ollo@s tat in it te di!!erence
bro%gt abo%t by di!!erent periods o! t%rno8er o! di!!erent capitals is also e!!aced0 A%t tese
di!!erences a8e a decisi8e bearing on te di!!erent rates o! pro!it in te 8ario%s speres o!
prod%ction @ose a8erage !orms te general rate o! pro!it0
&n te preceding ill%stration concerning te !ormation o! te a8erage rate o! pro!it @e ass%med
eac capital in eac spere o! prod%ction R 1==, and @e did so to so@ te di!!erence in te rates
o! pro!it in per cent, and t%s also te di!!erence in te 8al%es o! commodities prod%ced by eD%al
amo%nts o! capital0 A%t it goes @ito%t saying tat te act%al amo%nts o! s%rpl%s-8al%e prod%ced
in eac spere o! prod%ction depend on te magnit%de o! te in8ested capitals, since te
composition o! capital is gi8en in eac spere o! prod%ction0 .et te act%al rate o! pro!it in any
partic%lar spere o! prod%ction is not a!!ected by te !act tat te capital in8ested is 1==, or m
times 1==, or xm times 1==0 5e rate o! pro!it remains 1=T, @eter te total pro!it is 1=:1==, or
1,===:1=,===0
6o@e8er, since te rates o! pro!it di!!er in te 8ario%s speres o! prod%ction, @it 8ery m%c
di!!erent D%antities o! s%rpl%s-8al%e, or pro!it, being prod%ced in tem, depending on te
proportion o! te 8ariable to te total capital, it is e8ident tat te a8erage pro!it per 1== o! te
social capital, and ence te a8erage, or general, rate o! pro!it, @ill di!!er considerably in
accordance @it te respecti8e magnit%des o! te capitals in8ested in te 8ario%s speres0 'et %s
take !o%r capitals ?, A, ;, 70 'et te rate o! s%rpl%s-8al%e !or all R 1==T0 'et te 8ariable capital
!or eac 1== o! te total be <+ in ?, 2= in A, 1+ in ;, and 1= in 70 5en eac 1== o! te total
capital @o%ld yield a s%rpl%s-8al%e, or pro!it, o! <+ in ?, 2= in A, 1+ in ;, and 1= in 70 5is
@o%ld total *=, and i! tese !o%r capitals are o! te same magnit%de, te a8erage rate o! pro!it
@o%ld ten be *=N2 or <<ZT0
$%ppose, o@e8er, te total capitals are as !ollo@s: ? R <==, A R 3==, ; R 1,===, 7 R 2,===0 5e
pro!its prod%ced @o%ld ten respecti8ely R +=, 1<=, 1+=, and 2==0 5is makes a pro!it o! ><=, and
an a8erage rate o! pro!it o! 13 1N11T !or +,+==, te s%m o! te !o%r capitals0
5e masses o! te total 8al%e prod%ced di!!er in accordance @it te magnit%des o! te total
capitals in8ested in ?, A, ;, 7, respecti8ely0 5e !ormation o! te a8erage rate o! pro!it is,
tere!ore, not merely a matter o! obtaining te simple a8erage o! te di!!erent rates o! pro!it in te
8ario%s speres o! prod%ction, b%t rater one o! te relati8e @eigt @ic tese di!!erent rates o!
pro!it a8e in !orming tis a8erage0 5is, o@e8er, depends on te relati8e magnit%de o! te
capital in8ested in eac partic%lar spere, or on te aliD%ot part @ic te capital in8ested in eac
partic%lar spere !orms in te aggregate social capital0 5ere @ill nat%rally be a 8ery great
di!!erence, depending on @eter a greater or smaller part o! te total capital prod%ces a iger or
lo@er rate o! pro!it0 ?nd tis, again, depends on o@ m%c capital is in8ested in speres, in @ic
te 8ariable capital is relati8ely small or large compared to te total capital0 &t is H%st like te
a8erage interest obtained by a %s%rer @o lends 8ario%s D%antities o! capital at di!!erent interest
1<3 ;apter &J
rates# !or instance, at 2, +, 6, >T, etc0 5e a8erage rate @ill depend entirely on o@ m%c o! is
capital e as loaned o%t at eac o! te di!!erent rates o! interest0
5e general rate o! pro!it is, tere!ore, determined by t@o !actors:
1C 5e organic composition o! te capitals in te di!!erent speres o! prod%ction, and t%s, te
di!!erent rates o! pro!it in te indi8id%al speres0
<C 5e distrib%tion o! te total social capital in tese di!!erent speres, and t%s, te relati8e
magnit%de o! te capital in8ested in eac partic%lar spere at te speci!ic rate o! pro!it pre8ailing
in it# i0 e0, te relati8e sare o! te total social capital absorbed by eac indi8id%al spere o!
prod%ction0
&n Aooks & and && @e dealt only @it te value o! commodities0 3n te one and, te cost1price
as no@ been singled o%t as a part o! tis 8al%e, and, on te oter, te price of production o!
commodities as been de8eloped as its con8erted !orm0
$%ppose te composition o! te a8erage social capital is 8=c U <=8 and te ann%al rate o! s%rpl%s-
8al%e, s", is 1==T0 &n tat case te a8erage ann%al pro!it !or a capital o! 1== R <=, and te general
ann%al rate o! pro!it R <=T0 Wate8er te cost-price, k, o! te commodities ann%ally prod%ced by
a capital o! 1==, teir price o! prod%ction @o%ld ten be k U <=0 &n tose speres o! prod%ction in
@ic te composition o! capital @o%ld R B8= - xCc U B<= U xC8, te act%ally prod%ced s%rpl%s-
8al%e, or te ann%al pro!it prod%ced in tat partic%lar spere, @o%ld be <= U x, tat is, greater tan
<=, and te 8al%e o! te prod%ced commodities R k U <= U x, tat is, greater tan k U <=, or
greater tan teir price o! prod%ction0 &n tose speres, in @ic te composition o! te
capitalRB8= U xC c U B<= - xC8, te ann%ally prod%ced s%rpl%s-8al%e, or pro!it, @o%ld R <= - x, or
less tan <=, and conseD%ently te 8al%e o! te commodities k U <= - x less tan te price o!
prod%ction, @ic R k U <=0 ?side !rom possible di!!erences in te periods o! t%rno8er, te price
o! prod%ction o! te commodities @o%ld ten eD%al teir 8al%e only in speres, in @ic te
composition @o%ld appen to be 8=c U <=80
5e speci!ic de8elopment o! te social prod%cti8ity o! labo%r in eac partic%lar spere o!
prod%ction 8aries in degree, iger or lo@er, depending on o@ large a D%antity o! means o!
prod%ction are set in motion by a de!inite D%antity o! labo%r, ence in a gi8en @orking-day by a
de!inite n%mber o! labo%rers, and, conseD%ently, on o@ small a D%antity o! labo%r is reD%ired !or
a gi8en D%antity o! means o! prod%ction0 $%c capitals as contain a larger percentage o! constant
and a smaller percentage o! 8ariable capital tan te a8erage social capital are, tere!ore, called
capitals o! higher composition, and, con8ersely, tose capitals in @ic te constant is relati8ely
smaller, and te 8ariable relati8ely greater tan in te a8erage social capital, are called capitals o!
lowercomposition0 Finally, @e call tose capitals @ose composition coincides @it te a8erage,
capitals o! a8erage composition0 $o%ld te a8erage social capital be composed in per cent o! 8=c
U <=8, ten a capital o! *=c U 1=8 is higher, and a capital o! >=c U 3=8 lower tan te social
a8erage0 :enerally speaking, i! te composition o! te a8erage social capitalRmc U n8, in @ic
m and n are constant magnit%des and m U n R 1==, te !orm%la Bm U xCc U Bn - xC8represents te
iger composition, and Bm - xCc U Bn U xC8 te lo@er composition o! an indi8id%al capital or
gro%p o! capitals0 5e @ay in @ic tese capitals per!orm teir !%nctions a!ter establisment o!
an a8erage rate o! pro!it and ass%ming one t%rno8er per year, is so@n in te !ollo@ing
tab%lation, in @ic & represents te a8erage composition @it an a8erage rate o! pro!it o! <=T0
&C 8=8 U <=8 U <=s0 )ate o! pro!it R <=T0
,rice o! prod%ct R 1<=0 4al%e R 1<=0
&&C *=c U 1=8 U 1=s0 )ate o! pro!it R <=T0
,rice o! prod%ct R 1<=0 4al%e R 11=0
&&&C >=c U 3=8 U 3=s0 )ate o! pro!it R <=T0
1<2 ;apter &J
,rice o! prod%ct R 1<=0 4al%e R 13=0
5e 8al%e o! te commodities prod%ced by capital && @o%ld, tere!ore, be smaller tan teir price
o! prod%ction, te price o! prod%ction o! te commodities o! &&& smaller tan teir 8al%e, and only
in te case o! capital & in brances o! prod%ction in @ic te composition appens to coincide
@it te social a8erage, @o%ld 8al%e and price o! prod%ction be eD%al0 &n applying tese terms to
any partic%lar cases note m%st, o@e8er, be taken @eter a de8iation o! te ratio bet@een c and
8 is simply d%e to a cange in te 8al%e o! te elements o! constant capital, rater tan to a
di!!erence in te tecnical composition0
5e !oregoing statements a8e at any rate modi!ied te original ass%mption concerning te
determination o! te cost-price o! commodities0 We ad originally ass%med tat te cost-price o!
a commodity eD%alled te 8al%e o! te commodities cons%med in its prod%ction0 A%t !or te b%yer
te price o! prod%ction o! a speci!ic commodity is its cost-price, and may t%s pass as cost-price
into te prices o! oter commodities0 $ince te price o! prod%ction may di!!er !rom te 8al%e o! a
commodity, it !ollo@s tat te cost-price o! a commodity containing tis price o! prod%ction o!
anoter commodity may also stand abo8e or belo@ tat portion o! its total 8al%e deri8ed !rom te
8al%e o! te means o! prod%ction cons%med by it0 &t is necessary to remember tis modi!ied
signi!icance o! te cost-price, and to bear in mind tat tere is al@ays te possibility o! an error i!
te cost-price o! a commodity in any partic%lar spere is identi!ied @it te 8al%e o! te means o!
prod%ction cons%med by it0 3%r present analysis does not necessitate a closer examination o! tis
point0 &t remains tr%e, ne8erteless, tat te cost-price o! a commodity is al@ays smaller tan its
8al%e0 For no matter o@ m%c te cost-price o! a commodity may di!!er !rom te 8al%e o! te
means o! prod%ction cons%med by it, tis past mistake is immaterial to te capitalist0 5e cost-
price o! a partic%lar commodity is a de!inite condition @ic is gi8en, and independent o! te
prod%ction o! o%r capitalist, @ile te res%lt o! is prod%ction is a commodity containing s%rpl%s-
8al%e, tere!ore an excess o! 8al%e o8er and abo8e its cost-price0 For all oter p%rposes, te
statement tat te cost-price is smaller tan te 8al%e o! a commodity as no@ canged
practically into te statement tat te cost-price is smaller tan te price o! prod%ction0 ?s
concerns te total social capital, in @ic te price o! prod%ction is eD%al to te 8al%e, tis
statement is identical @it te !ormer, namely tat te cost-price is smaller tan te 8al%e0 ?nd
@ile it is modi!ied in te indi8id%al speres o! prod%ction, te !%ndamental !act al@ays remains
tat in te case o! te total social capital te cost-price o! te commodities prod%ced by it is
smaller tan teir 8al%e, or, in te case o! te total mass o! social commodities, smaller tan teir
price o! prod%ction, @ic is identical @it teir 8al%e0 5e cost-price o! a commodity re!ers only
to te D%antity o! paid labo%r contained in it, @ile its 8al%e re!ers to all te paid and %npaid
labo%r contained in it0 5e price o! prod%ction re!ers to te s%m o! te paid labo%r pl%s a certain
D%antity o! %npaid labo%r determined !or any partic%lar spere o! prod%ction by conditions o8er
@ic it as no control0
5e !orm%la tat te price o! prod%ction o! a commodity R k U p, i0 e0, eD%als its cost-price pl%s
pro!it, is no@ more precisely de!ined @it p R kp" Bp" being te general rate o! pro!itC0 6ence te
price o! prod%ction R k U kp"0 &! k R 3== and p" R 1+T, ten te price o! prod%ction is k U kp" R
3== U 3== \ 1+N1==, or 32+0
5e price o! prod%ction o! te commodities in any partic%lar spere may cange in magnit%de:
1C &! te general rate o! pro!it canges independently o! tis partic%lar spere, @ile te 8al%e o!
te commodities remains te same Bte same D%antities o! congealed and li8ing labo%r being
cons%med in teir prod%ction as be!oreC0
<C &! tere is a cange o! 8al%e, eiter in tis partic%lar spere in conseD%ence o! tecnical
canges, or in conseD%ence o! a cange in te 8al%e o! tose commodities @ic !orm te
elements o! its constant capital, @ile te general rate o! pro!it remains %ncanged0
1<+ ;apter &J
3C Finally, i! a combination o! te t@o a!orementioned circ%mstances takes place0
&n spite o! te great canges occ%rring contin%ally, as @e sall see, in te act%al rates o! pro!it
@itin te indi8id%al speres o! prod%ction, any real cange in te general rate o! pro!it, %nless
bro%gt abo%t by @ay o! an exception by extraordinary economic e8ents, is te belated e!!ect o! a
series o! !l%ct%ations extending o8er 8ery long periods, !l%ct%ations @ic reD%ire m%c time
be!ore consolidating and eD%alising one anoter to bring abo%t a cange in te general rate o!
pro!it0 &n all sorter periods BD%ite aside !rom !l%ct%ations o! market-pricesC, a cange in te
prices o! prod%ction is, tere!ore, al@ays traceable prima facie to act%al canges in te 8al%e o!
commodities, i0 e0, to canges in te total amo%nt o! labo%r-time reD%ired !or teir prod%ction0
Mere canges in te money-expression o! te same 8al%es are, nat%rally, not at all considered
ere0
3n te oter and, it is e8ident tat !rom te point o! 8ie@ o! te total social capital te 8al%e o!
te commodities prod%ced by it Bor, expressed in money, teir priceC R 8al%e o! constant capital U
8al%e o! 8ariable capital U s%rpl%s-8al%e0 ?ss%ming te degree o! labo%r exploitation to be
constant, te rate o! pro!it cannot cange so long as te mass o! s%rpl%s-8al%e remains te same,
%nless tere is a cange in eiter te 8al%e o! te constant capital, te 8al%e o! te 8ariable capital,
or te 8al%e o! bot, so tat ; canges, and tereby sN;, @ic represents te general rate o!
pro!it0 &n eac case, tere!ore, a cange in te general rate o! pro!it implies a cange in te 8al%e
o! commodities @ic !orm te elements o! te constant or 8ariable capital, or o! bot0
3r, te general rate o! pro!it may cange, @ile te 8al%e o! te commodities remains te same,
@en te degree o! labo%r exploitation canges0
3r, i! te degree o! labo%r exploitation remains te same, te general rate o! pro!it may cange
tro%g a cange in te amo%nt o! labo%r employed relati8e to te constant capital as a res%lt o!
tecnical canges in te labo%r-process0 A%t s%c tecnical canges m%st al@ays so@
temsel8es in, and be attended by, a cange in te 8al%e o! te commodities, @ose prod%ction
@o%ld ten reD%ire more or less labo%r tan be!ore0
We sa@ in ,art & tat s%rpl%s-8al%e and pro!it are identical !rom te standpoint o! teir mass0 A%t
te rate o! pro!it is !rom te 8ery o%tset distinct !rom te rate o! s%rpl%s-8al%e, @ic appears at
!irst sigt as merely a di!!erent !orm o! calc%lating0 A%t at te same time tis ser8es, also !rom te
o%tset, to obsc%re and mysti!y te act%al origin o! s%rpl%s-8al%e, since te rate o! pro!it can rise or
!all @ile te rate o! s%rpl%s-8al%e remains te same, and 8ice 8ersa, and since te capitalist is in
practice solely interested in te rate o! pro!it0 .et tere @as di!!erence o! magnit%de only bet@een
te rate o! s%rpl%s-8al%e and te rate o! pro!it and not bet@een te s%rpl%s-8al%e itsel! and pro!it0
$ince in te rate o! pro!it te s%rpl%s-8al%e is calc%lated in relation to te total capital and te
latter is taken as its standard o! meas%rement, te s%rpl%s-8al%e itsel! appears to originate !rom
te total capital, %ni!ormly deri8ed !rom all its parts, so tat te organic di!!erence bet@een
constant and 8ariable capital is obliterated in te conception o! pro!it0 7isg%ised as pro!it,
s%rpl%s-8al%e act%ally denies its origin, loses its caracter, and becomes %nrecognisable0
6o@e8er, iterto te distinction bet@een pro!it and s%rpl%s-8al%e applied solely to a D%alitati8e
cange, or cange o! !orm, @ile tere @as no real di!!erence o! magnit%de in tis !irst stage o!
te cange bet@een s%rpl%s-8al%e and pro!it, b%t only bet@een te rate o! pro!it and te rate o!
s%rpl%s-8al%e0
A%t it is di!!erent, as soon as a general rate o! pro!it, and tereby an a8erage pro!it corresponding
to te magnit%de o! in8ested capital gi8en in te 8ario%s speres o! prod%ction, a8e been
establised0
&t is ten only an accident i! te s%rpl%s-8al%e, and t%s te pro!it, act%ally prod%ced in any
partic%lar spere o! prod%ction, coincides @it te pro!it contained in te selling price o! a
commodity0 ?s a r%le, s%rpl%s-8al%e and pro!it and not teir rates alone, are ten di!!erent
magnit%des0 ?t a gi8en degree o! exploitation, te mass o! s%rpl%s-8al%e prod%ced in a partic%lar
1<6 ;apter &J
spere o! prod%ction is ten more important !or te aggregate a8erage pro!it o! social capital, and
t%s !or te capitalist class in general, tan !or te indi8id%al capitalist in any speci!ic branc o!
prod%ction0 &t is o! importance to te latter only in so !ar as te D%antity o! s%rpl%s-8al%e
prod%ced in is branc elps to reg%late te a8erage pro!it0 A%t tis is a process @ic occ%rs
beind is back, one e does not see, nor %nderstand, and @ic indeed does not interest im0 5e
act%al di!!erence o! magnit%de bet@een pro!it and s%rpl%s-8al%e I not merely bet@een te rate o!
pro!it and te rate o! s%rpl%s-8al%e I in te 8ario%s speres o! prod%ction no@ completely
conceals te tr%e nat%re and origin o! pro!it not only !rom te capitalist, @o as a special interest
in decei8ing imsel! on tis score, b%t also !rom te labo%rer0 5e trans!ormation o! 8al%es into
prices o! prod%ction ser8es to obsc%re te basis !or determining 8al%e itsel!0 Finally, since te
mere trans!ormation o! s%rpl%s-8al%e into pro!it disting%ises te portion o! te 8al%e o! a
commodity !orming te pro!it !rom te portion !orming its cost-price, it is nat%ral tat te
conception o! 8al%e so%ld el%de te capitalist at tis H%nct%re, !or e does not see te total labo%r
p%t into te commodity, b%t only tat portion o! te total labo%r !or @ic e as paid in te sape
o! means o! prod%ction, be tey li8ing or not, so tat is pro!it appears to im as someting
o%tside te immanent 8al%e o! te commodity0 -o@ tis idea is !%lly con!irmed, !orti!ied, and
ossi!ied in tat, !rom te standpoint o! is partic%lar spere o! prod%ction, te pro!it added to te
cost-price is not act%ally determined by te limits o! te !ormation o! 8al%e @itin is o@n
spere, b%t tro%g completely o%tside in!l%ences0
5e !act tat tis intrinsic connection is ere re8ealed !or te !irst time# tat %p to te present time
political economy, as @e sall see in te !ollo@ing and in Aook &4, eiter !orcibly abstracted itsel!
!rom te distinctions bet@een s%rpl%s-8al%e and pro!it, and teir rates, so it co%ld retain 8al%e
determination as a basis, or else abandoned tis 8al%e determination and @it it all 8estiges o! a
scienti!ic approac, in order to cling to te di!!erences tat strike te eye in tis penomenon I
tis con!%sion o! te teorists best ill%strates te %tter incapacity o! te practical capitalist,
blinded by competition as e is, and incapable o! penetrating its penomena, to recognise te
inner essence and inner str%ct%re o! tis process beind its o%ter appearance0
&n !act, all te la@s e8ol8ed in ,art & concerning te rise and !all o! te rate o! pro!it a8e te
!ollo@ing t@o-!old meaning:
1C 3n te one and, tey are te la@s o! te general rate o! pro!it0 &n 8ie@ o! te many di!!erent
ca%ses @ic make te rate o! pro!it rise or !all one @o%ld tink, a!ter e8eryting tat as been
said and done, tat te general rate o! pro!it m%st cange e8ery day0 A%t a trend in one spere o!
prod%ction compensates !or tat in anoter, teir e!!ects cross and paralyse one anoter0 We sall
later examine to @ic side tese !l%ct%ations %ltimately gra8itate0 A%t tey are slo@0 5e
s%ddenness, m%ltiplicity, and di!!erent d%ration o! te !l%ct%ations in te indi8id%al speres o!
prod%ction make tem compensate !or one anoter in te order o! teir s%ccession in time, a !all
in prices !ollo@ing a rise, and 8ice 8ersa, so tat tey remain limited to local, i0 e0, indi8id%al,
speres0 Finally, te 8ario%s local !l%ct%ations ne%tralise one anoter0 Witin eac indi8id%al
spere o! prod%ction, tere take place canges, i0 e0, de8iations !rom te general rate o! pro!it,
@ic co%nterbalance one anoter in a de!inite time on te one and, and t%s a8e no in!l%ence
%pon te general rate o! pro!it, and @ic, on te oter, do not react %pon it, beca%se tey are
balanced by oter sim%ltaneo%s local !l%ct%ations0 $ince te general rate o! pro!it is not only
determined by te a8erage rate o! pro!it in eac spere, b%t also by te distrib%tion o! te total
social capital among te di!!erent indi8id%al speres, and since tis distrib%tion is contin%ally
canging, it becomes anoter constant ca%se o! cange in te general rate o! pro!it0 A%t it is a
ca%se o! cange @ic mostly paralyses itsel!, o@ing to te %ninterr%pted and many-sided nat%re
o! tis mo8ement0
<C Witin eac spere, tere is some room !or play !or a longer or sorter space o! time, in @ic
te rate o! pro!it o! tis spere may !l%ct%ate, be!ore tis !l%ct%ation consolidates s%!!iciently
a!ter rising or !alling to gain time !or in!l%encing te general rate o! pro!it and tere!ore ass%ming
1<> ;apter &J
more tan local importance0 5e la@s o! te rate o! pro!it, as de8eloped in ,art & o! tis book,
like@ise remain applicable @itin tese limits o! space and time0
5e teoretical conception concerning te !irst trans!ormation o! s%rpl%s-8al%e into pro!it, tat
e8ery part o! a capital yields a %ni!orm pro!it, expresses a practical !act0 Wate8er te
composition o! an ind%strial capital, @eter it sets in motion one D%arter o! congealed labo%r and
tree-D%arters o! li8ing labo%r, or tree-D%arters o! congealed labo%r and one-D%arter o! li8ing
labo%r, @eter in one case it absorbs tree times as m%c s%rpl%s-labo%r, or prod%ces tree times
as m%c s%rpl%s-8al%e tan in anoter I in eiter case it yields te same pro!it, gi8en te same
degree o! labo%r exploitation and lea8ing aside indi8id%al di!!erences, @ic, incidentally,
disappear beca%se @e are dealing in bot cases @it te a8erage composition o! te entire spere
o! prod%ction0 5e indi8id%al capitalist Bor all te capitalists in eac indi8id%al spere o!
prod%ctionC, @ose o%tlook is limited, rigtly belie8es tat is pro!it is not deri8ed solely !rom
te labo%r employed by im, or in is line o! prod%ction0 5is is D%ite tr%e, as !ar as is a8erage
pro!it is concerned0 5o @at extent tis pro!it is d%e to te aggregate exploitation o! labo%r on te
part o! te total social capital, i0 e0, by all is capitalist colleag%es I tis interrelation is a complete
mystery to te indi8id%al capitalist# all te more so, since no bo%rgeois teorists, te political
economists, a8e so !ar re8ealed it0 ? sa8ing o! labo%r I not only labo%r necessary to prod%ce a
certain prod%ct, b%t also te n%mber o! employed labo%rers I and te employment o! more
congealed labo%r Bconstant capitalC, appear to be 8ery so%nd operations !rom te economic
standpoint and do not seem to exert te least in!l%ence on te general rate o! pro!it and te
a8erage pro!it0 6o@ co%ld li8ing labo%r be te sole so%rce o! pro!it, in 8ie@ o! te !act tat a
red%ction in te D%antity o! labo%r reD%ired !or prod%ction appears not to exert any in!l%ence on
pro!itQ Moreo8er, it e8en seems in certain circ%mstances to be te nearest so%rce o! an increase o!
pro!its, at least !or te indi8id%al capitalist0
&! in any partic%lar spere o! prod%ction tere is a rise or !all o! te portion o! te cost-price
@ic represents te 8al%e o! constant capital, tis portion comes !rom te circ%lation and, eiter
enlarged or red%ced, passes !rom te 8ery o%tset into te process o! prod%ction o! te commodity0
&!, on te oter and, te same n%mber o! labo%rers prod%ces more or less in te same time, so
tat te D%antity o! labo%r reD%ired !or te prod%ction o! a de!inite D%antity o! commodities 8aries
@ile te n%mber o! labo%rers remains te same, tat portion o! te cost-price @ic represents
te 8al%e o! te 8ariable capital may remain te same, i0 e0, contrib%te te same amo%nt to te
cost-price o! to total prod%ct0 A%t e8ery one o! te indi8id%al commodities @ose s%m makes %p
te total prod%ct, sares in more or less labo%r Bpaid and tere!ore also %npaidC, and sares
conseD%ently in te greater or smaller o%tlay !or tis labo%r, i0 e0, a 1arger or smaller portion o!
te @age0 5e total @ages paid by te capitalist remain te same, b%t @ages di!!er i! calc%lated
per piece o! te commodity0 5%s, tere is a cange in tis portion o! te cost-price o! te
commodity0 A%t no matter @eter te cost-price o! te indi8id%al commodity Bor, peraps, te
cost-price o! te s%m o! commodities prod%ced by a capital o! a gi8en magnit%deC rises or !alls,
be it d%e to s%c canges in its o@n 8al%e, or in tat o! its elements, te a8erage pro!it o!, e0g0,
1=T remains 1=T0 $till, 1=T o! an indi8id%al commodity may represent 8ery di!!erent amo%nts,
depending on te cange o! magnit%de ca%sed in te cost-price o! te indi8id%al commodity by
s%c canges o! 8al%e as @e a8e ass%med0
$o !ar as te 8ariable capital is concerned I and tis is most important, beca%se it is te so%rce o!
s%rpl%s-8al%e, and beca%se anyting @ic conceals its relation to te acc%m%lation o! @ealt by
te capitalist ser8es to mysti!y te entire system I matters get cr%der or appear to te capitalist in
te !ollo@ing ligt: ? 8ariable capital o! V1== represents te @eekly @age o!, say, 1== labo%rers0
&! tese 1== labo%rers @eekly prod%ce <== pieces o! a commodity R <==;, in a gi8en @orking-
time, ten 1; I abstracted !rom tat portion o! its cost-price @ic is added by te constant
capital, costs V1==N<== R 1= sillings, since V1== R <==;0 -o@ s%ppose tat a cange occ%rs in
te prod%cti8eness o! labo%r0 $%ppose it do%bles, so tat te same n%mber o! labo%rers no@
1<8 ;apter &J
prod%ces t@ice <==; in te time @ic it pre8io%sly took to prod%ce <==;0 &n tat case
Bconsidering only tat part o! te cost-price @ic consists o! @agesC 1; R V1==N2== R +
sillings, since no@ V1== R 2==;0 $o%ld te prod%cti8eness decrease one-al!, te same labo%r
@o%ld prod%ce only <==;N< and since V1== R <==;N<, 1; R V<==N< R V10 5e canges in te
labo%r-time reD%ired !or te prod%ction o! te commodities, and ence te canges in teir 8al%e,
t%s appear in regard to te cost-price, and ence to te price o! prod%ction, as a di!!erent
distrib%tion o! te same @age !or more or !e@er commodities, depending on te greater or
smaller D%antity o! commodities prod%ced in te same @orking-time !or te same @age0 Wat te
capitalist, and conseD%ently also te political economist, see is tat te part o! te paid labo%r per
piece o! commodity canges @it te prod%cti8ity o! labo%r, and tat te 8al%e o! eac piece also
canges accordingly0 Wat tey do not see is tat te same applies to %npaid labo%r contained in
8ery piece o! te commodity, and tis is percei8ed so m%c less since te a8erage pro!it act%ally
is only accidentally determined by te %npaid labo%r absorbed in te spere o! te indi8id%al
capitalist0 &t is only in s%c cr%de and meaningless !orm tat @e can glimpse tat te 8al%e o!
commodities is determined by te labo%r contained in tem0
Chapter 10. Equalisation of the General Rate of
Proft Through Competition.
Market-Prices and Market-Values. Surplus-
Proft
5e capital in8ested in some speres o! prod%ction as a mean, or a8erage, composition, tat is, it
as te same, or almost te same composition as te a8erage social capital0
&n tese speres te price o! prod%ction is exactly or almost te same as te 8al%e o! te prod%ced
commodity expressed in money0 &! tere @ere no oter @ay o! reacing a matematical limit, tis
@o%ld be te one0 ;ompetition so distrib%tes te social capital among te 8ario%s speres o!
prod%ction tat te prices o! prod%ction in eac spere take sape according to te model o! te
prices o! prod%ction in tese speres o! a8erage composition, i0e0, tey R k U kp" Bcost-price pl%s
te a8erage rate o! pro!it m%ltiplied by te cost priceC0 5is a8erage rate o! pro!it, o@e8er, is te
percentage o! pro!it in tat spere o! a8erage composition in @ic pro!it, tere!ore, coincides
@it s%rpl%s-8al%e0 6ence, te rate o! pro!it is te same in all speres o! prod%ction, !or it is
eD%aliEed on te basis o! tose a8erage speres o! prod%ction @ic as te a8erage composition
o! capital0 ;onseD%ently, te s%m o! te pro!its in all speres o! prod%ction m%st eD%al te s%m o!
te s%rpl%s-8al%es, and te s%m o! te prices o! prod%ction o! te total social prod%ct eD%al te
s%m o! its 8al%e0 A%t it is e8ident tat te balance among speres o! prod%ction o! di!!erent
composition m%st tend to eD%aliEe tem @it te speres o! a8erage composition, be it exactly or
only approximately te same as te social a8erage0 Aet@een te speres more or less
approximating te a8erage tere is again a tendency to@ard eD%aliEation, seeking te ideal
a8erage, i0e0, an a8erage tat does not really exist, i0e0, a tendency to take tis ideal as a standard0
&n tis @ay te tendency necessarily pre8ails to make te prices o! prod%ction merely con8erted
!orms o! 8al%e, or to t%rn pro!its into mere portions o! s%rpl%s-8al%e0 6o@e8er, tese are not
distrib%ted in proportion to te s%rpl%s-8al%e prod%ced in eac special spere o! prod%ction, b%t
rater in proportion to te mass o! capital employed in eac spere, so tat eD%al masses o!
capital, @ate8er teir composition, recei8e eD%al aliD%ot sares o! te total s%rpl%s-8al%e
prod%ced by te total social capital0
&n te case o! capitals o! a8erage, or approximately a8erage, composition, te price o! prod%ction
is t%s te same or almost te same as te 8al%e, and te pro!it te same as te s%rpl%s-8al%e
prod%ced by tem0 ?ll oter capitals, o! @ate8er composition, tend to@ard tis a8erage %nder
press%re o! competition0 A%t since te capitals o! a8erage composition are o! te same, or
approximately te same, str%ct%re as te a8erage social capital, all capitals a8e te tendency,
regardless o! te s%rpl%s-8al%e prod%ced by tem, to realiEe te a8erage pro!it, rater tan teir
o@n s%rpl%s-8al%e in te price o! teir commodity, i0e0, to realiEe te prices o! prod%ction0
3n te oter and, it may be said tat @ere8er an a8erage pro!it, and tere!ore a general rate o!
pro!it, is prod%ced I no matter by @at means I s%c an a8erage pro!it cannot be anyting b%t te
pro!it on te a8erage social capital, @ose s%m is eD%al to te s%m o! s%rpl%s-8al%e0 Moreo8er,
te prices obtained by adding tis a8erage pro!it to te cost-prices cannot be anyting b%t te
8al%es transm%ted into prices o! prod%ction0 -oting @o%ld be altered i! capitals in certain
13= ;apter J
speres o! prod%ction @o%ld not, !or some reason, be s%bHect to te process o! eD%aliEation0 5e
a8erage pro!it @o%ld ten be comp%ted on tat portion o! te social capital @ic enters te
eD%aliEation process0 &t is e8ident tat te a8erage pro!it can be noting b%t te total mass o!
s%rpl%s-8al%es allotted to te 8ario%s D%antities o! capital proportionally to teir magnit%des in
teir di!!erent speres o! prod%ction0 &t is te total realiEed %npaid labo%r, and tis total mass, like
te paid, congealed or li8ing, labo%r, obtains in te total mass o! commodities and money tat
!alls to te capitalists0
5e really di!!ic%lt D%estion is tis: o@ is tis eD%aliEation o! pro!its into a general rate o! pro!it
bro%gt abo%t, since it is ob8io%sly a res%lt rater tan a point o! depart%reQ
5o begin @it, an estimate o! te 8al%es o! commodities, !or instance in terms o! money, can
ob8io%sly only be te res%lt o! teir excange0 &!, tere!ore, @e ass%me s%c an estimate, @e m%st
regard it as te o%tcome o! an act%al excange o! commodity-8al%e !or commodity-8al%e0 A%t
o@ does tis excange o! commodities at teir real 8al%e come abo%tQ
'et %s !irst ass%me tat all commodities in te di!!erent brances o! prod%ction are sold at teir
real 8al%es0 Wat @o%ld ten be te o%tcomeQ ?ccording to te !oregoing, 8ery di!!erent rates o!
pro!it @o%ld ten reign in te 8ario%s speres o! prod%ction0 &t is prima facie t@o entirely
di!!erent matters @eter commodities are sold at teir 8al%es Bi0e0, excanged in proportion to
te 8al%e contained in tem at prices corresponding to teir 8al%eC, or @eter tey are sold at
s%c prices tat teir sale yields eD%al pro!its !or eD%al masses o! te capital ad8anced !or teir
respecti8e prod%ction0
5e !act tat capitals employing %neD%al amo%nts o! li8ing labo%r prod%ce %neD%al amo%nts o!
s%rpl%s-8al%e, pres%pposes at least to a certain extent tat te degree o! exploitation or te rate o!
s%rpl%s-8al%e are te same, or tat any existing di!!erences in tem are eD%aliEed by real or
imaginary Bcon8entionalC gro%nds o! compensation0 5is @o%ld ass%me competition among
labo%rers and eD%aliEation tro%g teir contin%al migration !rom one spere o! prod%ction to
anoter0 $%c a general rate o! s%rpl%s-8al%e I 8ie@ed as a tendency, like all oter economic la@s
I as been ass%med by %s !or te sake o! teoretical simpli!ication0 A%t in reality it is an act%al
premise o! te capitalist mode o! prod%ction, alto%g it is more or less obstr%cted by practical
!rictions ca%sing more or less considerable local di!!erences, s%c as te settlement la@s !or !arm-
labo%rers in Aritain0 A%t in teory it is ass%med tat te la@s o! capitalist prod%ction operate in
teir p%re !orm0 &n reality tere exists only approximation# b%t, tis approximation is te greater,
te more de8eloped te capitalist mode o! prod%ction and te less it is ad%lterated and
amalgamated @it s%r8i8als o! !ormer economic conditions0
5e @ole di!!ic%lty arises !rom te !act tat commodities are not excanged simply as
commodities, b%t as products of capitals, @ic claim participation in te total amo%nt o! s%rpl%s-
8al%e, proportional to teir magnit%de, or eD%al i! tey are o! eD%al magnit%de0 ?nd tis claim is
to be satis!ied by te total price !or commodities prod%ced by a gi8en capital in a certain space o!
time0 5is total price is, o@e8er, only te s%m o! te prices o! te indi8id%al commodities
prod%ced by tis capital0
5e punctum saliens @ill be best bro%gt i! @e approac te matter as !ollo@s: s%ppose, te
labo%rers temsel8es are in possession o! teir respecti8e means o! prod%ction and excange teir
commodities @it one anoter0 &n tat case tese commodities @o%ld not be prod%cts o! capital0
5e 8al%e o! te 8ario%s means o! labo%r and ra@ materials @o%ld di!!er in accordance @it te
tecnical nat%re o! te labo%rs per!ormed in te di!!erent brances o! prod%ction0 F%rtermore,
aside !rom te %neD%al 8al%e o! te means o! prod%ction employed by tem, tey @o%ld reD%ire
di!!erent D%antities o! means o! prod%ction !or gi8en D%antities o! labo%r, depending on @eter a
certain commodity can be !inised in one o%r, anoter in one day, and so !ort0 ?lso s%ppose te
labo%rers @ork an eD%al a8erage lengt o! time, allo@ing !or compensations tat arise !rom te
di!!erent labo%r intensities, etc0 &n s%c a case, t@o labo%rers @o%ld, !irst, bot a8e replaced teir
131 ;apter J
o%tlays, te cost-prices o! te cons%med means o! prod%ction, in te commodities @ic make %p
te prod%ct o! teir day"s @ork0 5ese o%tlays @o%ld di!!er, depending on te tecnical nat%re o!
teir labo%r0 $econdly, bot o! tem @o%ld a8e created eD%al amo%nts o! ne@ 8al%e, namely te
@orking-day added by tem to te means o! prod%ction0 5is @o%ld comprise teir @ages pl%s
te s%rpl%s-8al%e, te latter representing s%rpl%s-labo%r o8er and abo8e teir necessary @ants, te
prod%ct o! @ic @o%ld o@e8er belong to tem0 5o p%t it te capitalist @ay, bot o! tem
recei8e te same @ages pl%s te same pro!it, or te same 8al%e, expressed, say, by te prod%ct o!
a ten-o%r @orking-day0 A%t in te !irst place, te 8al%es o! teir commodities @o%ld a8e to
di!!er0 &n commodity &, !or instance, te portion o! 8al%e corresponding to te cons%med means o!
prod%ction migt be iger tan in commodity &&0 ?nd, to introd%ce all possible di!!erences, @e
migt ass%me rigt no@ tat commodity & absorbs more li8ing labo%r, and conseD%ently reD%ires
more labo%r-time to be prod%ced, tan commodity &&0 5e 8al%es o! commodities & and && are,
tere!ore, 8ery di!!erent0 $o are te s%ms o! te 8al%es o! te commodities, @ic represent te
prod%ct o! te labo%r per!ormed by labo%rers & and && in a gi8en time0 5e rates o! pro!it @o%ld
also di!!er considerably !or & and && i! @e take te rate o! pro!it to be te proportion o! te s%rpl%s-
8al%e to te total 8al%e o! te in8ested means o! prod%ction0 5e means o! s%bsistence daily
cons%med by & and && d%ring prod%ction, @ic take te place o! @ages, ere !orm te part o! te
in8ested means o! prod%ction ordinarily called 8ariable capital0 A%t !or eD%al @orking periods te
s%rpl%s 8al%es @o%ld be te same !or & and &&, or, more precisely, since & and && eac recei8e te
8al%e o! te prod%ct o! a day"s @ork, bot o! tem recei8e eD%al 8al%es a!ter te 8al%e o! te
in8ested KconstantL elements as been ded%cted, and one portion o! tose eD%al 8al%es may be
regarded as a s%bstit%te !or te means o! s%bsistence cons%med in prod%ction, and te oter as
s%rpl%s-8al%e in excess o! it0 &! labo%rer & as greater expenses, tey are made good by a greater
portion o! te 8al%e o! is commodity, @ic replaces tis Kconstant K part, and e tere!ore as
to recon8ert a larger portion o! te total 8al%e o! is prod%ct into te material elements o! tis
constant part, @ile labo%rer &&, to%g recei8ing less !or tis, as so m%c less to recon8ert0 &n
tese circ%mstances, a di!!erence in te rates o! pro!it @o%ld tere!ore be immaterial, H%st as it is
immaterial to te @age-labo%rer today @at rate o! pro!it may express te amo%nt o! s%rpl%s-
8al%e !ilced !rom im, and H%st as in international commerce te di!!erence in te 8ario%s
national rates o! pro!it is immaterial to commodity excange0
5e excange o! commodities at teir 8al%es, or approximately at teir 8al%es, t%s reD%ires a
m%c lo@er stage tan teir excange at teir prices o! prod%ction, @ic reD%ires a de!inite le8el
o! capitalist de8elopment0
Wate8er te manner in @ic te prices o! 8ario%s commodities are !irst m%t%ally !ixed or
reg%lated, teir mo8ements are al@ays go8erned by te la@ o! 8al%e0 &! te labo%r-time reD%ired
!or teir prod%ction appens to srink, prices !all# i! it increases, prices rise, pro8ided oter
conditions remain te same0
?part !rom te domination o! prices and price mo8ement by te la@ o! 8al%e, it is D%ite
appropriate to regard te 8al%es o! commodities as not only teoretically b%t also istorically
prius to te prices o! prod%ction0 5is applies to conditions in @ic te labo%rer o@ns is means
o! prod%ction, and tis is te condition o! te land-o@ning !armer li8ing o!! is o@n labo%r and
te cra!tsman, in te ancient as @ell as in te modern @orld0 5is agrees also @it te 8ie@ @e
expressed pre8io%sly tat te e8ol%tion o! prod%cts into commodities arises tro%g excange
bet@een di!!erent comm%nities, not bet@een te members o! te same comm%nity0 &t olds not
only !or tis primiti8e condition, b%t also !or s%bseD%ent conditions, based on sla8ery and
ser!dom, and !or te g%ild organisation o! andicra!ts, so long as te means o! prod%ction
in8ol8ed in eac branc o! prod%ction can be trans!erred !rom one spere to anoter only @it
di!!ic%lty and tere!ore te 8ario%s speres o! prod%ction are related to one anoter, @itin certain
limits, as !oreign co%ntries or comm%nist comm%nities0
13< ;apter J
For prices at @ic commodities are excanged to approximately correspond to teir 8al%es,
noting more is necessary tan 1C !or te excange o! te 8ario%s commodities to cease being
p%rely accidental or only occasional# <C so !ar as direct excange o! commodities is concerned,
!or tese commodities to be prod%ced on bot sides in approximately s%!!icient D%antities to meet
m%t%al reD%irements, someting learned !rom m%t%al experience in trading and tere!ore a
nat%ral o%tgro@t o! contin%ed trading# and 3C so !ar as selling is concerned, !or no nat%ral or
arti!icial monopoly to enable eiter o! te contracting sides to sell commodities abo8e teir 8al%e
or to compel tem to %ndersell0 Ay accidental monopoly @e mean a monopoly @ic a b%yer or
seller acD%ires tro%g an accidental state o! s%pply and demand0
5e ass%mption tat te commodities o! te 8ario%s speres o! prod%ction are sold at teir 8al%e
merely implies, o! co%rse, tat teir 8al%e is te centre o! gra8ity aro%nd @ic teir prices
!l%ct%ate, and teir contin%al rises and drops tend to eD%alise0 5ere is also te mar-et1value I o!
@ic later I to be disting%ised !rom te indi8id%al 8al%e o! partic%lar commodities prod%ced by
di!!erent prod%cers0 5e indi8id%al 8al%e o! some o! tese commodities @ill be belo@ teir
market-8al%e Btat is, less labo%r time is reD%ired !or teir prod%ction tan expressed is te
market 8al%eC @ile tat o! oters @ill exceed te market-8al%e0 3n te one and, market-8al%e is
to be 8ie@ed as te a8erage 8al%e o! commodities prod%ced in a single spere, and, on te oter,
as te indi8id%al 8al%e o! te commodities prod%ced %nder a8erage conditions o! teir respecti8e
spere and !orming te b%lk o! te prod%cts o! tat spere0 &t is only in extraordinary
combinations tat commodities prod%ced %nder te @orst, or te most !a8o%rable, conditions
reg%late te market-8al%e, @ic, in t%rn, !orms te centre o! !l%ct%ation !or market-prices0 5e
latter, o@e8er, are te same !or commodities o! te same kind0 &! te ordinary demand is
satis!ied by te s%pply o! commodities o! a8erage 8al%e, ence o! a 8al%e mid@ay bet@een te
t@o extremes, ten te commodities @ose indi8id%al 8al%e is belo@ te market-8al%e realise an
extra s%rpl%s-8al%e, or s%rpl%s-pro!it, @ile tose, @ose indi8id%al 8al%e exceeds te market-
8al%e, are %nable to realise a portion o! te s%rpl%s-8al%e contained in tem0
&t does no good to say tat te sale o! commodities prod%ced %nder te least !a8o%rable
conditions pro8es tat tey are reD%ired to satis!y te demand0 &! in te ass%med case te price
@ere iger tan te a8erage market-8al%e, te demand @o%ld be smaller0 ?t a certain price, a
commodity occ%pies H%st so m%c place on te market0 5is place remains te same in case o! a
price cange only i! te iger price is accompanied by a drop in te s%pply o! te commodity,
and a lo@er price by an increase o! s%pply0 ?nd i! te demand is so great tat it does not contract
@en te price is reg%lated by te 8al%e o! commodities prod%ced %nder te least !a8o%rable
conditions, ten tese determine te market-8al%e0 5is is not possible %nless demand is greater
tan %s%al, or i! s%pply drops belo@ te %s%al le8el0 Finally, i! te mass o! te prod%ced
commodities exceeds te D%antity disposed o! at a8erage market-8al%es, te commodities
prod%ced %nder te most !a8o%rable conditions reg%late te market-8al%e0 5ey may, !or
example, be sold exactly or approximately at teir indi8id%al 8al%e, in @ic case te
commodities prod%ced %nder te least !a8o%rable conditions may not e8en realise teir cost-price,
@ile tose prod%ced %nder a8erage conditions realise only a portion o! te s%rpl%s-8al%e
contained in tem0 Wat as been said ere o! market-8al%e applies to te price o! prod%ction as
soon as it takes te place o! market-8al%e0 5e price o! prod%ction is reg%lated in eac spere,
and like@ise reg%lated by special circ%mstances0 ?nd tis price o! prod%ction is, in its t%rn, te
centre aro%nd @ic te daily market-prices !l%ct%ate and tend to eD%alise one anoter @itin
de!inite periods0 B$ee )icardo on determining te price o! prod%ction tro%g tose @orking
%nder te least !a8o%rable conditions0C
-o matter o@ te prices are reg%lated, @e arri8e at te !ollo@ing:
1C 5e la@ o! 8al%e dominates price mo8ements @it red%ctions or increases in reD%ired labo%r-
time making prices o! prod%ction !all or rise0 &t is in tis sense tat )icardo B@o do%btlessly
realised tat is prices o! prod%ction de8iated !rom te 8al%e o! commoditiesC says tat Kte
133 ;apter J
inD%iry to @ic & @is to dra@ te reader"s attention relates to te e!!ect o! te 8ariations in te
relati8e 8al%e o! commodities, and not in teir absol%te 8al%eL0
< C 5e a8erage pro!it determining te prices o! prod%ction m%st al@ays be approximately eD%al
to tat D%antity o! s%rpl%s-8al%e @ic !alls to te sare o! indi8id%al capital in its capacity o! an
aliD%ot part o! te total social capital0 $%ppose tat te general rate o! pro!it, and tere!ore te
a8erage pro!it, are expressed by money-8al%e greater tan te money-8al%e o! te act%al a8erage
s%rpl%s-8al%e0 $o !ar as te capitalists are concerned, it is ten immaterial @eter tey
reciprocally carge 1= or 1+T pro!it0 -eiter o! tese percentages co8ers more act%al
commodity-8al%e tan te oter, since te o8ercarge in money is m%t%al0 ?s !or te labo%rer Bte
ass%mption being tat e recei8es is normal @age and te rise in te a8erage pro!it does not
tere!ore imply an act%al ded%ction !rom is @age, i0e0, it expresses someting entirely di!!erent
!rom te normal s%rpl%s-8al%e o! te capitalistC, te rise in commodity-prices ca%sed by an
increase o! te a8erage pro!it m%st correspond to te rise o! te money-expression o! te 8ariable
capital0 $%c a general nominal increase in te rate o! pro!it and te a8erage pro!it abo8e te limit
pro8ided by te ratio o! te act%al s%rpl%s-8al%e to te total in8ested capital is not, in e!!ect,
possible @ito%t ca%sing an increase in @ages, and also an increase in te prices o! commodities
!orming te constant capital0 5e re8erse is tr%e in case o! a red%ction0 $ince te total 8al%e o! te
commodities reg%lates te total s%rpl%s-8al%e, and tis in t%rn reg%lates te le8el o! a8erage pro!it
and tereby te general rate o! pro!it I as a general la@ or a la@ go8erning !l%ct%ations I it
!ollo@s te la@ o! 8al%e reg%lates te prices o! prod%ction0
Wat competition, !irst in a single spere, acie8es is a single market-8al%e and market-price
deri8ed !rom te 8ario%s indi8id%al 8al%es o! commodities0 ?nd it is competition o! capitals in
di!!erent speres, @ic !irst brings o%t te price o! prod%ction eD%aliEing te rates o! pro!it in te
di!!erent speres0 5e latter process reD%ires a iger de8elopment o! capitalist prod%ction tat
te pre8io%s one0
For commodities o! te same spere o! prod%ction, te same kind, and approximately te same
D%ality, to be sold at teir 8al%es, te !ollo@ing t@o reD%irements are necessary:
'irst, te di!!erent indi8id%al 8al%es m%st be eD%aliEed at one social 8al%e, te abo8e-named
market 8al%e, and tis implies competition among prod%cers o! te same kind o! commodities
and, like@ise, te existence o! a common market in @ic tey o!!er teir articles !or sale0 For te
market-price o! identical commodities, eac, o@e8er, prod%ced %nder di!!erent indi8id%al
circ%mstances, to correspond to te market-8al%e and not to de8iate !rom it eiter by rising abo8e
or !alling belo@ it, it is necessary tat te press%re exerted by di!!erent sellers %pon one anoter
be s%!!icient to bring eno%g commodities to market to !ill te social reD%irements, i0e0, a D%antity
!or @ic society is capable o! paying te market-8al%e0 $o%ld te mass o! prod%cts exceed tis
demand, te commodities @o%ld a8e to be sold belo@ teir market-8al%e# and con8ersely, abo8e
teir market-8al%e i! te mass o! prod%cts @ere not large eno%g to meet te demand, or, @at
amo%nts to te same, i! te press%re o! competition among sellers @ere not strong eno%g to
bring tis mass o! prod%cts to market0 $o%ld te market-8al%e cange, tis @o%ld also entail a
cange in te conditions on @ic te total mass o! commodities co%ld be sold0 $o%ld te
market-8al%e !all, tis @o%ld entail a rise in te a8erage social demand Btis al@ays taken to mean
te e!!ecti8e demandC, @ic co%ld, @itin certain limits, absorb larger masses o! commodities0
$o%ld te market-8al%e rise, tis @o%ld entail a drop in te social demand, and a smaller mass o!
commodities @o%ld be absorbed0 6ence, i! s%pply and demand reg%late te market-price, or
rater te de8iations o! te market-price !rom te market-8al%e, ten, in t%rn, te market-8al%e
reg%lates te ratio o! s%pply to demand, or te centre ro%nd @ic !l%ct%ations o! s%pply and
demand ca%se market-prices to oscillate0
'ooking closer, @e !ind tat te conditions applicable to te 8al%e o! an indi8id%al commodity
are ere reprod%ced as conditions go8erning te 8al%e o! te aggregate o! a certain kind o!
commodity0 ;apitalist prod%ction is mass prod%ction !rom te 8ery o%tset0 A%t e8en in oter, less
132 ;apter J
de8eloped, modes o! prod%ction tat @ic is prod%ced in relati8ely small D%antities as a
common prod%ct by small-scale, e8en i! n%mero%s, prod%cers, is concentrated in large D%antities
I at least in te case o! te 8ital commodities I in te ands o! relati8ely !e@ mercants0 5e
latter acc%m%late tem and sell tem as te common prod%ct o! an entire branc o! prod%ction, or
o! a more or less considerable contingent o! it0
&t so%ld be ere noted in passing tat te Ksocial demand,L i0e0, te !actor @ic reg%lates te
principle o! demand, is essentially s%bHect to te m%t%al relationsip o! te di!!erent classes and
teir respecti8e economic position, notably tere!ore to, !irstly, te ratio o! total s%rpl%s-8al%e to
@ages, and, secondly, to te relation o! te 8ario%s parts into @ic s%rpl%s-8al%e is split %p
Bpro!it, interest, gro%nd-rent, taxes, etc0C0 ?nd tis t%s again so@s o@ absol%tely noting can
be explained by te relation o! s%pply to demand be!ore ascertaining te basis on @ic tis
relation rests0
?lto%g bot commodity and money represent a %nity o! excange-8al%e and %se-8al%e, @e
a8e already seen tat in b%ying and selling bot o! tese !%nctions are polarised at te t@o
extremes, te commodity BsellerC representing te %se-8al%e, and te money Bb%yerC representing
te excange-8al%e0 3ne o! te !irst premises o! selling @as tat a commodity so%ld a8e %se-
8al%e and so%ld tere!ore satis!y a social need0 5e oter premise @as tat te D%antity o! labo%r
contained in te commodity so%ld represent socially necessary labo%r, i0e0, its indi8id%al 8al%e
Band, @at amo%nts to te same %nder te present ass%mption, its selling priceC so%ld coincide
@it its social 8al%e0
'et %s apply tis to te mass o! commodities a8ailable in te market, @ic represents te
prod%ct o! a @ole spere0
5e matter @ill be most readily pict%red by regarding tis @ole mass o! commodities, prod%ced
by one branc o! ind%stry, as one commodity, and te s%m o! te prices o! te many identical
commodities as one price0 5en, @ate8er as been said o! a single commodity applies literally to
te mass o! commodities o! an entire branc o! prod%ction a8ailable in te market0 5e
reD%irement tat te indi8id%al 8al%e o! a commodity so%ld correspond to its social 8al%e is no@
realised, or !%rter determined, in tat te mass contains social labo%r necessary !or its
prod%ction, and tat te 8al%e o! tis mass is eD%al to its market-8al%e0
-o@ s%ppose tat te b%lk o! tese commodities is prod%ced %nder approximately similar normal
social conditions, so tat tis 8al%e is at te same time te indi8id%al 8al%e o! te indi8id%al
commodities @ic make %p tis mass0 &! a relati8ely small portion o! tese commodities may
no@ a8e been prod%ced belo@, and anoter abo8e, tese conditions, so tat te indi8id%al 8al%e
o! one portion is greater, and tat o! te oter smaller, tan te a8erage 8al%e o! te b%lk o! te
commodities, b%t in s%c proportions tat tese extremes balance one anoter, so tat te a8erage
8al%e o! te commodities at tese extremes is eD%al to te 8al%e o! commodities in te centre,
ten te market-8al%e is determined by te 8al%e o! te commodities prod%ced %nder a8erage
conditions0 5e 8al%e o! te entire mass o! commodities is eD%al to te act%al s%m o! te 8al%es
o! all indi8id%al commodities taken togeter, @eter prod%ced %nder a8erage conditions, or
%nder conditions abo8e or belo@ te a8erage0 &n tat case, te market-8al%e, or social 8al%e, o!
te mass o! commodities I te necessary labo%r-time contained in tem I is determined by te
8al%e o! te preponderant mean mass0
$%ppose, on te contrary, tat te total mass o! te commodities in D%estion bro%gt to market
remains te same, @ile te 8al%e o! te commodities prod%ced %nder less !a8o%rable conditions
!ails to balance o%t te 8al%e o! commodities prod%ced %nder more !a8o%rable conditions, so tat
te part o! te mass prod%ced %nder less !a8o%rable conditions !orms a relati8ely @eigty
D%antity as compared @it te a8erage mass and @it te oter extreme0 &n tat case, te mass
prod%ced %nder less !a8o%rable conditions reg%lates te market, or social, 8al%e0
13+ ;apter J
$%ppose, !inally, tat te mass o! commodities prod%ced %nder better tan a8erage conditions
considerably exceeds tat prod%ced %nder @orse conditions, and is large e8en compared @it tat
prod%ced %nder a8erage conditions0 &n tat case, te part prod%ced %nder te most !a8o%rable
conditions determines te market-8al%e0 We ignore ere te o8erstocked market, in @ic te part
prod%ced %nder most !a8o%rable conditions al@ays reg%lates te market-price0 We are not dealing
ere @it te market-price, in so !ar as it di!!ers !rom te market-8al%e, b%t @it te 8ario%s
determinations o! te market-8al%e itsel!0
1

&n !act, strictly speaking B@ic, o! co%rse, occ%rs in reality only in approximation and @it a
to%sand modi!icationsC te market-8al%e o! te entire mass, reg%lated as it is by te a8erage
8al%es, is in case & eD%al to te s%m o! teir indi8id%al 8al%es# alto%g in te case o! te
commodities prod%ced at te extremes, tis 8al%e is represented as an a8erage 8al%e @ic is
!orced %pon tem0 5ose @o prod%ce at te @orst extreme m%st ten sell teir commodities
belo@ te indi8id%al 8al%e# tose prod%cing at te best extreme sell tem abo8e it0
&n case && te indi8id%al lots o! commodity-8al%es prod%ced at te t@o extremes do not balance
one anoter0 )ater, te lot prod%ced %nder te @orse conditions decides te iss%e0 $trictly
speaking, te a8erage price, or te market-8al%e, o! eac indi8id%al commodity, or eac aliD%ot
part o! te total mass, @o%ld no@ be determined by te total 8al%e o! te mass as obtained by
adding %p te 8al%es o! te commodities prod%ced %nder di!!erent conditions, and in accordance
@it te aliD%ot part o! tis total 8al%e !alling to te sare o! eac indi8id%al commodity0 5e
market-8al%e t%s obtained @o%ld exceed te indi8id%al 8al%e not only o! te commodities
belonging to te !a8o%rable extreme, b%t also o! tose belonging to te a8erage lot0 .et it @o%ld
still be belo@ te indi8id%al 8al%e o! tose commodities prod%ced at te %n!a8o%rable extreme0
6o@ close te market-8al%e approaces, or !inally coincides @it, te latter @o%ld depend
entirely on te 8ol%me occ%pied by commodities prod%ced at te %n!a8o%rable extreme o! te
commodity spere in D%estion0 &! demand is only sligtly greater tan s%pply, te indi8id%al 8al%e
o! te %n!a8o%rably prod%ced commodities reg%lates te market-price0
Finally, i! te lot o! commodities prod%ced at te !a8o%rable extreme occ%pies greater place tan
te oter extreme, and also tan te a8erage lot, as it does in case &&&, ten te market-8al%e !alls
belo@ te a8erage 8al%e0 5e a8erage 8al%e, comp%ted by adding te s%ms o! 8al%es at te t@o
extremes and at te middle, stands ere belo@ te 8al%e o! te middle, @ic it approaces, or
8ice 8ersa, depending on te relati8e place occ%pied by te !a8o%rable extreme0 $o%ld demand
be @eaker tan s%pply, te !a8o%rably sit%ated part, @ate8er its siEe, makes room !or itsel!
!orcibly by paring its price do@n to its indi8id%al 8al%e0 5e market-8al%e cannot e8er coincide
@it tis indi8id%al 8al%e o! te commodities prod%ced %nder te most !a8o%rable conditions,
except @en s%pply !ar exceeds demand0
5is mode o! determining market-8al%es, @ic @e a8e ere o%tlined abstractly, is promoted in
te real market by competition among te b%yers, pro8ided te demand is large eno%g to absorb
te mass o! commodities at 8al%es so !ixed0 ?nd tis brings %s to te oter point0
Second, to say tat a commodity as a %se-8al%e is merely to say tat it satis!ies some social
@ant0 $o long as @e dealt @it indi8id%al commodities only, @e co%ld ass%me tat tere @as a
need !or a partic%lar commodity I its D%antity already implied by its price @ito%t inD%iring
!%rter into te D%antity reD%ired to satis!y tis @ant0 5is D%antity is, o@e8er, o! essential
importance, as soon as te prod%ct o! an entire branc o! prod%ction is placed on one side, and
te social need !or it on te oter0 &t ten becomes necessary to consider te extent, i0e0, te
amo%nt o! tis social @ant0
&n te !oregoing determinations o! market-8al%e it @as ass%med tat te mass o! te prod%ced
commodities is gi8en, i0e0, remains te same, and tat tere is a cange only in te proportions o!
its constit%ent elements, @ic are prod%ced %nder di!!erent conditions, and tat, ence, te
market-8al%e o! te same mass o! commodities is di!!erently reg%lated0 $%ppose, tis mass
136 ;apter J
corresponds in siEe to te %s%al s%pply, lea8ing aside te possibility tat a portion o! te prod%ced
commodities may be temporarily @itdra@n !rom te market0 $o%ld demand !or tis mass no@
also remain te same, tis commodity @ill be sold at its market-8al%e, no matter @ic o! te
tree a!orementioned cases reg%lates tis market-8al%e0 5is mass o! commodities does not
merely satis!y a need, b%t satis!ies it to its !%ll social extent0 $o%ld teir D%antity be smaller or
greater, o@e8er, tan te demand !or tem, tere @ill be de8iations o! te market-price !rom te
market-8al%e0 ?nd te !irst de8iation is tat i! te s%pply is too small, te market-8al%e is al@ays
reg%lated by te commodities prod%ced %nder te least !a8o%rable circ%mstances and, i! te
s%pply is too large, al@ays by te commodities prod%ced %nder te most !a8o%rable conditions#
tat tere!ore it is one o! te extremes @ic determines te market-8al%e, in spite o! te !act tat
in accordance @it te mere proportion o! te commodity masses prod%ced %nder di!!erent
conditions, a di!!erent res%lt so%ld obtain0 &! te di!!erence bet@een demand and te a8ailable
D%antity o! te prod%ct is more considerable, te market-price @ill like@ise be considerably
abo8e or belo@ te market-8al%e0 -o@, te di!!erence bet@een te D%antity o! te prod%ced
commodities and tat D%antity o! tem at @ic tey are sold at market-8al%e may be d%e to t@o
reasons0 Eiter te D%antity itsel! canges, becoming too small or too large, so tat reprod%ction
@o%ld a8e taken place on a di!!erent scale tan tat @ic reg%lated te gi8en market-8al%e0 &n
tat case, te s%pply canged, alto%g demand remained te same, and tere @as, tere!ore,
relati8e o8er-prod%ction or %nder-prod%ction0 3r else reprod%ction, and t%s s%pply, remained te
same, @ile demand srank or increased, @ic may be d%e to se8eral reasons0 ?lto%g te
absol%te magnit%de o! te s%pply @as te same, its relati8e magnit%de, its magnit%de relati8e to,
or meas%red by, te demand, ad canged0 5e e!!ect is te same as in te !irst case, b%t in te
re8erse direction0 Finally, i! canges take place on bot sides, b%t eiter in re8erse directions, or,
i! in te same direction, ten not to te same extent, i! tere!ore tere are canges on bot sides,
b%t tese alter te !ormer proportion bet@een te t@o sides, ten te !inal res%lt m%st al@ays lead
to one o! te t@o abo8e-mentioned cases0
5e real di!!ic%lty in !orm%lating te general de!inition o! s%pply and demand is tat it seems to
take on te appearance o! a ta%tology0 First consider te s%pply I te prod%ct a8ailable in te
market, or tat @ic can be deli8ered to it0 5o a8oid d@elling %pon %seless detail, @e sall ere
consider only te mass ann%ally reprod%ced in e8ery gi8en branc o! prod%ction and ignore te
greater or lesser !ac%lty possessed by te di!!erent commodities to be @itdra@n !rom te market
and stored a@ay !or cons%mption, say, %ntil next year0 5is ann%al reprod%ction is expressed by a
certain D%antity I in @eigt or n%mbers I depending on @eter tis mass o! commodities is
meas%red in discrete elements or contin%o%sly0 5ey are not only %se-8al%es satis!ying %man
@ants, b%t tese %se-8al%es are a8ailable in te market in de!inite D%antities0 $econdly, o@e8er,
tis D%antity o! commodities as a speci!ic market-8al%e, @ic may be expressed by a m%ltiple
o! te market-8al%e o! te commodity, or o! its meas%re, @ic ser8es as %nit0 5%s, tere is no
necessary connection bet@een te D%antitati8e 8ol%me o! te commodities in te market and teir
market-8al%e, since, !or instance, many commodities a8e a speci!ically ig 8al%e, and oters a
speci!ically lo@ 8al%e, so tat a gi8en s%m o! 8al%es may be represented by a 8ery large D%antity
o! one commodity, and a 8ery small D%antity o! anoter0 5ere is only te !ollo@ing connection
bet@een te D%antity o! te articles a8ailable in te market and te market-8al%e o! tese articles:
3n a gi8en basis o! labo%r prod%cti8ity te prod%ction o! a certain D%antity o! articles in e8ery
partic%lar spere o! prod%ction reD%ires a de!inite D%antity o! social labo%r-time# alto%g tis
proportion 8aries in di!!erent speres o! prod%ction and as no inner relation to te %se!%lness o!
tese articles or te special nat%re o! teir %se-8al%es0 ?ss%ming all oter circ%mstances to be
eD%al, and a certain D%antity a o! some commodity to cost b labo%r-time, a D%antity na o! te
same commodity @ill cost nb labo%r-time0 F%rter, i! society @ants to satis!y some @ant and a8e
an article prod%ced !or tis p%rpose, it m%st pay !or it0 &ndeed, since commodity-prod%ction
necessitates a di8ision o! labo%r, society pays !or tis article by de8oting a portion o! te a8ailable
13> ;apter J
labo%r-time to its prod%ction0 5ere!ore, society b%ys it @it a de!inite D%antity o! its disposable
labo%r-time0 5at part o! society @ic tro%g te di8ision o! labo%r appens to employ its
labo%r in prod%cing tis partic%lar article, m%st recei8e an eD%i8alent in social labo%r
incorporated in articles @ic satis!y its o@n @ants0 6o@e8er, tere exists an accidental rater
tan a necessary connection bet@een te total amo%nt o! social labo%r applied to a social article,
i0e0, bet@een te aliD%ot part o! society"s total labo%r-po@er allocated to prod%cing tis article, or
bet@een te 8ol%me @ic te prod%ction o! tis article occ%pies in total prod%ction, on te one
and, and te 8ol%me @ereby society seeks to satis!y te @ant grati!ied by te article in
D%estion, on te oter0 E8ery indi8id%al article, or e8ery de!inite D%antity o! a commodity may,
indeed, contain no more tan te social labo%r reD%ired !or its prod%ction, and !rom tis point o!
8ie@ te market-8al%e o! tis entire commodity represents only necessary labo%r, b%t i! tis
commodity as been prod%ced in excess o! te existing social needs, ten so m%c o! te social
labo%r-time is sD%andered and te mass o! te commodity comes to represent a m%c smaller
D%antity o! social labo%r in te market tan is act%ally incorporated in it0 B&t is only @ere
prod%ction is %nder te act%al, predetermining control o! society tat te latter establises a
relation bet@een te 8ol%me o! social labo%r-time applied in prod%cing de!inite articles, and te
8ol%me o! te social @ant to be satis!ied by tese articles0C For tis reason, tese commodities
m%st be sold belo@ teir market-8al%e, and a portion o! tem may e8en be altogeter %nsaleable0
5e re8erse applies i! te D%antity o! social labo%r employed in te prod%ction o! a certain kind o!
commodity is too small to meet te social demand !or tat commodity0 A%t i! te D%antity o!
social labo%r expended in te prod%ction o! a certain article corresponds to te social demand !or
tat article, so tat te prod%ced D%antity corresponds to te %s%al scale o! reprod%ction and te
demand remains %ncanged, ten te article is sold at its market-8al%e0 5e excange, or sale, o!
commodities at teir 8al%e is te rational state o! a!!airs, i0e0, te nat%ral la@ o! teir eD%ilibri%m0
&t is tis la@ tat explains te de8iations, and not 8ice 8ersa, te de8iations tat explain te la@0
-o@ let %s look at te oter side I te demand0
;ommodities are bo%gt eiter as means o! prod%ction or means o! s%bsistence to enter
prod%cti8e or indi8id%al cons%mption0 &t does not alter matters tat some commodities may ser8e
bot p%rposes0 5ere is, ten, a demand !or tem on te part o! prod%cers Bere capitalists, since
@e a8e ass%med tat means o! prod%ction a8e been trans!ormed into capitalC and o! cons%mers0
Aot appear at !irst sigt to pres%ppose a gi8en D%antity o! social @ant on te side o! demand,
corresponding on te oter side to a de!inite D%antity o! social o%tp%t in te 8ario%s lines o!
prod%ction0 &! te cotton ind%stry is to accomplis its ann%al reprod%ction on a gi8en scale, it
m%st a8e te %s%al s%pply o! cotton, and, oter circ%mstances remaining te same, an additional
amo%nt o! cotton corresponding to te ann%al extension o! reprod%ction ca%sed by te
acc%m%lation o! capital0 5is is eD%ally tr%e @it regard to means o! s%bsistence0 5e @orking-
class m%st !ind at least te same D%antity o! necessities on and i! it is to contin%e li8ing in its
acc%stomed a8erage @ay, alto%g tey may be more or less di!!erently distrib%ted among te
di!!erent kinds o! commodities0 Moreo8er, tere m%st be an additional D%antity to allo@ !or te
ann%al increase o! pop%lation0 5e same, @it more or less modi!ication, applies to oter classes0
&t @o%ld seem, ten, tat tere is on te side o! demand a certain magnit%de o! de!inite social
@ants @ic reD%ire !or teir satis!action a de!inite D%antity o! a commodity on te market0 A%t
D%antitati8ely, te de!inite social @ants are 8ery elastic and canging0 5eir !ixedness is only
apparent0 &! te means o! s%bsistence @ere ceaper, or money-@ages iger, te labo%rers @o%ld
b%y more o! tem, and a greater social need @o%ld arise !or tem, lea8ing aside te pa%pers, etc0,
@ose demand is e8en belo@ te narro@est limits o! teir pysical @ants0 3n te oter and, i!
cotton @ere ceaper, !or example, te capitalists" demand !or it @o%ld increase, more additional
capital @o%ld be tro@n into te cotton ind%stry, etc0 We m%st ne8er !orget tat te demand !or
prod%cti8e cons%mption is, %nder o%r ass%mption, a demand o! te capitalist, @ose essential
p%rpose is te prod%ction o! s%rpl%s-8al%e, so tat e prod%ces a partic%lar commodity to tis sole
138 ;apter J
end0 $till, tis does not inder te capitalist, so long as e appears in te market as a b%yer o!, say,
cotton, !rom representing te need !or tis cotton, H%st as it is immaterial to te seller o! cotton
@eter te b%yer con8erts it into sirting or g%n-cotton, or @eter e intends to t%rn it into
@ads !or is o@n, and te @orld"s, ears0 A%t tis does exert a considerable in!l%ence on te kind
o! b%yer te capitalist is0 6is demand !or cotton is s%bstantially modi!ied by te !act tat it
disg%ises is real need !or making pro!it0 5e limits @itin @ic te need !or commodities in te
mar-et, te demand, di!!ers D%antitati8ely !rom te actual social need, nat%rally 8ary
considerably !or di!!erent commodities# @at & mean is te di!!erence bet@een te demanded
D%antity o! commodities and te D%antity @ic @o%ld a8e been in demand at oter money-
prices or oter money or li8ing conditions o! te b%yers0
-oting is easier tan to realise te inconsistencies o! demand and s%pply, and te res%lting
de8iation o! market-prices !rom market-8al%es0 5e real di!!ic%lty consists in determining @at is
meant by te eD%ation o! s%pply and demand0
$%pply and demand coincide @en teir m%t%al proportions are s%c tat te mass o!
commodities o! a de!inite line o! prod%ction can be sold at teir market-8al%e, neiter abo8e nor
belo@ it0 5at is te !irst ting @e ear0
5e second is tis: &! commodities are sold at teir market-8al%es, s%pply and demand coincide0
&! s%pply eD%als demand, tey cease to act, and !or tis 8ery reason commodities are sold at teir
market-8al%es0 Wene8er t@o !orces operate eD%ally in opposite directions, tey balance one
anoter, exert no o%tside in!l%ence, and any penomena taking place in tese circ%mstances m%st
be explained by ca%ses oter tan te e!!ect o! tese t@o !orces0 &! s%pply and demand balance
one anoter, tey cease to explain anyting, do not a!!ect market-8al%es, and tere!ore lea8e %s so
m%c more in te dark abo%t te reasons @y te market-8al%e is expressed in H%st tis s%m o!
money and no oter0 &t is e8ident tat te real inner la@s o! capitalist prod%ction cannot be
explained by te interaction o! s%pply and demand BD%ite aside !rom a deeper analysis o! tese
t@o social moti8e !orces, @ic @o%ld be o%t o! place ereC, beca%se tese la@s cannot be
obser8ed in teir p%re state, %ntil s%pply and demand cease to act, i0e0, are eD%ated0 &n reality,
s%pply and demand ne8er coincide, or, i! tey do, it is by mere accident, ence scienti!ically R =,
and to be regarded as not a8ing occ%rred0 A%t political economy ass%mes tat s%pply and
demand coincide @it one anoter0 WyQ 5o be able to st%dy penomena in teir !%ndamental
relations, in te !orm corresponding to teir conception, tat is, is to st%dy tem independent o!
te appearances ca%sed by te mo8ement o! s%pply and demand0 5e oter reason is to !ind te
act%al tendencies o! teir mo8ements and to some extent to record tem0 $ince te inconsistencies
are o! an antagonistic nat%re, and since tey contin%ally s%cceed one anoter, tey balance o%t
one anoter tro%g teir opposing mo8ements, and teir m%t%al contradiction0 $ince, tere!ore,
s%pply and demand ne8er eD%al one anoter in any gi8en case, teir di!!erences !ollo@ one
anoter in s%c a @ay I and te res%lt o! a de8iation in one direction is tat it calls !ort a
de8iation in te opposite direction I tat s%pply and demand are al@ays eD%ated @en te @ole
is 8ie@ed o8er a certain period, b%t only as an a8erage o! past mo8ements, and only as te
contin%o%s mo8ement o! teir contradiction0 &n tis @ay, te market-prices @ic a8e de8iated
!rom te market-8al%es adH%st temsel8es, as 8ie@ed !rom te standpoint o! teir a8erage n%mber,
to eD%al te market-8al%es, in tat de8iations !rom te latter cancel eac oter as pl%s and min%s0
?nd tis a8erage is not merely o! teoretical, b%t also o! practical importance to capital, @ose
in8estment is calc%lated on te !l%ct%ations and compensations o! a more or less !ixed period0
3n te one and, te relation o! demand and s%pply, tere!ore, only explains te de8iations o!
market-prices !rom market-8al%es0 3n te oter, it explains te tendency to eliminate tese
de8iations, i0e0, to eliminate te e!!ect o! te relation o! demand and s%pply0 B$%c exceptions as
commodities @ic a8e a price @ito%t a8ing a 8al%e are not considered ere0C $%pply and
demand may eliminate te e!!ect ca%sed by teir di!!erence in many di!!erent @ays0 For instance,
i! te demand, and conseD%ently te market-price, !all, capital may be @itdra@n, t%s ca%sing
13* ;apter J
s%pply to srink0 &t may also be tat te market-8al%e itsel! srinks and balances @it te market-
price as a res%lt o! in8entions @ic red%ce te necessary labo%r-time0 ;on8ersely, i! te demand
increases, and conseD%ently te market-price rises abo8e te market-8al%e, tis may lead to too
m%c capital !lo@ing into tis line o! prod%ction and prod%ction may s@ell to s%c an extent tat
te market-price @ill e8en !all belo@ te market-8al%e0 3r, it may lead to a price increase, @ic
c%ts te demand0 &n some lines o! prod%ction it may also bring abo%t a rise in te market-8al%e
itsel! !or a sorter or longer period, @it a portion o! te desired prod%cts a8ing to be prod%ced
%nder @orse conditions d%ring tis period0
$%pply and demand determine te market-price, and so does te market-price, and te market-
8al%e in te !%rter analysis, determine s%pply and demand0 5is is ob8io%s in te case o!
demand, since it mo8es in a direction opposite to prices, s@elling @en prices !all, and 8ice 8ersa0
A%t tis is also tr%e o! s%pply0 Aeca%se te prices o! means o! prod%ction incorporated in te
o!!ered commodities determine te demand !or tese means o! prod%ction, and t%s te s%pply o!
commodities @ose s%pply embraces te demand !or tese means o! prod%ction0 5e prices o!
cotton are determinants in te s%pply o! cotton goods0
5o tis con!%sion I determining prices tro%g demand and s%pply, and, at te same time,
determining s%pply and demand tro%g prices I m%st be added tat demand determines s%pply,
H%st as s%pply determines demand, and prod%ction determines te market, as @ell as te market
determines prod%ction0
<

E8en te ordinary economist Bsee !ootnoteC agrees tat te proportion bet@een s%pply and
demand may 8ary in conseD%ence o! a cange in te market-8al%e o! commodities, @ito%t a
cange being bro%gt abo%t in demand or s%pply by extraneo%s circ%mstances0 E8en e m%st
admit tat, @ate8er te market-8al%e, s%pply and demand m%st coincide in order !or it to be
establised0 &n oter @ords, te ratio o! s%pply to demand does not explain te market-8al%e, b%t
con8ersely, te latter rater explains te !l%ct%ations o! s%pply and demand0 5e a%tor o! te
:bservations contin%es a!ter te passage D%oted in te !ootnote:
K5is proportionL Bbet@een demand and s%pplyC,
Ko@e8er, i! @e still mean by "demand" and "nat%ral
price", @at @e meant H%st no@, @en re!erring to
?dam $mit, m%st al@ays be a proportion o! eD%ality#
!or it is only @en te s%pply is eD%al to te e!!ect%al
demand, tat is, to tat demand @ic @ill neiter
more nor less tan pay te nat%ral price, tat te
nat%ral price is in !act paid# conseD%ently, tere may
be t@o 8ery di!!erent nat%ral prices, at di!!erent times,
!or te same commodity, and yet te proportion,
@ic te s%pply bears to te demand, be in bot
cases te same, namely, te proportion o! eD%ality0L
&t is admitted, ten, tat @it t@o di!!erent nat%ral prices o! te same commodity, at di!!erent
times, demand and s%pply are al@ays able to, and m%st, balance one anoter i! te commodity is
to be sold at its nat%ral price in bot instances0 $ince tere is no di!!erence in te ratio o! s%pply
to demand in eiter case, b%t a di!!erence in te magnit%de o! te nat%ral price itsel!, it !ollo@s
tat tis price is ob8io%sly determined independently o! demand and s%pply, and t%s tat it can
least o! all be determined by tem0
12= ;apter J
For a commodity to be sold at its market-8al%e, i0e0, proportionally to te necessary social labo%r
contained in it, te total D%antity o! social labo%r %sed in prod%cing te total mass o! tis
commodity m%st correspond to te D%antity o! te social @ant !or it, i0e0, te e!!ecti8e social @ant0
;ompetition, te !l%ct%ations o! market-prices @ic correspond to te !l%ct%ations o! demand
and s%pply, tend contin%ally to red%ce to tis scale te total D%antity o! labo%r de8oted to eac
kind o! commodity0
5e proportion o! s%pply and demand recapit%lates, !irst, te relation o! %se-8al%e to excange-
8al%e, o! commodity to money, and o! b%yer to seller# and, second, tat o! prod%cer to cons%mer,
alto%g bot o! tem may be represented by tird parties, te mercants0 &n considering b%yer
and seller, it s%!!ices to co%nterpose tem indi8id%ally in order to present teir relationsip0 5ree
indi8id%als are eno%g !or te complete metamorposis o! a commodity, and tere!ore !or te
process o! sale and p%rcase taken as a @ole0 ? con8erts is commodity into te money o! A, to
@om e sells is commodity, and recon8erts is money again into commodities, @en e %ses it
to make p%rcases !rom ;# te @ole process takes place among tese tree0 F%rter, in te st%dy
o! money it ad been ass%med tat te commodities are sold at teir 8al%es beca%se tere @as
absol%tely no reason to consider prices di8ergent !rom 8al%es, it being merely a matter o! canges
o! !orm @ic commodities %ndergo in teir trans!ormation into money and teir recon8ersion
!rom money into commodities0 ?s soon as a commodity as been sold and a ne@ commodity
bo%gt @it te receipts, @e a8e be!ore %s te entire metamorposis, and to tis process as s%c
it is immaterial @eter te price o! te commodity lies abo8e or belo@ its 8al%e0 5e 8al%e o!
te commodity remains important as a basis, beca%se te concept o! money cannot be de8eloped
on any oter !o%ndation, and price, in its general meaning, is b%t 8al%e in te !orm o! money0 ?t
any rate, it is ass%med in te st%dy o! money as a medi%m o! circ%lation tat tere is not H%st one
metamorposis o! a certain commodity0 &t is rater te social interrelation o! tese
metamorposes @ic is st%died0 3nly t%s do @e arri8e at te circ%lation o! money and te
de8elopment o! its !%nction as a medi%m o! circ%lation0 A%t o@e8er important tis connection
may be !or te con8ersion o! money into a circ%lating medi%m, and !or its res%lting cange o!
!orm, it is o! no moment to te transaction bet@een indi8id%al b%yers and sellers0
&n te case o! s%pply and demand, o@e8er, te s%pply is eD%al to te s%m o! sellers, or
prod%cers, o! a certain kind o! commodity, and te demand eD%als te s%m o! b%yers or
cons%mers Bbot prod%cti8e and indi8id%alC o! te same kind o! commodity0 5e s%ms react on
one anoter as %nits, as aggregate !orces0 5e indi8id%al co%nts ere only as part o! a social !orce,
as an atom o! te mass, and it is in tis !orm tat competition brings o%t te socialcaracter o!
prod%ction and cons%mption0
5e side o! competition @ic appens !or te moment to be @eaker is also te side in @ic te
indi8id%al acts independently o!, and o!ten directly against, te mass o! is competitors, and
precisely in tis manner is te dependence o! one %pon te oter impressed %pon tem, @ile te
stronger side acts al@ays more or less as a %nited @ole against its antagonist0 &! te demand !or
tis partic%lar kind o! commodity is greater tan te s%pply, one b%yer o%tbids anoter I @itin
certain limits I and so raises te price o! te commodity !or all o! tem abo8e te market-8al%e,
@ile on te oter and te sellers %nite in trying to sell at a ig market-price0 &!, con8ersely, te
s%pply exceeds te demand, one begins to dispose o! is goods at a ceaper rate and te oters
m%st !ollo@, @ile te b%yers %nite in teir e!!orts to depress te market-price as m%c as
possible belo@ te market-8al%e0 5e common interest is appreciated by eac only so long as e
gains more by it tan @ito%t it0 ?nd %nity o! action ceases te moment one or te oter side
becomes te @eaker, @en eac tries to extricate imsel! on is o@n as ad8antageo%sly as e
possibly can0 ?gain, i! one prod%ces more ceaply and can sell more goods, t%s possessing
imsel! o! a greater place in te market by selling belo@ te c%rrent market-price, or market-
8al%e, e @ill do so, and @ill tereby begin a mo8ement @ic grad%ally compels te oters to
introd%ce te ceaper mode o! prod%ction, and one @ic red%ces te socially necessary labo%r to
121 ;apter J
a ne@, and lo@er, le8el0 &! one side as te ad8antage, all belonging to it gain0 &t is as to%g tey
exerted teir common monopoly0 &! one side is @eaker, ten one may try on is o@n ook to
become te stronger B!or instance, one @o @orks @it lo@er costs o! prod%ctionC, or at least to
get o!! as ligtly as possible, and in s%c cases eac !or imsel! and te de8il take te indmost,
alto%g is actions a!!ect not only imsel!, b%t also all is boon companions0
3

7emand and s%pply imply te con8ersion o! 8al%e into market-8al%e, and so !ar as tey proceed
on a capitalist basis, so !ar as te commodities are prod%cts o! capital, tey are based on capitalist
prod%ction processes, i0e0, on D%ite di!!erent relationsips tan te mere p%rcase and sale o!
goods0 6ere it is not a D%estion o! te !ormal con8ersion o! te 8al%e o! commodities into prices,
i0e0, not o! a mere cange o! !orm0 &t is a D%estion o! de!inite de8iations in D%antity o! te market-
prices !rom te market-8al%es, and, !%rter, !rom te prices o! prod%ction0 &n simple p%rcase and
sale it s%!!ices to a8e te prod%cers o! commodities as s%c co%nterposed to one anoter0 &n
!%rter analysis s%pply and demand pres%ppose te existence o! di!!erent classes and sections o!
classes @ic di8ide te total re8en%e o! a society and cons%me it among temsel8es as re8en%e,
and, tere!ore, make %p te demand created by re8en%e0 Wile on te oter and it reD%ires an
insigt into te o8er-all str%ct%re o! te capitalist prod%ction process !or an %nderstanding o! te
s%pply and demand created among temsel8es by prod%cers as s%c0
(nder capitalist prod%ction it is not merely a matter o! obtaining an eD%al mass o! 8al%e in
anoter !orm I be it tat o! money or some oter commodity I !or a mass o! 8al%es tro@n into
circ%lation in te !orm o! a commodity, b%t it is rater a matter o! realising as m%c s%rpl%s-
8al%e, or pro!it, on capital ad8anced !or prod%ction, as any oter capital o! te same magnit%de,
or pro rata to its magnit%de in @ice8er line it is applied0 &t is, tere!ore, a matter, at least as a
minim%m, o! selling te commodities at prices @ic yield te a8erage pro!it, i0e0, at prices o!
prod%ction0 &n tis !orm capital becomes conscio%s o! itsel! as a social power in @ic e8ery
capitalist participates proportionally to is sare in te total social capital0
First, capitalist prod%ction is in itsel! indi!!erent to te partic%lar %se-8al%e, and distincti8e
!eat%res o! any commodity it prod%ces0 &n e8ery spere o! prod%ction it is only concerned @it
prod%cing s%rpl%s-8al%e, and appropriating a certain D%antity o! %npaid labo%r incorporated in te
prod%ct o! labo%r0 ?nd it is like@ise in te nat%re o! te @age-labo%r s%bordinated by capital tat
it is indi!!erent to te speci!ic caracter o! its labo%r and m%st s%bmit to being trans!ormed in
accordance @it te reD%irements o! capital and to being trans!erred !rom one spere o!
prod%ction to anoter0
$econd, one spere o! prod%ction is, in !act, H%st as good or H%st as bad as anoter0 E8ery one o!
tem yields te same pro!it, and e8ery one o! tem @o%ld be %seless i! te commodities it
prod%ced did not satis!y some social need0
-o@, i! te commodities are sold at teir 8al%es, ten, as @e a8e so@n, 8ery di!!erent rates o!
pro!it arise in te 8ario%s speres o! prod%ction, depending on te di!!erent organic composition
o! te masses o! capital in8ested in tem0 A%t capital @itdra@s !rom a spere @it a lo@ rate o!
pro!it and in8ades oters, @ic yield a iger pro!it0 5ro%g tis incessant o%t!lo@ and in!l%x,
or, brie!ly, tro%g its distrib%tion among te 8ario%s speres, @ic depends on o@ te rate o!
pro!it !alls ere and rises tere, it creates s%c a ratio o! s%pply to demand tat te a8erage pro!it
in te 8ario%s speres o! prod%ction becomes te same, and 8al%es are, tere!ore, con8erted into
prices o! prod%ction0 ;apital s%cceeds in tis eD%alisation, to a greater or lesser degree, depending
on te extent o! capitalist de8elopment in te gi8en nation# i0e0, on te extent te conditions in te
co%ntry in D%estion are adapted !or te capitalist mode o! prod%ction0 Wit te progress o!
capitalist prod%ction, it also de8elops its o@n conditions and s%bordinates to its speci!ic caracter
and its immanent la@s all te social prereD%isites on @ic te prod%ction process is based0
5e incessant eD%ilibration o! constant di8ergences is accomplised so m%c more D%ickly, 1C te
more mobile te capital, i0e0, te more easily it can be si!ted !rom one spere and !rom one place
12< ;apter J
to anoter# <C te more D%ickly labo%r-po@er can be trans!erred !rom one spere to anoter and
!rom one prod%ction locality to anoter0 5e !irst condition implies complete !reedom o! trade
@itin te society and te remo8al o! all monopolies @it te exception o! te nat%ral ones, tose,
tat is, @ic nat%rally arise o%t o! te capitalist mode o! prod%ction0 &t implies, !%rtermore, te
de8elopment o! te credit system, @ic concentrates te inorganic mass o! te disposable social
capital 8is-a-8is te indi8id%al capitalist0 Finally, it implies te s%bordination o! te 8ario%s
speres o! prod%ction to te control o! capitalists0 5is last implication is incl%ded in o%r
premises, since @e ass%med tat it @as a matter o! con8erting 8al%es into prices o! prod%ction in
all capitalistically exploited speres o! prod%ction0 A%t tis eD%ilibration itsel! r%ns into greater
obstacles, @ene8er n%mero%s and large speres o! prod%ction not operated on a capitalist basis
Bs%c as soil c%lti8ation by small !armersC, !ilter in bet@een te capitalist enterprises and become
linked @it tem0 ? great density o! pop%lation is anoter reD%irement0I 5e second condition
implies te abolition o! all la@s pre8enting te labo%rers !rom trans!erring !rom one spere o!
prod%ction to anoter and !rom one local centre o! prod%ction to anoter# indi!!erence o! te
labo%rer to te nat%re o! is labo%r# te greatest possible red%ction o! labo%r in all speres o!
prod%ction to simple labo%r# te elimination o! all 8ocational preH%dices among labo%rers# and
last b%t not least, a s%bH%gation o! te labo%rer to te capitalist mode o! prod%ction0 F%rter
re!erence to tis belongs to a special analysis o! competition0
&t !ollo@s !rom te !oregoing tat in eac partic%lar spere o! prod%ction te indi8id%al capitalist,
as @ell as te capitalists as a @ole, take direct part in te exploitation o! te total @orking-class
by te totality o! capital and in te degree o! tat exploitation, not only o%t o! general class
sympaty, b%t also !or direct economic reasons0 For, ass%ming all oter conditions I among tem
te 8al%e o! te total ad8anced constant capital I to be gi8en, te a8erage rate o! pro!it depends
on te intensity o! exploitation o! te s%m total o! labo%r by te s%m total o! capital0
5e a8erage pro!it coincides @it te a8erage s%rpl%s-8al%e prod%ced !or eac 1== o! capital, and
so !ar as te s%rpl%s-8al%e is concerned te !oregoing statements apply as a matter o! co%rse0 &n
te case o! te a8erage pro!it te 8al%e o! te ad8anced capital becomes an additional element
determining te rate o! pro!it0 &n !act, te direct interest taken by te capitalist, or te capital, o!
any indi8id%al spere o! prod%ction in te exploitation o! te labo%rers @o are directly
employed is con!ined to making an extra gain, a pro!it exceeding te a8erage, eiter tro%g
exceptional o8er@ork, or red%ction o! te @age belo@ te a8erage, or tro%g te exceptional
prod%cti8ity o! te labo%r employed0 ?side !rom tis, a capitalist @o @o%ld not in is line o!
prod%ction employ any 8ariable capital, and tere!ore any labo%rer Bin reality an exaggerated
ass%mptionC, @o%ld noneteless be as m%c interested in te exploitation o! te @orking-class by
capital, and @o%ld deri8e is pro!it D%ite as m%c !rom %npaid s%rpl%s-labo%r, as, say, a capitalist
@o @o%ld employ only 8ariable capital Banoter exaggerationC, and @o @o%ld t%s in8est is
entire capital in @ages0 A%t te degree o! exploitation o! labo%r depends on te a8erage intensity
o! labo%r i! te @orking-day is gi8en, and on te lengt o! te @orking-day i! te intensity o!
exploitation is gi8en0 5e degree o! exploitation o! labo%r determines te rate o! s%rpl%s-8al%e,
and tere!ore te mass o! s%rpl%s-8al%e !or a gi8en total mass o! 8ariable capital, and
conseD%ently te magnit%de o! te pro!it0 5e indi8id%al capitalist, as distinct !rom is spere as a
@ole, as te same special interest in exploiting te labo%rers e personally employs as te
capital o! a partic%lar spere, as distinct !rom te total social capital, as in exploiting te
labo%rers directly employed in tat spere0
3n te oter and, e8ery partic%lar spere o! capital, and e8ery indi8id%al capitalist, a8e te
same interest in te prod%cti8ity o! te social labo%r employed by te s%m total o! capital0 For
t@o tings depend on tis prod%cti8ity: First, te mass o! %se-8al%es in @ic te a8erage pro!it is
expressed# and tis is do%bly important, since tis a8erage pro!it ser8es as a !%nd !or te
acc%m%lation o! ne@ capital and as a !%nd !or re8en%e to be spent !or cons%mption0 $econd, te
8al%e o! te total capital in8ested Bconstant and 8ariableC, @ic, te amo%nt o! s%rpl%s-8al%e, or
123 ;apter J
pro!it, !or te @ole capitalist class being gi8en, determines te rate o! pro!it, or te pro!it on a
certain D%antity o! capital0 5e special prod%cti8ity o! labo%r in any partic%lar spere, or in any
indi8id%al enterprise o! tis spere, is o! interest only to tose capitalists @o are directly
engaged in it, since it enables tat partic%lar spere, 8is-a-8is te total capital, or tat indi8id%al
capitalist, 8is-a-8is is spere, to make an extra pro!it0
6ere, ten, @e a8e a matematically precise proo! @y capitalists !orm a 8eritable !reemason
society 8is-a-8is te @ole @orking-class, @ile tere is little lo8e lost bet@een tem in
competition among temsel8es0
5e price o! prod%ction incl%des te a8erage pro!it0 We call it price o! prod%ction0 &t is really
@at ?dam $mit calls natural price, )icardo calls price of production, or cost of production, and
te pysiocrats call pri n7cessaire, beca%se in te long r%n it is a prereD%isite o! s%pply, o! te
reprod%ction o! commodities in e8ery indi8id%al spere0 A%t none o! tem as re8ealed te
di!!erence bet@een price o! prod%ction and 8al%e0 We can @ell %nderstand @y te same
economists @o oppose determining te 8al%e o! commodities by labo%r-time, i0e0, by te
D%antity o! labo%r contained in tem, @y tey al@ays speak o! prices o! prod%ction as centres
aro%nd @ic market-prices !l%ct%ate0 5ey can a!!ord to do it beca%se te price o! prod%ction is
an %tterly external and prima facie meaningless !orm o! te 8al%e o! commodities, a !orm as it
appears in competition, tere!ore in te mind o! te 8%lgar capitalist, and conseD%ently in tat o!
te 8%lgar economist0
3%r analysis as re8ealed o@ te market-8al%e Band e8eryting said concerning it applies @it
appropriate modi!ications to te price o! prod%ctionC embraces a s%rpl%s-pro!it !or tose @o
prod%ce in any partic%lar spere o! prod%ction %nder te most !a8o%rable conditions0 Wit te
exception o! crises, and o! o8erprod%ction in general, tis applies to all market-prices, no matter
o@ m%c tey may de8iate !rom market-8al%es or market-prices o! prod%ction0 For te market-
price signi!ies tat te same price is paid !or commodities o! te same kind, alto%g tey may
a8e been prod%ced %nder 8ery di!!erent indi8id%al conditions and ence may a8e di!!erent cost-
prices0 BWe do not speak at tis point o! any s%rpl%s-pro!its d%e to monopolies in te %s%al sense
o! te term, @eter nat%ral or arti!icial0C
? s%rpl%s-pro!it may also arise i! certain speres o! prod%ction are in a position to e8ade te
con8ersion o! te 8al%es o! teir commodities into prices o! prod%ction, and t%s te red%ction o!
teir pro!its to te a8erage pro!it0 We sall de8ote more attention to te !%rter modi!ications o!
tese t@o !orms o! s%rpl%s-pro!it in te part dealing @it gro%nd-rent0
Chapter 11. Efects of General Wage
Fluctuations on Prices of Production
'et te a8erage composition o! social capital be 8=c U <=8, and te pro!it <=T0 5e rate o!
s%rpl%s-8al%e is ten 1==T0 ? general increase o! @ages, all else remaining te same, is
tantamo%nt to a red%ction in te rate o! s%rpl%s-8al%e0 &n te case o! a8erage capital, pro!it and
s%rpl%s-8al%e are identical0 'et @ages rise <+T0 5en te same D%antity o! labo%r, !ormerly set in
motion @it <=, @ill cost <+0 We sall ten a8e a t%rno8er 8al%e o! 8=c U <+8 U 1+p, instead o!
8=c U <=8 U <=p0 ?s be!ore, te labo%r set in motion by te 8ariable capital prod%ces a 8al%e o! 2=0
&! 8 rises !rom <= to <+, te s%rpl%s s, or p, @ill amo%nt to only 1+0 5e pro!it o! 1+ on a capital o!
1=+ is 12 <N>T, and tis @o%ld be te ne@ a8erage rate o! pro!it0 $ince te price o! prod%ction o!
commodities prod%ced by te a8erage capital coincides @it teir 8al%e, te price o! prod%ction
o! tese commodities @o%ld a8e remained %ncanged0 ? @age increase @o%ld tere!ore a8e
ca%sed a drop in pro!it, b%t no cange in te 8al%e and price o! te commodities0 Formerly, as
long as te a8erage pro!it @as <=T, te price o! prod%ction o! commodities prod%ced in one
period o! t%rno8er @as eD%al to teir cost-price pl%s a pro!it o! <=T on tis cost-price, tere!ore R
k U kp" R k U <=kN1==0 &n tis !orm%la k is a 8ariable magnit%de, canging in accordance @it te
8al%e o! te means o! prod%ction tat go into te commodities, and @it te amo%nt o!
depreciation gi8en %p by te !ixed capital to te prod%ct0 5e price o! prod%ction @o%ld ten
amo%nt to k U 12 <N> kN1==0 'et %s no@ select a capital, @ose composition is lo@er tan te
original composition o! te a8erage social capital o! 8=c U <=8 B@ic as no@ canged into >6
2N<1c U <3 1>N<18C# say, +=c U +=80 &n tis case, te price o! prod%ction o! te ann%al prod%ct
be!ore te @age increase @o%ld a8e been +=c U +=8 U <=p R 1<=, ass%ming !or te sake o!
simplicity tat te entire !ixed capital passes tro%g depreciation into te prod%ct and tat te
period o! t%rno8er is te same as in te !irst case0 For te same D%antity o! labo%r set in motion a
@age increase o! <+T means an increase o! te 8ariable capital !rom += to 6<Z0 &! te ann%al
prod%ct @ere sold at te !ormer price o! prod%ction o! 1<=, tis @o%ld gi8e %s +=c U 6<Z8 U >Zp,
or a rate o! pro!it o! 6WT0 A%t te ne@ a8erage rate o! pro!it is 12 <N>T, and since @e ass%me all
oter circ%mstances to remain te same, te capital o! +=c U 6<Z 8 m%st also make tis pro!it0
-o@ a capital o! 11<Z makes a pro!it o! 16 1N12 at a rate o! pro!it o! 12 <N>T0 5ere!ore, te
price o! prod%ction o! te commodities prod%ced by tis capital is no@ +=c U 6<Z 8 U 16[p R 1<8
8N120 3@ing to a @age rise o! <++, te price o! prod%ction o! te same D%antity o! te same
commodities, tere!ore, as ere risen !rom 1<= to 1<8 8N12, or more tan >T0
;on8ersely, s%ppose @e take a spere o! prod%ction o! a iger composition tan te a8erage
capital# say, *<c U 880 5e original a8erage pro!it in tis case @o%ld still be <=, and i! @e again
ass%me tat te entire !ixed capital passes into te ann%al prod%ct and tat te period o! t%rno8er
is te same as in cases & and &&, te price o! prod%ction o! te commodity is ere also 1<=0
3@ing to te rise in @ages o! <+T te 8ariable capital !or te same D%antity o! labo%r rises !rom
8 to 1=, te cost-price o! te commodities !rom 1== to 1=<, @ile te a8erage rate o! pro!it !alls
!rom <=T to 12 <N>T0 A%t 1==:12 <N> R 1=<:12 2N>0 5e pro!it no@ !alling to te sare o! 1=< is
tere!ore 12 2N>0 For tis reason, te total prod%ct sells at k U kp" R 1=< U 12 2N> R 116 2N>0 5e
price o! prod%ction as tere!ore !allen !rom 1<= to 116 2N>, or 3 3N>0
;onseD%ently, i! @ages are raised <+T:
1C te price o! prod%ction o! te commodities o! a capital o! a8erage social composition does not
cange#
12+ ;apter J&
<C te price o! prod%ction o! te commodities o! a capital o! lo@er composition rises, b%t not in
proportion to te !all in pro!it#
3C te price o! prod%ction o! te commodities o! a capital o! iger composition !alls, b%t also not
in te same proportion as pro!it0
$ince te price o! prod%ction o! te commodities o! te a8erage capital remained te same, eD%al
to te 8al%e o! te prod%ct, te s%m o! te prices o! prod%ction o! te prod%cts o! all capitals
remained te same as @ell, and eD%al to te s%m total o! te 8al%es prod%ced by te aggregate
capital0 5e increase on one side and te decrease on te oter balance !or te aggregate capital
on te le8el o! te a8erage social capital0
&! te price o! prod%ction rises in case && and !alls in case &&&, tese opposite e!!ects alone, @ic
are bro%gt abo%t by a !all in te rate o! s%rpl%s-8al%e or by a general @age increase, so@ tat
tis cannot be a matter o! compensation in te price !or te rise in @ages, since te !all in te
price o! prod%ction in case &&& cannot compensate te capitalist !or te !all in pro!it, and since te
rise o! te price in case && does not pre8ent a !all in pro!it0 )ater, in eiter case, @eter te price
rises or !alls, te pro!it remains te same as tat o! te a8erage capital, in @ic case te price
remains %ncanged0 &t is te same a8erage pro!it @ic as !allen by + +N>, or some@at o8er
<+T, in te case o! && as @ell as &&&0 &t !ollo@s !rom tis tat i! te price did not rise in && and !all
in &&&, && @o%ld a8e to sell belo@ and &&& abo8e te ne@ red%ced a8erage pro!it0 &t is sel!-e8ident
tat, depending on @eter +=, <+, or 1= per 1== %nits o! capital are laid o%t !or @ages, te e!!ect
o! a @age increase on a capitalist @o as in8ested 1N1= o! is capital in @ages m%st be D%ite
di!!erent !rom tat on one @o as in8ested [ or Z0 ?n increase in te price o! prod%ction on te
one side, a !all on te oter, depending on a capital being belo@ or abo8e te a8erage social
composition, occ%rs solely by 8irt%e o! te process o! le8elling te pro!it to te ne@ red%ced
a8erage pro!it0
6o@ @o%ld a general red%ction in @ages, and a corresponding general rise o! te rate o! pro!it,
and t%s o! te a8erage pro!it, no@ a!!ect te prices o! prod%ction o! commodities prod%ced by
capitals de8iating in opposite directions !rom te a8erage social compositionQ We a8e b%t to
re8erse te !oregoing exposition to obtain te res%lt B@ic )icardo !ails to analyseC0
&0 ?8erage capital R 8=c U <=8 R 1==# rate o! s%rpl%s-8al%e R 1==T# price o! prod%ctionR8al%e o!
commodities R 8=c U <=8 U <=p R 1<=# rate o! pro!it R <=T0 $%ppose @ages !all by one-!o%rt0
5en te same constant capital is set in motion by 1+8, instead o! <=80 5en te 8al%e o!
commodities R 8=c U 1+8 U <+p R 1<=0 5e D%antity o! labo%r per!ormed by 8 remains %ncanged,
except tat te 8al%e ne@ly created by it is distrib%ted di!!erently bet@een te capitalist and te
labo%rer0 5e s%rpl%s-8al%e rises !rom <= to <+ and te rate o! s%rpl%s-8al%e !rom <=N<= to <+N1+,
or !rom 1==T to 166WT0 5e pro!it on *+ no@ R <+, so tat te rate o! pro!it per 1== R <6 6N1*0
5e ne@ composition o! te capital in per cent is no@ 82 2N1*c U 1+ 1+N1*8 R 1==0
&&0 'o@er composition0 3riginally +=c U +=8, as abo8e0 7%e to te !all o! @ages by one-!o%rt 8 is
red%ced to 3>Z, and conseD%ently te ad8anced total capital to +=c U 3>Z 8 R 8>Z0 &! @e apply
te ne@ rate o! pro!it o! <6 6N1*T to tis, @e get 1==:<6 6N1* R 8>Z:<3 1N380 5e same mass o!
commodities @ic !ormerly cost 1<=, no@ costs 8>Z U <3 1N38 R 11= 1=N1*, tis being a price
red%ction o! almost 1=T0
&&&0 6iger composition0 3riginally *<c U 88 R 1==0 5e red%ction o! @ages by one-!o%rt red%ces
88 to 68, and te total capital to *80 ;onseD%ently, 1==:<6 6N1* R *8:<+ 16N1*0 5e price o!
prod%ction o! te commodity, !ormerly 1== U <= R 1<=, is no@, a!ter te !all in @ages, *8 U <+
1+N1* R 1<3 1+N1*, tis being a rise o! almost 20
&t is e8ident, tere!ore, tat @e a8e b%t to !ollo@ te same de8elopment in te opposite direction
@it te appropriate modi!ications# tat a general red%ction o! @ages is attended by a general rise
o! s%rpl%s-8al%e, o! te rate o! s%rpl%s-8al%e and, oter circ%mstances remaining te same, o! te
rate o! pro!it, e8en i! expressed in a di!!erent proportion# a !all in te prices o! prod%ction !or
126 ;apter J&
commodities prod%ced by capitals o! lo@er composition, and a rise in te prices o! prod%ction !or
commodities prod%ced by capitals o! iger composition0 5e res%lt is H%st te re8erse o! tat
obser8ed !or a general rise o! @ages0
1
&n bot cases I rise or !all o! @ages I it is ass%med tat te
@orking-day remains te same, and also te prices o! te means o! s%bsistence0 &n tese
circ%mstances a !all in @ages is possible only i! tey stood iger tan te normal price o! labo%r,
or i! tey are depressed belo@ tis price0 5e @ay in @ic te matter is modi!ied i! te rise or
!all o! @ages is d%e to a cange in 8al%e, and conseD%ently te price o! prod%ction o!
commodities %s%ally cons%med by te labo%rer, @ill be analysed at some lengt in te part
dealing @it gro%nd-rent0 ?t tis point, o@e8er, te !ollo@ing remarks are to be made once and
!or all:
$o%ld te rise or !all in @ages be d%e to a cange in te 8al%e o! te necessities o! li!e, a
modi!ication o! te !oregoing !indings can take place only to te extent tat commodities, @ose
cange o! price raises or lo@ers te 8ariable capital, also go into te constant capital as
constit%ent elements and tere!ore a!!ect more tan H%st te @ages alone0 A%t i! tey a!!ect only
@ages, te abo8e analysis contains all tat needs to be said0
&n tis entire capter, te establisment o! te general rate o! pro!it and te a8erage pro!it, and
conseD%ently, te transm%tation o! 8al%es into prices o! prod%ction, are ass%med as gi8en0 5e
D%estion merely @as, o@ a general rise or !all in @ages a!!ected te ass%med prices o!
prod%ction o! commodities0 5is is b%t a 8ery secondary D%estion compared @it te oter
important points analysed in tis part0 A%t it is te only rele8ant D%estion treated by )icardo, and,
as @e sall see, e treated it one-sidedly and %nsatis!actorily0
Chapter 12. Supplementary Remarks
I. Causes Impl#ing a Change in the Price of
Production
5ere are H%st t@o ca%ses tat can cange te price o! prod%ction o! a commodity:
'irst0 ? cange in te general rate o! pro!it0 5is can solely be d%e to a cange in te a8erage rate
o! s%rpl%s-8al%e, or, i! te a8erage rate o! s%rpl%s-8al%e remains te same, to a cange in te ratio
o! te s%m o! te appropriated s%rpl%s-8al%es to te s%m o! te ad8anced total social capital0
&! te cange in te rate o! s%rpl%s-8al%e is not d%e to a depression o! @ages belo@ normal, or
teir rise abo8e normal I and mo8ements o! tat kind are to be regarded merely as oscillations I
it can only occ%r eiter tro%g a rise, or !all, in te 8al%e o! labo%r-po@er, te one being H%st as
impossible as te oter %nless tere is a cange in te prod%cti8ity o! te labo%r prod%cing means
o! s%bsistence, i0e0, in te 8al%e o! commodities cons%med by te labo%rer0
3r, tro%g a cange in te proportion o! te s%m o! appropriated s%rpl%s-8al%es to te ad8anced
total capital o! society0 $ince te cange in tis case is not ca%sed by te rate o! s%rpl%s-8al%e, it
m%st be ca%sed by te total capital, or rater its constant part0 5e mass o! tis part, tecnically
considered, increases or decreases in proportion to te D%antity o! labo%r-po@er bo%gt by te
8ariable capital, and te mass o! its 8al%e t%s increases or decreases @it te increase or
decrease o! its o@n mass0 &t also increases or decreases, tere!ore, proportionately to te mass o!
te 8al%e o! te 8ariable capital0 &! te same labo%r sets more constant capital in motion, it as
become more prod%cti8e0 &! te re8erse, ten less prod%cti8e0 5%s, tere as been a cange in te
prod%cti8ity o! labo%r, and tere m%st a8e occ%rred a cange in te 8al%e o! certain
commodities0
5e !ollo@ing la@, ten, applies to bot cases: &! te price o! prod%ction o! a commodity canges
in conseD%ence o! a cange in te general rate o! pro!it, its o@n 8al%e may a8e remained
%ncanged0 6o@e8er, a cange m%st a8e occ%rred in te 8al%e o! oter commodities0
Second0 5e general rate o! pro!it remains %ncanged0 &n tis case te price o! prod%ction o! a
commodity can cange only i! its o@n 8al%e as canged0 5is may be d%e to more, or less,
labo%r being reD%ired to reprod%ce te commodity in D%estion, eiter beca%se o! a cange in te
prod%cti8ity o! labo%r @ic prod%ces tis commodity in its !inal !orm, or o! te labo%r @ic
prod%ces tose commodities tat go into its prod%ction0 5e price o! prod%ction o! cotton yarn
may !all, eiter beca%se ra@ cotton is prod%ced ceaper tan be!ore, or beca%se te labo%r o!
spinning as become more prod%cti8e d%e to impro8ed macinery0
5e price o! prod%ction, as @e a8e seen, R k U p, eD%al to cost-price pl%s pro!it0 5is, o@e8er, R
k U kp", in @ic k, te cost-price, is a 8ariable magnit%de, @ic canges !or di!!erent speres o!
prod%ction and is e8ery@ere eD%al to te 8al%e o! te constant and 8ariable capital cons%med in
te prod%ction o! te commodity, and p" is te a8erage rate o! pro!it in percentage !orm0 &! k R
<==, and p" R <=T, te price o! prod%ction k U kp" R <== U <== \ <=N1== R <== U 2= R <2=0 5is
price o! prod%ction may clearly remain te same, in spite o! a cange in te 8al%e o! te
commodities0
?ll canges in te price o! prod%ction o! commodities are red%ced, in te last analysis, to canges
in 8al%e0 A%t not all canges in te 8al%e o! commodities need express temsel8es in canges in
te price o! prod%ction0 5e price o! prod%ction is not determined by te 8al%e o! any one
commodity alone, b%t by te aggregate 8al%e o! all commodities0 ? cange in commodity ? may
128 ;apter J&&
tere!ore be balanced by an opposite cange in commodity A, so tat te general relation remains
te same0
II. Price of Production of Commodities of
Average Composition
We a8e seen o@ a de8iation in prices o! prod%ction !rom 8al%es arises !rom: 1C adding te
a8erage pro!it instead o! te s%rpl%s-8al%e contained in a commodity to is cost-price# <C te price
o! prod%ction, @ic so de8iates !rom te 8al%e o! a commodity, entering into te cost-price o!
oter commodities as one o! its elements, so tat te cost-price o! a commodity may already
contain a de8iation !rom 8al%e in tose means o! prod%ction cons%med by it, D%ite aside !rom a
de8iation o! its o@n @ic may arise tro%g a di!!erence bet@een te a8erage pro!it and te
s%rpl%s-8al%e0
&t is tere!ore possible tat e8en te cost-price o! commodities prod%ced by capitals o! a8erage
composition may di!!er !rom te s%m o! te 8al%es o! te elements @ic make %p tis
component o! teir price o! prod%ction0 $%ppose, te a8erage composition is 8=c U <=80 -o@, it is
possible tat in te act%al capitals o! tis composition 8=c may be greater or smaller tan te
8al%e o! c, i0e0, te constant capital, beca%se tis c may be made %p o! commodities @ose price
o! prod%ction di!!ers !rom teir 8al%e0 &n te same @ay, <=8 migt di8erge !rom its 8al%e i! te
cons%mption o! te @age incl%des commodities @ose price o! prod%ction di8erges !rom teir
8al%e# in @ic case te labo%rer @o%ld @ork a longer, or sorter, time to b%y tem back Bto
replace temC and @o%ld t%s per!orm more, or less, necessary labo%r tan @o%ld be reD%ired i!
te price o! prod%ction o! s%c necessities o! li!e coincided @it teir 8al%e0
6o@e8er, tis possibility does not detract in te least !rom te correctness o! te teorems
demonstrated @ic old !or commodities o! a8erage composition0 5e D%antity o! pro!it !alling
to tese commodities is eD%al to te D%antity o! s%rpl%s-8al%e contained in tem0 For instance, in
a capital o! te gi8en composition 8=c U <=8, te most important ting in determining s%rpl%s-
8al%e is not @eter tese !ig%res are expressions o! act%al 8al%es, b%t o@ tey are related to one
anoter, i0e0, @eter 8 R lN+ o! te total capital, and c R 2N+0 Wene8er tis is te case, te
s%rpl%s-8al%e prod%ced by 8 is, as @as ass%med, eD%al to te a8erage pro!it0 3n te oter and,
since it eD%als te a8erage pro!it, te price o! prod%ction R cost-price pl%s pro!it R k U p R k U s#
i0e0, in practice it is eD%al to te 8al%e o! te commodity0 5is implies tat a rise or !all in @ages
@o%ld not cange te price o! prod%ction, k U p, any more tan it @o%ld cange te 8al%e o! te
commodities, and @o%ld merely e!!ect a corresponding opposite mo8ement, a !all or a rise, in te
rate o! pro!it0 For i! a rise or !all o! @ages @ere ere to bring abo%t a cange in te price o!
commodities, te rate o! pro!it in tese speres o! a8erage composition @o%ld rise abo8e, or !all
belo@, te le8el pre8ailing in oter speres0 5e spere o! a8erage composition maintains te
same le8el o! pro!it as te oter speres only so long as te price remains %ncanged0 5e
practical res%lt is tere!ore te same as it @o%ld be i! its prod%cts @ere sold at teir real 8al%e0
For i! commodities are sold at teir act%al 8al%es, it is e8ident tat, oter conditions being eD%al,
a rise, or !all, in @ages @ill ca%se a corresponding !all or rise in pro!it, b%t no cange in te 8al%e
o! commodities, and tat %nder all circ%mstances a rise or !all in @ages can ne8er a!!ect te 8al%e
o! commodities, b%t only te magnit%de o! te s%rpl%s-8al%e0
III. The Capitalist3s Grounds for Compensating
&t as been said tat competition le8els te rates o! pro!it o! te di!!erent speres o! prod%ction
into an a8erage rate o! pro!it and tereby t%rns te 8al%es o! te prod%cts o! tese di!!erent
speres into prices o! prod%ction0 5is occ%rs tro%g te contin%al trans!er o! capital !rom one
spere to anoter, in @ic, !or te moment, te pro!it appens to lie abo8e a8erage0 5e
12* ;apter J&&
!l%ct%ations o! pro!it ca%sed by te cycle o! !at and lean years s%cceeding one anoter in any
gi8en branc o! ind%stry @itin gi8en periods m%st, o@e8er, recei8e d%e consideration0 5is
incessant o%t!lo@ and in!lo@ o! capital bet@een te di!!erent speres o! prod%ction creates trends
o! rise and !all in te rate o! pro!it, @ic eD%alise one anoter more or less and t%s a8e a
tendency to red%ce te rate o! pro!it e8ery@ere to te same common and general le8el0
5is mo8ement o! capitals is primarily ca%sed by te le8el o! market-prices, @ic li!t pro!its
abo8e te general a8erage in one place and depress tem belo@ it in anoter0 Mercant"s capital is
le!t o%t o! consideration as it is irrele8ant at tis point, !or @e kno@ !rom te s%dden paroxysms
o! spec%lation appearing in certain pop%lar articles tat it can @itdra@ masses o! capital !rom
one line o! b%siness @it extraordinary rapidity and tro@ tem @it eD%al rapidity into anoter0
.et @it respect to eac spere o! act%al prod%ction I ind%stry, agric%lt%re, mining, etc0 I te
trans!er o! capital !rom one spere to anoter o!!ers considerable di!!ic%lties, partic%larly on
acco%nt o! te existing !ixed capital0 Experience so@s, moreo8er, tat i! a branc o! ind%stry,
s%c as, say, te cotton ind%stry, yields %n%s%ally ig pro!its at one period, it makes 8ery little
pro!it, or e8en s%!!ers losses, at anoter, so tat in a certain cycle o! years te a8erage pro!it is
m%c te same as in oter brances0 ?nd capital soon learns to take tis experience into acco%nt0
Wat competition does not so@, o@e8er, is te determination o! 8al%e, @ic dominates te
mo8ement o! prod%ction# and te 8al%es tat lie beneat te prices o! prod%ction and tat
determine tem in te last instance0 ;ompetition, on te oter and, so@s: 1C te a8erage pro!its,
@ic are independent o! te organic composition o! capital in te di!!erent speres o!
prod%ction, and tere!ore also o! te mass o! li8ing labo%r appropriated by any gi8en capital in
any gi8en spere o! exploitation# <C te rise and !all o! prices o! prod%ction ca%sed by canges in
te le8el o! @ages, a penomenon @ic at !irst glance completely contradicts te 8al%e relation
o! commodities# 3C te !l%ct%ations o! market-prices, @ic red%ce te a8erage market-price o!
commodities in a gi8en period o! time, not to te market-value, b%t to a 8ery di!!erent market-
price o! prod%ction, @ic di8erges considerably !rom tis market-8al%e0 ?ll tese penomena
seem to contradict te determination o! 8al%e by labo%r-time as m%c as te nat%re o! s%rpl%s-
8al%e consisting o! %npaid s%rpl%s-labo%r04hus everything appears reversed in competition0 5e
!inal pattern o! economic relations as seen on te s%r!ace, in teir real existence and conseD%ently
in te conceptions by @ic te bearers and agents o! tese relations seek to %nderstand tem, is
8ery m%c di!!erent !rom, and indeed D%ite te re8erse o!, teir inner b%t concealed essential
pattern and te conception corresponding to it0
F%rter0 ?s soon as capitalist prod%ction reaces a certain le8el o! de8elopment, te eD%alisation
o! te di!!erent rates o! pro!it in indi8id%al speres to general rate o! pro!it no longer proceeds
solely tro%g te play o! attraction and rep%lsion, by @ic market-prices attract or repel capital0
?!ter a8erage prices, and teir corresponding market-prices, become stable !or a time it reaces
te consciousness o! te indi8id%al capitalists tat tis eD%alisation balances definite differences,
so tat tey incl%de tese in teir m%t%al calc%lations0 5e di!!erences exist in te mind o! te
capitalists and are taken into acco%nt as gro%nds !or compensating0
?8erage pro!it is te basic conception, te conception tat capitals o! eD%al magnit%de m%st yield
eD%al pro!its in eD%al time spans0 5is, again, is based on te conception tat te capital in eac
spere o! prod%ction m%st sare pro rata to its magnit%de in te total s%rpl%s-8al%e sD%eeEed o%t
o! te labo%rers by te total social capital# or, tat e8ery indi8id%al capital so%ld be regarded
merely as a part o! te total social capital, and e8ery capitalist act%ally as a sareolder in te
total social enterprise, eac saring in te total pro!it pro rata to te magnit%de o! is sare o!
capital0
5is conception ser8es as a basis !or te capitalist"s calc%lations, !or instance, tat a capital @ose
t%rno8er is slo@er tan anoter"s, beca%se its commodities take longer to be prod%ced, or beca%se
tey are sold in remoter markets, ne8erteless carges te pro!it it loses in tis @ay, and
compensates itsel! by raising te price0 3r else, tat in8estments o! capital in lines exposed to
1+= ;apter J&&
greater aEards, !or instance in sipping, are compensated by iger prices0 ?s soon as capitalist
prod%ction, and @it it te ins%rance b%siness, are de8eloped, te aEards are, in e!!ect, made
eD%al !or all speres o! prod%ction Bc!0 ;orbetC# b%t te more aEardo%s lines pay iger
ins%rance rates, and reco8er tem in te prices o! teir commodities0 &n practice all tis means
tat e8ery circ%mstance, @ic renders one line o! prod%ction I and all o! tem are considered
eD%ally necessary @itin certain limits I less pro!itable, and anoter more pro!itable, is taken into
acco%nt once and !or all as 8alid gro%nd !or compensation, @ito%t al@ays reD%iring te rene@ed
action o! competition to H%sti!y te moti8es or !actors !or calc%lating tis compensation0 5e
capitalist simply !orgets I or rater !ails to see, beca%se competition does not point it o%t to im I
tat all tese gro%nds !or compensation m%t%ally ad8anced by capitalists in calc%lating te prices
o! commodities o! di!!erent lines o! prod%ction merely come do@n to te !act tat tey all a8e
an eD%al claim, pro rata to te magnit%de o! teir respecti8e capitals, to te common loot, te
total s%rpl%s-8al%e0 &t rater seems to tem tat since te pro!it pocketed by tem di!!ers !rom te
s%rpl%s-8al%e tey appropriated, tese gro%nds !or compensation do not le8el o%t teir
participation in te total s%rpl%s-8al%e, b%t create the profit itself, @ic seems to be deri8ed !rom
te additions made on one or anoter gro%nd to te cost-price o! teir commodities0
&n oter respects te statements made in ;apter 4&& concerning te capitalists" ass%mptions as to
te so%rce o! s%rpl%s-8al%e, apply also to a8erage pro!it0 5e present case appears di!!erent only
in so !ar as a sa8ing in cost-price depends on indi8id%al b%siness ac%men, alertness, etc0,
ass%ming te market-price o! commodities and te exploitation o! labo%r to be gi8en0
Part III. The Law of the Tendency
of the Rate of Proft to Fall
Chapter 13. The Law As Such
?ss%ming a gi8en @age and @orking-day, a 8ariable capital, !or instance o! 1==, represents a
certain n%mber o! employed labo%rers0 &t is te index o! tis n%mber0 $%ppose V1== are te @ages
o! 1== labo%rers !or, say, one @eek0 &! tese labo%rers per!orm eD%al amo%nts o! necessary and
s%rpl%s-labo%r, i! tey @ork daily as many o%rs !or temsel8es, i.e., !or te reprod%ction o! teir
@age, as tey do !or te capitalist, i.e., !or te prod%ction o! s%rpl%s-8al%e, ten te 8al%e o! teir
total prod%ct R V<==, and te s%rpl%s-8al%e tey prod%ce @o%ld amo%nt to V1==0 5e rate o!
s%rpl%s-8al%e, sN8, @o%ld R 1==T0 A%t, as @e a8e seen, tis rate o! s%rpl%s-8al%e @o%ld
noneteless express itsel! in 8ery di!!erent rates o! pro!it, depending on te di!!erent 8ol%mes o!
constant capital c and conseD%ently o! te total capital ;, beca%se te rate o! pro!it R sN;0 5e rate
o! s%rpl%s-8al%e is 1==T:
&! c R +=, and 8 R 1==, ten p" R 1==N1+= R 66WT#
c R 1==, and 8 R 1==, ten p" R 1==N<== R +=T#
c R <==, and 8 R 1==, ten p" R 1==N3== R 33XT#
c R 3==, and 8 R 1==, ten p" R 1==N2== R <+T#
c R 2==, and 8 R 1==, ten p" R 1==N+== R <=T0
5is is o@ te same rate o! s%rpl%s-8al%e @o%ld express itsel! %nder te same degree o! labo%r
exploitation in a !alling rate o! pro!it, beca%se te material gro@t o! te constant capital implies
also a gro@t I albeit not in te same proportion I in its 8al%e, and conseD%ently in tat o! te
total capital0
&! it is !%rter ass%med tat tis grad%al cange in te composition o! capital is not con!ined only
to indi8id%al speres o! prod%ction, b%t tat it occ%rs more or less in all, or at least in te key
speres o! prod%ction, so tat it in8ol8es canges in te a8erage organic composition o! te total
capital o! a certain society, ten te grad%al gro@t o! constant capital in relation to 8ariable
capital m%st necessarily lead to a gradual fall of the general rate of profit, so long as te rate o!
s%rpl%s-8al%e, or te intensity o! exploitation o! labo%r by capital, remain te same0 -o@ @e a8e
seen tat it is a la@ o! capitalist prod%ction tat its de8elopment is attended by a relati8e decrease
o! 8ariable in relation to constant capital, and conseD%ently to te total capital set in motion0 5is
is H%st anoter @ay o! saying tat o@ing to te distincti8e metods o! prod%ction de8eloping in
te capitalist system te same n%mber o! labo%rers, i.e., te same D%antity o! labo%r-po@er set in
motion by a 8ariable capital o! a gi8en 8al%e, operate, @ork %p and prod%cti8ely cons%me in te
same time span an e8er-increasing D%antity o! means o! labo%r, macinery and !ixed capital o! all
sorts, ra@ and a%xiliary materials I and conseD%ently a constant capital o! an e8er-increasing
8al%e0 5is contin%al relati8e decrease o! te 8ariable capital 8is-a-8is te constant, and
conseD%ently te total capital, is identical @it te progressi8ely iger organic composition o!
te social capital in its a8erage0 &t is like@ise H%st anoter expression !or te progressi8e
de8elopment o! te social prod%cti8ity o! labo%r, @ic is demonstrated precisely by te !act tat
te same n%mber o! labo%rers, in te same time, i.e., @it less labo%r, con8ert an e8er-increasing
D%antity o! ra@ and a%xiliary materials into prod%cts, tanks to te gro@ing application o!
macinery and !ixed capital in general0 5o tis gro@ing D%antity o! 8al%e o! te constant capital I
1+< ;apter J&&&
alto%g indicating te gro@t o! te real mass o! %se-8al%es o! @ic te constant capital
materially consists only approximately I corresponds a progressi8e ceapening o! prod%cts0
E8ery indi8id%al prod%ct, considered by itsel!, contains a smaller D%antity o! labo%r tan it did on
a lo@er le8el o! prod%ction, @ere te capital in8ested in @ages occ%pies a !ar greater place
compared to te capital in8ested in means o! prod%ction0 5e ypotetical series dra@n %p at te
beginning o! tis capter expresses, tere!ore, te act%al tendency o! capitalist prod%ction0 5is
mode o! prod%ction prod%ces a progressi8e relati8e decrease o! te 8ariable capital as compared
to te constant capital, and conseD%ently a contin%o%sly rising organic composition o! te total
capital0 5e immediate res%lt o! tis is tat te rate o! s%rpl%s-8al%e, at te same, or e8en a rising,
degree o! labo%r exploitation, is represented by a contin%ally !alling general rate o! pro!it0 BWe
sall see later /,resent edition: ;0 J&40 I 0d01 @y tis !all does not mani!est itsel! in an
absol%te !orm, b%t rater as a tendency to@ard a progressi8e !all0C 5e progressi8e tendency o!
te general rate o! pro!it to !all is, tere!ore, H%st an epression peculiar to the capitalist mode of
production o! te progressi8e de8elopment o! te social prod%cti8ity o! labo%r0 5is does not
mean to say tat te rate o! pro!it may not !all temporarily !or oter reasons0 A%t proceeding !rom
te nat%re o! te capitalist mode o! prod%ction, it is tereby pro8ed logical necessity tat in its
de8elopment te general a8erage rate o! s%rpl%s-8al%e m%st express itsel! in a !alling general rate
o! pro!it0 $ince te mass o! te employed li8ing labo%r is contin%ally on te decline as compared
to te mass o! materialised labo%r set in motion by it, i.e., to te prod%cti8ely cons%med means o!
prod%ction, it !ollo@s tat te portion o! li8ing labo%r, %npaid and congealed in s%rpl%s-8al%e,
m%st also be contin%ally on te decrease compared to te amo%nt o! 8al%e represented by te
in8ested total capital0 $ince te ratio o! te mass o! s%rpl%s-8al%e to te 8al%e o! te in8ested total
capital !orms te rate o! pro!it, tis rate m%st constantly !all0
$imple as tis la@ appears !rom te !oregoing statements, all o! political economy as so !ar ad
little s%ccess in disco8ering it, as @e sall see in a later part0 /K0 Marx, 4heorien ber den
Mehrwert0 K0 MarxNF0 Engels, "er-e, Aand <6, 5eil <, $0 23+-66, +21-23. J 0d.1 5e economists
percei8ed te penomenon and c%dgelled teir brains in tort%o%s attempts to interpret it0 $ince
tis la@ is o! great importance to capitalist prod%ction, it may be said to be a mystery @ose
sol%tion as been te goal o! all political economy since ?dam $mit, te di!!erence bet@een te
8ario%s scools since ?dam $mit a8ing been in te di8ergent approaces to a sol%tion0 Wen
@e consider, on te oter and, tat %p to te present political economy as been r%nning in
circles ro%nd te distinction bet@een constant and 8ariable capital, b%t as ne8er kno@n o@ to
de!ine it acc%rately# tat it as ne8er separated s%rpl%s-8al%e !rom pro!it, and ne8er e8en
considered pro!it in its p%re !orm as distinct !rom its di!!erent, independent components, s%c as
ind%strial pro!it, commercial pro!it, interest, and gro%nd-rent# tat it as ne8er toro%gly
analysed te di!!erences in te organic composition o! capital, and, !or tis reason, as ne8er
to%gt o! analysing te !ormation o! te general rate o! pro!it I i! @e consider all tis, te !ail%re
to sol8e tis riddle is no longer s%rprising0
We intentionally present tis la@ be!ore going on to te di8ision o! pro!it into di!!erent
independent categories0 5e !act tat tis analysis is made independently o! te di8ision o! pro!it
into di!!erent parts, @ic !all to te sare o! di!!erent categories o! people, so@s !rom te o%tset
tat tis la@ is, in its entirety, independent o! tis di8ision, and H%st as independent o! te m%t%al
relations o! te res%ltant categories o! pro!it0 5e pro!it to @ic @e are ere re!erring is b%t
anoter name !or s%rpl%s-8al%e itsel!, @ic is presented only in its relation to total capital rater
tan to 8ariable capital, !rom @ic it arises0 5e drop in te rate o! pro!it, tere!ore, expresses
te !alling relation o! s%rpl%s-8al%e to ad8anced total capital, and is !or tis reason independent o!
any di8ision @atsoe8er o! tis s%rpl%s-8al%e among te 8ario%s categories0
We a8e seen tat at a certain stage o! capitalist de8elopment, @ere te organic composition o!
capital c : 8 @as += : 1==, a rate o! s%rpl%s-8al%e o! 1==T @as expressed in a rate o! pro!it o! 66W
T, and tat at a iger stage, @ere c : 8 @as 2== : 1==, te same rate o! s%rpl%s-8al%e @as
1+3 ;apter J&&&
expressed in a rate o! pro!it o! only <=T0 Wat is tr%e o! di!!erent s%ccessi8e stages o!
de8elopment in one co%ntry, is also tr%e o! di!!erent coexisting stages o! de8elopment in di!!erent
co%ntries0 &n an %nde8eloped co%ntry, in @ic te !ormer composition o! capital is te a8erage,
te general rate o! pro!it @o%ld R 66WT, @ile in a co%ntry @it te latter composition and a
m%c iger stage o! de8elopment it @o%ld R <=T0
5e di!!erence bet@een te t@o national rates o! pro!it migt disappear, or e8en be re8ersed, i!
labo%r @ere less prod%cti8e in te less de8eloped co%ntry, so tat a larger D%antity o! labo%r @ere
to be represented in a smaller D%antity o! te same commodities, and a larger excange-8al%e
@ere represented in less %se-8al%e0 5e labo%rer @o%ld ten spend more o! is time in
reprod%cing is o@n means o! s%bsistence, or teir 8al%e, and less time in prod%cing s%rpl%s-
8al%e# conseD%ently, e @o%ld per!orm less s%rpl%s-labo%r, @it te res%lt tat te rate o! s%rpl%s-
8al%e @o%ld be lo@er0 $%ppose, te labo%rer o! te less de8eloped co%ntry @ere to @ork W o! te
@orking-day !or imsel! and X !or te capitalist# in accordance @it te abo8e ill%stration, te
same labo%r-po@er @o%ld ten be paid @it 133X and @o%ld !%rnis a s%rpl%s o! only 6=W0 ?
constant capital o! += @o%ld correspond to a 8ariable capital o! 233X0 5e rate o! s%rpl%s-8al%e
@o%ld amo%nt to 66W : 133X R +=T, and te rate o! pro!it to 66W : 133X, or approximately 36T0
$ince @e a8e not so !ar analysed te di!!erent component parts o! pro!it, i.e., tey do not !or te
present exist !or %s, @e make te !ollo@ing remarks be!oreand merely to a8oid
mis%nderstanding: &n comparing co%ntries in di!!erent stages o! de8elopment it @o%ld be a big
mistake to meas%re te le8el o! te national rate o! pro!it by, say, te le8el o! te national rate o!
interest, namely @en comparing co%ntries @it a de8eloped capitalist prod%ction @it co%ntries
in @ic labo%r as not yet been !ormally s%bHected to capital, alto%g in reality te labo%rer is
exploited by te capitalist Bas, !or instance, in &ndia, @ere te ryot manages is !arm as an
independent prod%cer @ose prod%ction as s%c is not, tere!ore, as yet s%bordinated to capital,
alto%g te %s%rer may not only rob im o! is entire s%rpl%s-labo%r by means o! interest, b%t
may also, to %se a capitalist term, ack o!! a part o! is @ageC0 5is interest comprises all te
pro!it, and more tan te pro!it, instead o! merely expressing an aliD%ot part o! te prod%ced
s%rpl%s-8al%e, or pro!it, as it does in co%ntries @it a de8eloped capitalist prod%ction0 3n te
oter and, te rate o! interest is, in tis case, mostly determined by relations Bloans granted by
%s%rers to o@ners o! larger estates @o dra@ gro%nd-rentC @ic a8e noting to do @it pro!it,
and rater indicate to @at extent %s%ry appropriates gro%nd-rent0
?s regards co%ntries possessing di!!erent stages o! de8elopment o! capitalist prod%ction, and
conseD%ently capitals o! di!!erent organic composition, a co%ntry @ere te normal @orking-day
is sorter tan anoter"s may a8e a iger rate o! s%rpl%s-8al%e Bone o! te !actors @ic
determines te rate o! pro!itC0 'irst, i! te Englis ten-o%r @orking-day is, on acco%nt o! its
iger intensity, eD%al to an ?%strian @orking-day o! 12 o%rs, ten, di8iding te @orking-day
eD%ally in bot instances, + o%rs o! Englis s%rpl%s-labo%r may represent a greater 8al%e on te
@orld-market tan > o%rs o! ?%strian s%rpl%s-labo%r0 Second, a larger portion o! te Englis
@orking-day tan o! te ?%strian may represent s%rpl%s-labo%r0
5e la@ o! te !alling rate o! pro!it, @ic expresses te same, or e8en a iger, rate o! s%rpl%s-
8al%e, states, in oter @ords, tat any D%antity o! te a8erage social capital, say, a capital o! 1==,
comprises an e8er larger portion or means o! labo%r, and an e8er smaller portion o! li8ing labo%r0
5ere!ore, since te aggregate mass o! li8ing labo%r operating te means o! prod%ction decreases
in relation to te 8al%e o! tese means o! prod%ction, it !ollo@s tat te %npaid labo%r and te
portion o! 8al%e in @ic it is expressed m%st decline as compared to te 8al%e o! te ad8anced
total capital0 3r: ?n e8er smaller aliD%ot part o! in8ested total capital is con8erted into li8ing
labo%r, and tis total capital, tere!ore, absorbs in proportion to its magnit%de less and less
s%rpl%s-labo%r, alto%g te %npaid part o! te labo%r applied may at te same time gro@ in
relation to te paid part0 5e relati8e decrease o! te 8ariable and increase o! te constant capital,
1+2 ;apter J&&&
o@e8er m%c bot parts may gro@ in absol%te magnit%de, is, as @e a8e said, b%t anoter
expression !or greater prod%cti8ity o! labo%r0
'et a capital o! 1== consist o! 8=c U <=8, and te latter R <= labo%rers0 'et te rate o! s%rpl%s-
8al%e be 1==T, i.e., te labo%rers @ork al! te day !or temsel8es and te oter al! !or te
capitalist0 -o@ let te capital o! 1== in a less de8eloped co%ntry R <=c U 8=8, and let te latter R
8= labo%rers0 A%t tese labo%rers reD%ire <N3 o! te day !or temsel8es, and @ork only 1N3 !or te
capitalist0 E8eryting else being eD%al, te labo%rers in te !irst case prod%ce a 8al%e o! 2=, and in
te second o! 1<=0 5e !irst capital prod%ces 8=c U <=8 U <=s R 1<=# rate o! pro!it R <=T0 5e
second capital, <=c U 8=8 U 2=s R 12=# rate o! pro!it 2=T0 &n te second case te rate o! pro!it is,
tere!ore, do%ble te !irst, alto%g te rate o! s%rpl%s-8al%e in te !irst R 1==T, @ic is do%ble
tat o! te second, @ere it is only +=T0 A%t ten, a capital o! te same magnit%de appropriates
te s%rpl%s-labo%r o! only <= labo%rers in te !irst case, and o! 8= labo%rers in te second case0
5e la@ o! te progressi8e !alling o! te rate o! pro!it, or te relati8e decline o! appropriated
s%rpl%s-labo%r compared to te mass o! materialised labo%r set in motion by li8ing labo%r, does
not r%le o%t in any @ay tat te absol%te mass o! exploited labo%r set in motion by te social
capital, and conseD%ently te absol%te mass o! te s%rpl%s-labo%r it appropriates, may gro@# nor,
tat te capitals controlled by indi8id%al capitalists may dispose o! a gro@ing mass o! labo%r and,
ence, o! s%rpl%s-labo%r, te latter e8en to%g te n%mber o! labo%rers tey employ does not
increase0
5ake a certain @orking pop%lation o!, say, t@o million0 ?ss%me, !%rtermore, tat te lengt and
intensity o! te a8erage @orking-day, and te le8el o! @ages, and tereby te proportion bet@een
necessary and s%rpl%s-labo%r, are gi8en0 &n tat case te aggregate labo%r o! tese t@o million,
and teir s%rpl%s-labo%r expressed in s%rpl%s-8al%e, al@ays prod%ces te same magnit%de o!
8al%e0 A%t @it te gro@t o! te mass o! te constant B!ixed and circ%latingC capital set in motion
by tis labo%r, tis prod%ced D%antity o! 8al%e declines in relation to te 8al%e o! tis capital,
@ic 8al%e gro@s @it its mass, e8en i! not in D%ite te same proportion0 5is ratio, and
conseD%ently te rate o! pro!it, srinks in spite o! te !act tat te mass o! commanded li8ing
labo%r is te same as be!ore, and te same amo%nt o! s%rpl%s-labo%r is s%cked o%t o! it by te
capital0 &t canges beca%se te mass o! materialised labo%r set in motion by li8ing labo%r
increases, and not beca%se te mass o! li8ing labo%r as sr%nk0 &t is a relati8e decrease, not an
absol%te one, and as, in !act, noting to do @it te absol%te magnit%de o! te labo%r and
s%rpl%s-labo%r set in motion0 5e drop in te rate o! pro!it is not d%e to an absol%te, b%t only to a
relati8e decrease o! te 8ariable part o! te total capital, i.e., to its decrease in relation to te
constant part0
Wat applies to any gi8en mass o! labo%r and s%rpl%s-labo%r, also applies to a gro@ing n%mber o!
labo%rers, and, t%s, %nder te abo8e ass%mption, to any gro@ing mass o! commanded labo%r in
general, and to its %npaid part, te s%rpl%s-labo%r, in partic%lar0 &! te @orking pop%lation
increases !rom t@o million to tree, and i! te 8ariable capital in8ested in @ages also rises to
tree million !rom its !ormer t@o million, @ile te constant capital rises !rom !o%r million to
!i!teen million, ten, %nder te abo8e ass%mption o! a constant @orking-day and a constant rate o!
s%rpl%s-8al%e, te mass o! s%rpl%s-labo%r, and o! s%rpl%s-8al%e, rises by one-al!, i.e., +=T, !rom
t@o million to tree0 -e8erteless, in spite o! tis gro@t o! te absol%te mass o! s%rpl%s-labo%r,
and ence o! s%rpl%s-8al%e, by +=T, te ratio o! 8ariable to constant capital @o%ld !all !rom < : 2
to 3 : 1+, and te ratio o! s%rpl%s-8al%e to total capital @o%ld be Bin millionsC
&0 2c U <8 U <s# ; R 6, p" R 33XT0
&&0 1+c U 38 U 3s# ; R 18, p" R 16WT0
Wile te mass o! s%rpl%s-8al%e as increased by one-al!, te rate o! pro!it as !allen by one-
al!0 6o@e8er, te pro!it is only te s%rpl%s-8al%e calc%lated in relation to te total social capital,
and te mass o! pro!it, its absol%te magnit%de, is socially eD%al to te absol%te magnit%de o! te
1++ ;apter J&&&
s%rpl%s-8al%e0 5e absol%te magnit%de o! te pro!it, its total amo%nt, @o%ld, tere!ore, a8e
gro@n by +=T, in spite o! its enormo%s relati8e decrease compared to te ad8anced total capital,
or in spite o! te enormo%s decrease in te general rate o! pro!it0 5e n%mber o! labo%rers
employed by capital, ence te absol%te mass o! te labo%r set in motion by it, and tere!ore te
absol%te mass o! s%rpl%s-labo%r absorbed by it, te mass o! te s%rpl%s-8al%e prod%ced by it, and
tere!ore te absol%te mass o! te pro!it prod%ced by it, can, conseD%ently, increase, and increase
progressi8ely, in spite o! te progressi8e drop in te rate o! pro!it0 ?nd tis not only can be so0
?side !rom temporary !l%ct%ations it must be so, on te basis o! capitalist prod%ction0
Essentially, te capitalist process o! prod%ction is sim%ltaneo%sly a process o! acc%m%lation0 We
a8e so@n tat @it te de8elopment o! capitalist prod%ction te mass o! 8al%es to be simply
reprod%ced, or maintained, increases as te prod%cti8ity o! labo%r gro@s, e8en i! te labo%r-
po@er employed so%ld remain constant0 A%t @it te de8elopment o! social prod%cti8ity o!
labo%r te mass o! prod%ced %se-8al%es, o! @ic te means o! prod%ction !orm a part, gro@s still
more0 ?nd te additional labo%r, tro%g @ose appropriation tis additional @ealt can be
recon8erted into capital, does not depend on te 8al%e, b%t on te mass o! tese means o!
prod%ction Bincl%ding means o! s%bsistenceC, beca%se in te prod%ction process te labo%rers
a8e noting to do @it te 8al%e, b%t @it te %se-8al%e, o! te means o! prod%ction0
?cc%m%lation itsel!, o@e8er, and te concentration o! capital tat goes @it it, is a material
means o! increasing prod%cti8eness0 -o@, tis gro@t o! te means o! prod%ction incl%des te
gro@t o! te @orking pop%lation, te creation o! a @orking pop%lation, @ic corresponds to te
s%rpl%s-capital, or e8en exceeds its general reD%irements, t%s leading to an o8er-pop%lation o!
@orkers0 ? momentary excess o! s%rpl%s-capital o8er te @orking pop%lation it as
commandeered, @o%ld a8e a t@o-!old e!!ect0 &t co%ld, on te one and, by raising @ages,
mitigate te ad8erse conditions @ic decimate te o!!spring o! te labo%rers and @o%ld make
marriages easier among tem, so as grad%ally to increase te pop%lation0 3n te oter and, by
applying metods @ic yield relati8e s%rpl%s-8al%e Bintrod%ction and impro8ement o!
macineryC it @o%ld prod%ce a !ar more rapid, arti!icial, relati8e o8er-pop%lation, @ic in its
t%rn, @o%ld be a breeding-gro%nd !or a really s@i!t propagation o! te pop%lation, since %nder
capitalist prod%ction misery prod%ces pop%lation0 &t tere!ore !ollo@s o! itsel! !rom te nat%re o!
te capitalist process o! acc%m%lation, @ic is b%t one !acet o! te capitalist prod%ction process,
tat te increased mass o! means o! prod%ction tat is to be con8erted into capital al@ays !inds a
correspondingly increased, e8en excessi8e, exploitable @orker pop%lation0 ?s te process o!
prod%ction and acc%m%lation ad8ances tere!ore, te mass o! a8ailable and appropriated s%rpl%s-
labo%r, and ence te absol%te mass o! pro!it appropriated by te social capital, must gro@0 ?long
@it te 8ol%me, o@e8er, te same la@s o! prod%ction and acc%m%lation increase also te 8al%e
o! te constant capital in a mo%nting progression more rapidly tan tat o! te 8ariable part o!
capital, in8ested as it is in li8ing labo%r0 6ence, te same la@s prod%ce !or te social capital a
gro@ing absol%te mass o! pro!it, and a !alling rate o! pro!it0
We sall entirely ignore ere tat @it te ad8ance o! capitalist prod%ction and te attendant
de8elopment o! te prod%cti8eness o! social labo%r and m%ltiplication o! prod%ction brances,
ence prod%cts, te same amo%nt o! 8al%e represents a progressi8ely increasing mass o! %se-
8al%es and enHoyments0
5e de8elopment o! capitalist prod%ction and acc%m%lation li!ts labo%r-processes to an
increasingly enlarged scale and t%s imparts to tem e8er greater dimensions, and in8ol8es
accordingly larger in8estments o! capital !or eac indi8id%al establisment0 ? mo%nting
concentration o! capitals Baccompanied, to%g on a smaller scale, by an increase in te n%mber
o! capitalistsC is, tere!ore, one o! its material reD%irements as @ell as one o! its res%lts0 6and in
and @it it, m%t%ally interacting, tere occ%rs a progressi8e expropriation o! te more or less
direct prod%cers0 &t is, ten, nat%ral !or te indi8id%al capitalists to command increasingly large
armies o! labo%rers Bno matter o@ m%c te 8ariable capital may decrease in relation to te
1+6 ;apter J&&&
constantC, and nat%ral, too, tat te mass o! s%rpl%s-8al%e, and ence pro!it, appropriated by tem,
so%ld gro@ sim%ltaneo%sly @it, and in spite o!, te !all in te rate o! pro!it0 5e ca%ses @ic
concentrate masses o! labo%rers %nder te command o! indi8id%al capitalists, are te 8ery same
tat s@ell te mass o! te in8ested !ixed capital, and a%xiliary and ra@ materials, in mo%nting
proportion as compared to te mass o! employed li8ing labo%r0
&t reD%ires no more tan a passing remark at tis point to indicate tat, gi8en a certain labo%ring
pop%lation, te mass o! s%rpl%s-8al%e, ence te absol%te mass o! pro!it, m%st gro@ i! te rate o!
s%rpl%s-8al%e increases, be it tro%g a lengtening or intensi!ication o! te @orking-day, or
tro%g a drop in te 8al%e o! @ages d%e to an increase in te prod%cti8eness o! labo%r, and tat it
m%st do so in spite o! te relati8e decrease o! 8ariable capital in respect to constant0
5e same de8elopment o! te prod%cti8eness o! social labo%r, te same la@s @ic express
temsel8es in a relati8e decrease o! 8ariable as compared to total capital, and in te tereby
!acilitated acc%m%lation, @ile tis acc%m%lation in its t%rn becomes a starting-point !or te
!%rter de8elopment o! te prod%cti8eness and !or a !%rter relati8e decrease o! 8ariable capital I
tis same de8elopment mani!ests itsel!, aside !rom temporary !l%ct%ations, in a progressi8e
increase o! te total employed labo%r-po@er and a progressi8e increase o! te absol%te mass o!
s%rpl%s-8al%e, and ence o! pro!it0
-o@, @at m%st be te !orm o! tis do%ble-edged la@ o! a decrease in te rate o! pro!it and a
sim%ltaneo%s increase in te absol%te mass o! pro!it arising !rom te same ca%sesQ ?s a la@ based
on te !act tat %nder gi8en conditions te appropriated mass o! s%rpl%s-labo%r, ence o! s%rpl%s-
8al%e, increases, and tat, so !ar as te total capital is concerned, or te indi8id%al capital as an
aliD%ot part o! te total capital, pro!it and s%rpl%s-8al%e are identical magnit%desQ
'et %s take an aliD%ot part o! capital %pon @ic @e calc%late te rate o! pro!it, e.g., 1==0 5ese
1== represent te a8erage composition o! te total capital, say, 8=c U <=80 We a8e seen in te
second part o! tis book tat te a8erage rate o! pro!it in te 8ario%s brances o! prod%ction is
determined not by te partic%lar composition o! eac indi8id%al capital, b%t by te a8erage social
composition0 ?s te 8ariable capital decreases relati8e to te constant, ence te total capital o!
1==, te rate o! pro!it, or te relati8e magnit%de o! s%rpl%s-8al%e, i.e., its ratio to te ad8anced
total capital o! 1==, !alls e8en to%g te intensity o! exploitation @ere to remain te same, or
e8en to increase0 A%t it is not tis relati8e magnit%de alone @ic !alls0 5e magnit%de o! te
s%rpl%s-8al%e or pro!it absorbed by te total capital o! 1== also !alls absol%tely0 ?t a rate o!
s%rpl%s-8al%e o! 1==T, a capital o! 6=c U 2=8 prod%ces a mass o! s%rpl%s-8al%e, and ence o!
pro!it, amo%nting to 2=# a capital o! 8=c U <=8 a mass o! pro!it o! 3=# and !or a capital o! 8=c U <=8
te pro!it !alls to <=0 5is !alling applies to te mass o! s%rpl%s-8al%e, and ence o! pro!it, and is
d%e to te !act tat te total capital o! 1== employs less li8ing labo%r, and, te intensity o! labo%r
exploitation remaining te same, sets in motion less s%rpl%s-labo%r, and tere!ore prod%ces less
s%rpl%s-8al%e0 5aking any aliD%ot part o! te social capital, i.e., a capital o! a8erage composition,
as a standard by @ic to meas%re s%rpl%s-8al%e I and tis is done in all pro!it calc%lations I a
relati8e !all o! s%rpl%s-8al%e is generally identical @it its absol%te !all0 &n te cases gi8en abo8e,
te rate o! pro!it sinks !rom 2=T to 3=T and to <=T, beca%se, in !act, te mass o! s%rpl%s-8al%e,
and ence o! pro!it, prod%ced by te same capital !alls absol%tely !rom 2= to 3= and to <=0 $ince
te magnit%de o! te 8al%e o! te capital, by @ic te s%rpl%s-8al%e is meas%red, is gi8en as 1==,
a !all in te proportion o! s%rpl%s-8al%e to tis gi8en magnit%de can be only anoter expression
!or te decrease o! te absol%te magnit%de o! s%rpl%s-8al%e and pro!it0 5is is, indeed, a
ta%tology0 A%t, as so@n, te !act tat tis decrease occ%rs at all, arises !rom te nat%re o! te
de8elopment o! te capitalist process o! prod%ction0
3n te oter and, o@e8er, te same ca%ses @ic bring abo%t an absol%te decrease o! s%rpl%s-
8al%e, and ence pro!it, on a gi8en capital, and conseD%ently o! te rate o! pro!it calc%lated in per
cent, prod%ce an increase in te absol%te mass o! s%rpl%s-8al%e, and ence o! pro!it, appropriated
by te social capital Bi.e., by all capitalists taken as a @oleC0 6o@ does tis occ%r, @at is te
1+> ;apter J&&&
only @ay in @ic tis can occ%r, or @at are te conditions obtaining in tis seeming
contradictionQ
&! any aliD%ot part R 1== o! te social capital, and ence any 1== o! a8erage social composition, is
a gi8en magnit%de, !or @ic tere!ore a !all in te rate o! pro!it coincides @it a !all in te
absol%te magnit%de o! te pro!it beca%se te capital @ic ere ser8es as a standard o!
meas%rement is a constant magnit%de, ten te magnit%de o! te social capital like tat o! te
capital in te ands o! indi8id%al capitalists, is 8ariable, and in keeping @it o%r ass%mptions it
m%st 8ary in8ersely @it te decrease o! its 8ariable portion0
&n o%r !ormer ill%stration, @en te percentage o! composition @as 6=c U 2=8, te corresponding
s%rpl%s-8al%e, or pro!it, @as 2=, and ence te rate o! pro!it 2=T0 $%ppose, te total capital in tis
stage o! composition @as one million0 5en te total s%rpl%s-8al%e, and ence te total pro!it,
amo%nted to 2==,===0 -o@, i! te composition later R 8=c U <=8, @ile te degree o! labo%r
exploitation remained te same, ten te s%rpl%s-8al%e or pro!it !or eac 1== R <=0 A%t since te
absol%te mass o! s%rpl%s-8al%e or pro!it increases, as demonstrated, in spite o! te decreasing rate
o! pro!it or te decreasing prod%ction o! s%rpl%s-8al%e by e8ery 1== o! capital I increases, say,
!rom 2==,=== to 22=,===, ten tis occ%rs solely beca%se te total capital @ic !ormed at te
time o! tis ne@ composition as risen to <,<==,===0 5e mass o! te total capital set in motion
as risen to <<=T, @ile te rate o! pro!it as !allen by +=T0 6ad te total capital no more tan
do%bled, it @o%ld a8e to prod%ce as m%c s%rpl%s-8al%e and pro!it to obtain a rate o! pro!it o!
<=T as te old capital o! 1,===,=== prod%ced at 2=T0 6ad it gro@n to less tan do%ble, it @o%ld
a8e prod%ced less s%rpl%s-8al%e, or pro!it, tan te old capital o! 1,===,===, @ic, in its !ormer
composition, @o%ld a8e ad to gro@ !rom 1,===,=== to no more tan 1,1==,=== to raise its
s%rpl%s-8al%e !rom 2==,=== to 22=,===0
We again meet ere te pre8io%sly de!ined la@ tat te relati8e decrease o! te 8ariable capital,
ence te de8elopment o! te social prod%cti8eness o! labo%r, in8ol8es an increasingly large mass
o! total capital to set in motion te same D%antity o! labo%r-po@er and sD%eeEe o%t te same
D%antity o! s%rpl%s-labo%r0 ;onseD%ently, te possibility o! a relati8e s%rpl%s o! labo%ring people
de8elops proportionately to te ad8ances made by capitalist prod%ction not beca%se te
prod%cti8eness o! social labo%r decreases, b%t beca%se it increases0 &t does not tere!ore arise o%t
o! an absol%te disproportion bet@een labo%r and te means o! s%bsistence, or te means !or te
prod%ction o! tese means o! s%bsistence, b%t o%t o! a disproportion occasioned by capitalist
exploitation o! labo%r, a disproportion bet@een te progressi8e gro@t o! capital and its relati8ely
srinking need !or an increasing pop%lation0
$o%ld te rate o! pro!it !all by +=T, it @o%ld srink one-al!0 &! te mass o! pro!it is to remain
te same, te capital m%st be do%bled0 For te mass o! pro!it made at a declining rate o! pro!it to
remain te same, te m%ltiplier indicating te gro@t o! te total capital m%st be eD%al to te
di8isor indicating te !all o! te rate o! pro!it0 &! te rate o! pro!it !alls !rom 2= to <=, te total
capital m%st rise in8ersely at te rate o! <= : 2= to obtain te same res%lt0 &! te rate o! pro!it !alls
!rom 2= to 8, te capital @o%ld a8e to increase at te rate o! 8 : 2=, or !i8e-!old0 ? capital o!
1,===,=== at 2=T prod%ces 2==,===, and a capital o! +,===,=== at 8T like@ise prod%ces 2==,===0
5is applies i! @e @ant te res%lt to remain te same0 A%t i! te res%lt is to be iger, ten te
capital m%st gro@ at a greater rate tan te rate o! pro!it !alls0 &n oter @ords, !or te 8ariable
portion o! te total capital not to remain te same in absol%te terms, b%t to increase absol%tely in
spite o! its !alling in percentage o! te total capital, te total capital m%st gro@ at a !aster rate tan
te percentage o! te 8ariable capital !alls0 &t m%st gro@ so considerably tat in its ne@
composition it so%ld reD%ire more tan te old portion o! 8ariable capital to p%rcase labo%r-
po@er0 &! te 8ariable portion o! a capital R 1== so%ld !all !rom 2= to <=, te total capital m%st
rise iger tan <== to be able to employ a larger 8ariable capital tan 2=0
E8en i! te exploited mass o! te @orking pop%lation @ere to remain constant, and only te
lengt and intensity o! te @orking-day @ere to increase, te mass o! te in8ested capital @o%ld
1+8 ;apter J&&&
a8e to increase, since it @o%ld a8e to be greater in order to employ te same mass o! labo%r
%nder te old conditions o! exploitation a!ter te composition o! capital canges0
5%s, te same de8elopment o! te social prod%cti8eness o! labo%r expresses itsel! @it te
progress o! capitalist prod%ction on te one and in a tendency o! te rate o! pro!it to !all
progressi8ely and, on te oter, in a progressi8e gro@t o! te absol%te mass o! te appropriated
s%rpl%s-8al%e, or pro!it# so tat on te @ole a relati8e decrease o! 8ariable capital and pro!it is
accompanied by an absol%te increase o! bot0 5is t@o-!old e!!ect, as @e a8e seen, can express
itsel! only in a gro@t o! te total capital at a pace more rapid tan tat at @ic te rate o! pro!it
!alls0 For an absol%tely increased 8ariable capital to be employed in a capital o! iger
composition, or one in @ic te constant capital as increased relati8ely more, te total capital
m%st not only gro@ proportionately to its iger composition, b%t still more rapidly0 &t !ollo@s,
ten, tat as te capitalist mode o! prod%ction de8elops, an e8er larger D%antity o! capital is
reD%ired to employ te same, let alone an increased, amo%nt o! labo%r-po@er0 5%s, on a capitalist
!o%ndation, te increasing prod%cti8eness o! labo%r necessarily and permanently creates a
seeming o8er-pop%lation o! labo%ring people0 &! te 8ariable capital !orms H%st 1N6 o! te total
capital instead o! te !ormer Z, te total capital m%st be trebled to employ te same amo%nt o!
labo%r-po@er0 ?nd i! t@ice as m%c labo%r-po@er is to be employed, te total capital m%st
increase six-!old0
,olitical economy, @ic as %ntil no@ been %nable to explain te la@ o! te tendency o! te rate
o! pro!it to !all, pointed sel!-consolingly to te increasing mass o! pro!it, i.e., to te gro@t o! te
absol%te magnit%de o! pro!it, be it !or te indi8id%al capitalist or !or te social capital, b%t tis
@as also based on mere platit%de and spec%lation0
5o say tat te mass o! pro!it is determined by t@o !actors I !irst, te rate o! pro!it, and, secondly,
te mass o! capital in8ested at tis rate, is mere ta%tology0 &t is tere!ore b%t a corollary o! tis
ta%tology to say tat tere is a possibility !or te mass o! pro!it to gro@ e8en to%g te rate o!
pro!it may !all at te same time0 &t does not elp %s one step !arter, since it is H%st as possible !or
te capital to increase @ito%t te mass o! pro!it gro@ing, and !or it to increase e8en @ile te
mass o! pro!it !alls0 For 1== at <+T yields <+, and 2== at +T yields only <=0
1
A%t i! te same
ca%ses @ic make te rate o! pro!it !all, entail te acc%m%lation, i.e., te !ormation, o! additional
capital, and i! eac additional capital employs additional labo%r and prod%ces additional s%rpl%s-
8al%e# i!, on te oter and, te mere !all in te rate o! pro!it implies tat te constant capital, and
@it it te total old capital, a8e increased, ten tis process ceases to be mysterio%s0 We sall see
later /K0 Marx, 4heorien ber den Mehrwert. K0 MarxNF0 Engels, "er-e, Aand <6, 5eil <,0 $0 23+-
66, +21- 23. J 0d1 to @at deliberate !alsi!ications some people resort in teir calc%lations to
spirit a@ay te possibility o! an increase in te mass o! pro!it sim%ltaneo%s @it a decrease in te
rate o! pro!it0
We a8e so@n o@ te same ca%ses tat bring abo%t a tendency !or te general rate o! pro!it to
!all necessitate an accelerated acc%m%lation o! capital and, conseD%ently, an increase in te
absol%te magnit%de, or total mass, o! te s%rpl%s-labo%r Bs%rpl%s-8al%e, pro!itC appropriated by it0
P%st as e8eryting appears re8ersed in competition, and t%s in te conscio%sness o! te agents o!
competition, so also tis la@, tis inner and necessary connection bet@een t@o seeming
contradictions0 &t is e8ident tat @itin te proportions indicated abo8e a capitalist disposing o! a
large capital @ill recei8e a larger mass o! pro!it tan a small capitalist making seemingly ig
pro!its0 E8en a c%rsory examination o! competition so@s, !%rtermore, tat %nder certain
circ%mstances, @en te greater capitalist @ises to make room !or imsel! on te market, and to
cro@d o%t te smaller ones, as appens in times o! crises, e makes practical %se o! tis, i.e., e
deliberately lo@ers is rate o! pro!it in order to dri8e te smaller ones to te @all0 Mercants
capital, @ic @e sall describe in detail later, also notably exibits penomena @ic appear to
attrib%te a !all in pro!it to an expansion o! b%siness, and t%s o! capital0 5e scienti!ic expression
!or tis !alse conception @ill be gi8en later0 $imilar s%per!icial obser8ations res%lt !rom a
1+* ;apter J&&&
comparison o! rates o! pro!it in indi8id%al lines o! b%siness, disting%ised eiter as s%bHect to !ree
competition, or to monopoly0 5e %tterly sallo@ conception existing in te minds o! te agents
o! competition is !o%nd in )oscer, namely, tat a red%ction in te rate o! pro!it is Kmore pr%dent
and %maneL0 /)oscer, Die Grundlage der $ationalK-onomie, 3 ?%!lage, 18+8, 1=8, $0 1*<. J
0d.1 5e !all in te rate o! pro!it appears in tis case as an effect o! an increase in capital and o!
te concomitant calc%lation o! te capitalist tat te mass o! pro!its pocketed by im @ill be
greater at a smaller rate o! pro!it0 5is entire conception B@it te exception o! ?dam $mit"s,
@ic @e sall mention laterC /K0 Marx, 4heorien ber den Mehrwert. K0 MarxNF0 Engels, "er-e,
Aand <6, 5eil <, $0 <12-<80 I 0d01 rests on an %tter misappreension o! @at te general rate o!
pro!it is, and on te cr%de notion tat prices are act%ally determined by adding a more or less
arbitrary D%ota o! pro!it to te tr%e 8al%e o! commodities0 ;r%de as tese ideas are, tey arise
necessarily o%t o! te in8erted aspect @ic te immanent la@s o! capitalist prod%ction represent
in competition0
5e la@ tat a !all in te rate o! pro!it d%e to te de8elopment o! prod%cti8eness is accompanied
by an increase in te mass o! pro!it, also expresses itsel! in te !act tat a !all in te price o!
commodities prod%ced by a capital is accompanied by a relati8e increase o! te masses o! pro!it
contained in tem and realised by teir sale0
$ince te de8elopment o! te prod%cti8eness and te correspondingly iger composition o!
capital sets in motion an e8er-increasing D%antity o! means o! prod%ction tro%g a constantly
decreasing D%antity o! labo%r, e8ery aliD%ot part o! te total prod%ct, i.e., e8ery single commodity,
or eac partic%lar lot o! commodities in te total mass o! prod%cts, absorbs less li8ing labo%r, and
also contains less materialised labo%r, bot in te depreciation o! te !ixed capital applied and in
te ra@ and a%xiliary materials cons%med0 6ence e8ery single commodity contains a smaller s%m
o! labo%r materialised in means o! prod%ction and o! labo%r ne@ly added d%ring prod%ction0 5is
ca%ses te price o! te indi8id%al commodity to !all0 A%t te mass o! pro!its contained in te
indi8id%al commodities may ne8erteless increase i! te rate o! te absol%te or relati8e s%rpl%s-
8al%e gro@s0 5e commodity contains less ne@ly added labo%r, b%t its %npaid portion gro@s in
relation to its paid portion0 6o@e8er, tis is te case only @itin certain limits0 Wit te absol%te
amo%nt o! li8ing labo%r ne@ly incorporated in indi8id%al commodities decreasing enormo%sly as
prod%ction de8elops, te absol%te mass o! %npaid labo%r contained in tem @ill like@ise
decrease, o@e8er m%c it may a8e gro@n as compared to te paid portion0 5e mass o! pro!it
on eac indi8id%al commodity @ill srink considerably @it te de8elopment o! te
prod%cti8eness o! labo%r, in spite o! a gro@t in te rate o! s%rpl%s-8al%e0 ?nd tis red%ction, H%st
as te !all in te rate o! pro!it, is only delayed by te ceapening o! te elements o! constant
capital and by te oter circ%mstances set !ort in te !irst part o! tis book, @ic increase te
rate o! pro!it at a gi8en, or e8en !alling, rate o! s%rpl%s-8al%e0
5at te price o! indi8id%al commodities @ose s%m makes %p te total prod%ct o! capital !alls,
means simply tat a certain D%antity o! labo%r is realised in a larger D%antity o! commodities, so
tat eac indi8id%al commodity contains less labo%r tan be!ore0 5is is te case e8en i! te price
o! one part o! constant capital, s%c as ra@ material, etc0, so%ld rise0 3%tside o! a !e@ cases B!or
instance, i! te prod%cti8eness o! labo%r %ni!ormly ceapens all elements o! te constant, and te
8ariable, capitalC, te rate o! pro!it @ill !all, in spite o! te iger rate o! s%rpl%s-8al%e, 1C beca%se
e8en a larger %npaid portion o! te smaller total amo%nt o! ne@ly added labo%r is smaller tan a
smaller aliD%ot %npaid portion o! te !ormer larger amo%nt and <C beca%se te iger composition
o! capital is expressed in te indi8id%al commodity by te !act tat te portion o! its 8al%e in
@ic ne@ly added labo%r is materialised decreases in relation to te portion o! its 8al%e @ic
represents ra@ and a%xiliary material, and te @ear and tear o! !ixed capital0 5is cange in te
proportion o! te 8ario%s component parts in te price o! indi8id%al commodities, i.e., te
decrease o! tat portion o! te price in @ic ne@ly added li8ing labo%r is materialised, and te
increase o! tat portion o! it in @ic !ormerly materialised labo%r is represented, is te !orm
16= ;apter J&&&
@ic expresses te decrease o! te 8ariable in relation to te constant capital tro%g te price o!
te indi8id%al commodities0 P%st as tis decrease is absol%te !or a certain amo%nt o! capital, say o!
1==, it is also absol%te !or e8ery indi8id%al commodity as an aliD%ot part o! te reprod%ced
capital0 6o@e8er, te rate o! pro!it, i! calc%lated merely on te elements o! te price o! an
indi8id%al commodity, @o%ld be di!!erent !rom @at it act%ally is0 ?nd !or te !ollo@ing reason:
/5e rate o! pro!it is calc%lated on te total capital in8ested, b%t !or a de!inite time, act%ally a
year0 5e rate o! pro!it is te ratio o! te s%rpl%s-8al%e, or pro!it, prod%ced and realised in a year,
to te total capital calc%lated in per cent0 &t is, tere!ore, not necessarily eD%al to a rate o! pro!it
calc%lated !or te period o! t%rno8er o! te in8ested capital rater tan !or a year0 &t is only i! te
capital is t%rned o8er exactly in one year tat te t@o coincide0
3n te oter and, te pro!it made in te co%rse o! a year is merely te s%m o! pro!its on
commodities prod%ced and sold d%ring tat same year0 -o@, i! @e calc%late te pro!it on te cost-
price o! commodities, @e obtain a rate o! pro!it R pNk in @ic p stands !or te pro!it realised
d%ring one year, and k !or te s%m o! te cost-prices o! commodities prod%ced and sold @itin te
same period0 &t is e8ident tat tis rate o! pro!it pNk @ill not coincide @it te act%al rate o! pro!it
pN;, mass o! pro!it di8ided by total capital, %nless k R ;, tat is, %nless te capital is t%rned o8er
in exactly one year0
'et %s take tree di!!erent conditions o! an ind%strial capital0
&0 ? capital o! V8,=== prod%ces and sells ann%ally +,=== pieces o! a commodity at 3=s0 per piece,
t%s making an ann%al t%rno8er o! V>,+==0 &t makes a pro!it o! 1=s0 on eac piece, or V<,+== per
year0 E8ery piece, ten, contains <=s0 ad8anced capital and 1=s0 pro!it, so tat te rate o! pro!it
per piece is 1=N<= R +=T0 5e t%rned-o8er s%m o! V>,+== contains V+,=== ad8anced capital and
V<,+== pro!it0 )ate o! pro!it per t%rno8er, pNk, like@ise +=T0 A%t calc%lated on te total capital
te rate o! pro!it pN; R <,+==N8,=== R 31[T
&&0 5e capital rises to V1=,===0 3@ing to increased prod%cti8ity o! labo%r it is able to prod%ce
ann%ally 1=,=== pieces o! te commodity at a cost-price o! <=s0 per piece0 $%ppose te
commodity is sold at a pro!it o! 2s0, ence at <2s0 per piece0 &n tat case te price o! te ann%al
prod%ct R V1<,===, o! @ic V1=,=== is ad8anced capital and V<,=== is pro!it0 5e rate o! pro!it
pNk R 2N<= per piece, and <,===N1=,=== !or te ann%al t%rno8er, or in bot cases R <=T0 ?nd since
te total capital is eD%al to te s%m o! te cost-prices, namely V1=,===, it !ollo@s tat pN;, te
act%al rate o! pro!it, is in tis case also <=T0
&&&0 'et te capital rise to V1+,=== o@ing to a constant gro@t o! te prod%cti8eness o! labo%r, and
let it ann%ally prod%ce 3=,=== pieces o! te commodity at a cost-price o! 13s0 per piece, eac
piece being sold at a pro!it o! <s0, or at 1+s0 5e ann%al t%rno8er tere!ore R 3=,===\1+s0 R
V<<,+==, o! @ic V1*,+== is ad8anced capital and V3,=== pro!it0 5e rate o! pro!it pNk ten R
<N13 R 3,===N1*,+== R 1+ +N13T0 A%t pN; R 3,===N1+,=== R <=T0
We see, tere!ore, tat only in case &&, @ere te t%rned-o8er capital-8al%e is eD%al to te total
capital, te rate o! pro!it per piece, or per total amo%nt o! t%rno8er, is te same as te rate o! pro!it
calc%lated on te total capital0 &n case &, in @ic te amo%nt o! te t%rno8er is smaller tan te
total capital, te rate o! pro!it calc%lated on te cost-price o! te commodity is iger# and in case
&&&, in @ic te total capital is smaller tan te amo%nt o! te t%rno8er, it is lo@er tan te act%al
rate calc%lated on te total capital0 5is is a general r%le0
&n commercial practice, te t%rno8er is generally calc%lated inacc%rately0 &t is ass%med tat te
capital as been t%rned o8er once as soon as te s%m o! te realised commodity-prices eD%als te
s%m o! te in8ested total capital0 A%t te capital can complete one @ole t%rno8er only @en te
s%m o! te cost1prices o! te realised commodities eD%als te s%m o! te total capital0 I '.0.1
5is again so@s o@ important it is in capitalist prod%ction to regard indi8id%al commodities, or
te commodity-prod%ct o! a certain period, as prod%cts o! ad8anced capital and in relation to te
total capital @ic prod%ces tem, rater tan in isolation, by temsel8es, as mere commodities0
161 ;apter J&&&
5e rate o! pro!it m%st be calc%lated by meas%ring te mass o! prod%ced and realised s%rpl%s-
8al%e not only in relation to te cons%med portion o! capital reappearing in te commodities, b%t
also to tis part pl%s tat portion o! %ncons%med b%t applied capital @ic contin%es to operate in
prod%ction0 6o@e8er, te mass o! pro!it cannot be eD%al to anyting b%t te mass o! pro!it or
s%rpl%s-8al%e, contained in te commodities temsel8es, and to be realised by teir sale0
&! te prod%cti8ity o! ind%stry increases, te price o! indi8id%al commodities !alls0 5ere is less
labo%r in tem, less paid and %npaid labo%r0 $%ppose, te same labo%r prod%ces, say, triple its
!ormer prod%ct0 5en W less labo%r yields indi8id%al prod%ct0 ?nd since pro!it can make %p b%t a
portion o! te amo%nt o! labo%r contained in an indi8id%al commodity, te mass o! pro!it in te
indi8id%al commodity m%st decrease, and tis takes place @itin certain limits, e8en i! te rate o!
s%rpl%s-8al%e so%ld rise0 &n any case, te mass o! pro!it on te total prod%ct does not !all belo@
te original mass o! pro!it so long as te capital employs te same n%mber o! labo%rers at te
same degree o! exploitation0 B5is may also occ%r i! !e@er labo%rers are employed at a iger rate
o! exploitation0C For te mass o! pro!it on te indi8id%al prod%ct decreases proportionately to te
increase in te n%mber o! prod%cts0 5e mass o! pro!it remains te same, b%t it is distrib%ted
di!!erently o8er te total amo%nt o! commodities0 -or does tis alter te distrib%tion bet@een te
labo%rers and capitalists o! te amo%nt o! 8al%e created by ne@ly added labo%r0 5e mass o!
pro!it cannot increase so long as te same amo%nt o! labo%r is employed, %nless te %npaid
s%rpl%s-labo%r increases, or, so%ld intensity o! exploitation remain te same, %nless te n%mber
o! labo%rers gro@s0 3r, bot tese ca%ses may combine to prod%ce tis res%lt0 &n all tese cases I
@ic, o@e8er, in accordance @it o%r ass%mption, pres%ppose an increase o! constant capital as
compared to 8ariable, and an increase in te magnit%de o! total capital I te indi8id%al
commodity contains a smaller mass o! pro!it and te rate o! pro!it !alls e8en i! calc%lated on te
indi8id%al commodity0 ? gi8en D%antity o! ne@ly added labo%r materialises in a larger D%antity o!
commodities0 5e price o! te indi8id%al commodity !alls0 ;onsidered abstractly te rate o! pro!it
may remain te same, e8en to%g te price o! te indi8id%al commodity may !all as a res%lt o!
greater prod%cti8eness o! labo%r and a sim%ltaneo%s increase in te n%mber o! tis ceaper
commodity i!, !or instance, te increase in prod%cti8eness o! labo%r acts %ni!ormly and
sim%ltaneo%sly on all te elements o! te commodity, so tat its total price !alls in te same
proportion in @ic te prod%cti8ity o! labo%r increases, @ile, on te oter and, te m%t%al
relation o! te di!!erent elements o! te price o! te commodity remains te same0 5e rate o!
pro!it co%ld e8en rise i! a rise in te rate o! s%rpl%s-8al%e @ere accompanied by a s%bstantial
red%ction in te 8al%e o! te elements o! constant, and partic%larly o! !ixed, capital0
A%t in reality, as @e a8e seen, te rate o! pro!it @ill !all in te long r%n0 &n no case does a !all in
te price o! any indi8id%al commodity by itsel! gi8e a cl%e to te rate o! pro!it0 E8eryting
depends on te magnit%de o! te total capital in8ested in its prod%ction0 For instance, i! te price
o! one yard o! !abric !alls !rom 3s0 to 1Ws0, i! @e kno@ tat be!ore tis price red%ction it
contained 1Ws0 constant capital, yarn, etc0, Ws0 @ages, and Ws0 pro!it, @ile a!ter te red%ction it
contains 1s0 constant capital, ab8+31s0 @ages, and Xs0 pro!it, @e cannot tell i! te rate o! pro!it
as remained te same or not0 5is depends on @eter, and by o@ m%c, te ad8anced total
capital as increased, and o@ many yards more it prod%ces in a gi8en time0
5e penomenon, springing !rom te nat%re o! te capitalist mode o! prod%ction, tat increasing
prod%cti8ity o! labo%r implies a drop in te price o! te indi8id%al commodity, or o! a certain
mass o! commodities, an increase in te n%mber o! commodities, a red%ction in te mass o! pro!it
on te indi8id%al commodity and in te rate o! pro!it on te aggregate o! commodities, and an
increase in te mass o! pro!it on te total D%antity o! commodities I tis penomenon appears on
te s%r!ace only in a red%ction o! te mass o! pro!it on te indi8id%al commodity, a !all in its
price, an increase in te mass o! pro!it on te a%gmented total n%mber o! commodities prod%ced
by te total social capital or an indi8id%al capitalist0 &t ten appears as i! te capitalist adds less
pro!it to te price o! te indi8id%al commodity o! is o@n !ree @ill, and makes %p !or it tro%g
16< ;apter J&&&
te greater n%mber o! commodities e prod%ces0 5is conception rests %pon te notion o! pro!it
%pon alienation, @ic, in its t%rn, is ded%ced !rom te conception o! mercant capital0
We a8e pre8io%sly seen in Aook & B2 and > ?bscnittC /Englis edition: ,arts &4 and 4&&0 I 0d01
tat te mass o! commodities gro@ing along @it te prod%cti8ity o! labo%r and te ceapening
o! te indi8id%al commodity as s%c Bas long as tese commodities do not enter te price o!
labo%r-po@er as determinantsC I tat tis does not a!!ect te proportion bet@een paid and %npaid
labo%r in te indi8id%al commodity, in spite o! te !alling price0
$ince all tings appear distorted, namely, re8ersed in competition, te indi8id%al capitalist may
imagine: 1C tat e is red%cing is pro!it on te indi8id%al commodity by c%tting its price, b%t still
making a greater pro!it by selling a larger D%antity o! commodities# <C tat e !ixes te price o!
te indi8id%al commodities and tat e determines te price o! te total prod%ct by m%ltiplication,
@ile te original process is really one o! di8ision Bsee Aook &, Kap0 J, $0 <81 /Englis edition:
;0 J&&0 I 0d1C, and m%ltiplication is only correct secondarily, since it is based on tat di8ision0
5e 8%lgar economist does practically no more tan translate te sing%lar concepts o! te
capitalists, @o are in te trall o! competition, into a seemingly more teoretical and generalised
lang%age, and attempt to s%bstantiate te H%stice o! tose conceptions0
5e !all in commodity-prices and te rise in te mass o! pro!it on te a%gmented mass o! tese
ceapened commodities is, in !act, b%t anoter expression !or te la@ o! te !alling rate o! pro!it
attended by a sim%ltaneo%sly increasing mass o! pro!it0
5e analysis o! o@ !ar a !alling rate o! pro!it may coincide @it rising prices no more belongs
ere tan tat o! te point pre8io%sly disc%ssed in Aook & B$0 <8=-81 /Englis edition: ;0 J&&0 I
0d.1C, concerning relati8e s%rpl%s-8al%e0 ? capitalist @orking @it impro8ed b%t not as yet
generally adopted metods o! prod%ction sells belo@ te market-price, b%t abo8e is indi8id%al
price o! prod%ction# is rate o! pro!it rises %ntil competition le8els it o%t0 7%ring tis eD%alisation
period te second reD%isite, expansion o! te in8ested capital, makes its appearance0 ?ccording to
te degree o! tis expansion te capitalist @ill be able to employ a part o! is !ormer labo%rers,
act%ally peraps all o! tem, or e8en more, %nder te ne@ conditions, and ence to prod%ce te
same, or a greater, mass o! pro!it0
Chapter 14. Counteracting Infuences
&! @e consider te enormo%s de8elopment o! te prod%cti8e !orces o! social labo%r in te last 3=
years alone as compared @it all preceding periods# i! @e consider, in partic%lar, te enormo%s
mass o! !ixed capital, aside !rom te act%al macinery, @ic goes into te process o! social
prod%ction as a @ole, ten te di!!ic%lty @ic as iterto tro%bled te economist, namely to
explain te !alling rate o! pro!it, gi8es place to its opposite, namely to explain @y tis !all is not
greater and more rapid0 5ere m%st be some co%nteracting in!l%ences at @ork, @ic cross and
ann%l te e!!ect o! te general la@, and @ic gi8e it merely te caracteristic o! a tendency, !or
@ic reason @e a8e re!erred to te !all o! te general rate o! pro!it as a tendency to !all0
5e !ollo@ing are te most general co%nterbalancing !orces:
I. Increasing Intensit# "f !ploitation
5e degree o! exploitation o! labo%r, te appropriation o! s%rpl%s-labo%r and s%rpl%s-8al%e, is
raised notably by lengtening te @orking-day and intensi!ying labo%r0 5ese t@o points a8e
been compreensi8ely treated in Aook & as incidental to te prod%ction o! absol%te and relati8e
s%rpl%s-8al%e0 5ere are many @ays o! intensi!ying labo%r @ic imply an increase o! constant,
as compared to 8ariable, capital, and ence a !all in te rate o! pro!it, s%c as compelling a
labo%rer to operate a larger n%mber o! macines0 &n s%c cases I and in most proced%res ser8ing
te prod%ction o! relati8e s%rpl%s-8al%es I te same ca%ses @ic increase te rate o! s%rpl%s-
8al%e, may also, !rom te standpoint o! gi8en D%antities o! in8ested total capital, in8ol8e a !all in
te mass o! s%rpl%s-8al%e0 A%t tere are oter aspects o! intensi!ication, s%c as te greater
8elocities o! macinery, @ic cons%me more ra@ material in te same time, b%t, so !ar as te
!ixed capital is concerned, @ear o%t te macinery so m%c !aster, and yet do not in any @ay
a!!ect te relation o! its 8al%e to te price o! te labo%r @ic sets it in motion0 A%t notably, it is
prolongation o! te @orking-day, tis in8ention o! modern ind%stry, @ic increases te mass o!
appropriated s%rpl%s-labo%r @ito%t essentially altering te proportion o! te employed labo%r-
po@er to te constant capital set in motion by it, and @ic rater tends to red%ce tis capital
relati8ely0 Moreo8er, it as already been demonstrated I and tis constit%tes te real secret o! te
tendency o! te rate o! pro!it to !all I tat te manip%lations to prod%ce relati8e s%rpl%s-8al%e
amo%nt, on te @ole, to trans!orming as m%c as possible o! a certain D%antity o! labo%r into
s%rpl%s-8al%e, on te one and, and employing as little labo%r as possible in proportion to te
in8ested capital, on te oter, so tat te same reasons @ic permit raising te intensity o!
exploitation r%le o%t exploiting te same D%antity o! labo%r as be!ore by te same capital0 5ese
are te co%nteracting tendencies, @ic, @ile e!!ecting a rise in te rate o! s%rpl%s-8al%e, also
tend to decrease te mass o! s%rpl%s-8al%e, and ence te rate o! pro!it prod%ced by a certain
capital0 Mention so%ld also be made ere o! te @idespread introd%ction o! !emale and cild
labo%r, in so !ar as te @ole !amily m%st no@ per!orm more s%rpl%s-labo%r !or capital tan
be!ore, e8en @en te total amo%nt o! teir @ages increases, @ic is by no means al@ays te
case0 I E8eryting tat promotes te prod%ction o! relati8e s%rpl%s-8al%e by mere impro8ement
in metods, as in agric%lt%re, @ito%t altering te magnit%de o! te in8ested capital, as te same
e!!ect0 5e constant capital, it is tr%e, does not, in s%c cases, increase in relation to te 8ariable,
inasm%c as @e regard te 8ariable capital as an index o! te amo%nt o! labo%r-po@er employed,
b%t te mass o! te prod%ct does increase in proportion to te labo%r-po@er employed0 5e same
occ%rs, i! te prod%cti8eness o! labo%r Bno matter, @eter its prod%ct goes into te labo%rer"s
cons%mption or into te elements o! constant capitalC is !reed !rom indrances in
comm%nications, !rom arbitrary or oter restrictions @ic a8e become obstacles in te co%rse
162 ;apter J&4
o! time# !rom !etters o! all kinds, @ito%t directly a!!ecting te ratio o! 8ariable to constant
capital0
&t migt be asked @eter te !actors tat ceck te !all o! te rate o! pro!it, b%t tat al@ays
asten its !all in te last analysis, @eter tese incl%de te temporary, b%t al@ays rec%rring,
ele8ations in s%rpl%s-8al%e abo8e te general le8el, @ic keep occ%rring no@ in tis and no@ in
tat line o! prod%ction redo%nding to te bene!it o! tose indi8id%al capitalists, @o make %se o!
in8entions, etc0, be!ore tese are introd%ced else@ere0 5is D%estion m%st be ans@ered in te
a!!irmati8e0
5e mass o! s%rpl%s-8al%e prod%ced by a capital o! a gi8en magnit%de is te prod%ct o! t@o
!actors I te rate o! s%rpl%s-8al%e m%ltiplied by te n%mber o! labo%rers employed at tis rate0 ?t
a gi8en rate o! s%rpl%s-8al%e it tere!ore depends on te n%mber o! labo%rers, and it depends on
te rate o! s%rpl%s-8al%e @en te n%mber o! labo%rers is gi8en0 :enerally, tere!ore, it depends
on te composite ratio o! te absol%te magnit%des o! te 8ariable capital and te rate o! s%rpl%s-
8al%e0 -o@ @e a8e seen tat, on te a8erage, te same !actors @ic raise te rate o! relati8e
s%rpl%s-8al%e lo@er te mass o! te employed labo%r-po@er0 &t is e8ident, o@e8er, tat tis @ill
occ%r to a greater or lesser extent, depending on te de!inite proportion in @ic tis con!licting
mo8ement obtains, and tat te tendency to@ards a red%ction in te rate o! pro!it is notably
@eakened by a rise in te rate o! absol%te s%rpl%s-8al%e, @ic originates @it te lengtening o!
te @orking-day0
We sa@ in te case o! te rate o! pro!it tat a drop in te rate @as generally accompanied by an
increase in te mass o! pro!it, d%e to te increasing mass o! total capital employed0 From te
standpoint o! te total 8ariable capital o! society, te s%rpl%s-8al%e it as prod%ced is eD%al to te
pro!it it as prod%ced0 Aot te absol%te mass and te rate o! s%rpl%s-8al%e a8e increased# te
one beca%se te D%antity o! labo%r-po@er employed by society as gro@n, and te oter, beca%se
te intensity o! exploitation o! tis labo%r-po@er as increased0 A%t in te case o! a capital o! a
gi8en magnit%de, e.g., 1==, te rate o! s%rpl%s-8al%e may increase, @ile te a8erage mass may
decrease# !or te rate is determined by te proportion, in @ic te 8ariable capital prod%ces
8al%e, @ile te mass is determined by te proportion o! 8ariable capital to te total capital0
5e rise in te rate o! s%rpl%s-8al%e is a !actor @ic determines te mass o! s%rpl%s-8al%e, and
ence also te rate o! pro!it, !or it takes place especially %nder conditions, in @ic, as @e a8e
pre8io%sly seen, te constant capital is eiter not increased at all, or not proportionately increased,
in relation to te 8ariable capital0 5is !actor does not abolis te general la@0 A%t it ca%ses tat
la@ to act rater as a tendency, i.e., as a la@ @ose absol%te action is cecked, retarded, and
@eakened, by co%nteracting circ%mstances0 A%t since te same in!l%ences @ic raise te rate o!
s%rpl%s-8al%e Be8en a lengtening o! te @orking-time is a res%lt o! large-scale ind%stryC tend to
decrease te labo%r-po@er employed by a certain capital, it !ollo@s tat tey also tend to red%ce
te rate o! pro!it and to retard tis red%ction0 &! one labo%rer is compelled to per!orm as m%c
labo%r as @o%ld rationally be per!ormed by at least t@o, and i! tis is done %nder circ%mstances in
@ic tis one labo%rer can replace tree, ten tis one labo%rer @ill per!orm as m%c s%rpl%s-
labo%r as @as !ormerly per!ormed by t@o, and te rate o! s%rpl%s-8al%e @ill a8e risen
accordingly0 A%t e @ill not per!orm as m%c as tree ad per!ormed, and te mass o! s%rpl%s-
8al%e @ill a8e decreased accordingly0 A%t tis red%ction in mass @ill be compensated, or
limited, by te rise in te rate o! s%rpl%s-8al%e0 &! te entire pop%lation is employed at a iger
rate o! s%rpl%s-8al%e, te mass o! s%rpl%s-8al%e @ill increase, in spite o! te pop%lation remaining
te same0 &t @ill increase still more i! te pop%lation increases0 ?nd alto%g tis is tied %p @it a
relati8e red%ction o! te n%mber o! employed labo%rers in proportion to te magnit%de o! te total
capital, tis red%ction is moderated, or cecked, by te rise in te rate o! s%rpl%s-8al%e0
Ae!ore lea8ing tis point, it is to be empasised once more tat @it a capital o! a gi8en
magnit%de te rate o! s%rpl%s-8al%e may rise, @ile its mass is decreasing, and 8ice 8ersa0 5e
mass o! s%rpl%s-8al%e is eD%al to te rate m%ltiplied by te n%mber o! labo%rers# o@e8er, te rate
16+ ;apter J&4
is ne8er calc%lated on te total, b%t only on te 8ariable capital, act%ally only !or e8ery @orking-
day0 3n te oter and, @it a gi8en magnit%de o! capital-8al%e, te rate of profit can neiter rise
nor !all @ito%t te mass of surplus1value also rising or !alling0
II. +epression "f Wages &elo$ The Value "f
Labour.Po$er
5is is mentioned ere only empirically, since, like many oter tings @ic migt be
en%merated, it as noting to do @it te general analysis o! capital, b%t belongs in an analysis o!
competition, @ic is not presented in tis @ork0 6o@e8er, it is one o! te most important !actors
cecking te tendency o! te rate o! pro!it to !all0
III. Cheapening "f lements "f Constant
Capital
E8eryting said in ,art & o! tis book abo%t !actors @ic raise te rate o! pro!it @ile te rate o!
s%rpl%s-8al%e remains te same, or regardless o! te rate o! s%rpl%s-8al%e, belongs ere0 6ence
also, @it respect to te total capital, tat te 8al%e o! te constant capital does not increase in te
same proportion as its material 8ol%me0 For instance, te D%antity o! cotton @orked %p by a single
E%ropean spinner in a modern !actory as gro@n tremendo%sly compared to te D%antity !ormerly
@orked %p by a E%ropean spinner @it a spinning-@eel0 .et te 8al%e o! te @orked-%p cotton
as not gro@n in te same proportion as its mass0 5e same applies to macinery and oter !ixed
capital0 &n sort, te same de8elopment @ic increases te mass o! te constant capital in
relation to te 8ariable red%ces te 8al%e o! its elements as a res%lt o! te increased prod%cti8ity
o! labo%r, and tere!ore pre8ents te 8al%e o! constant capital, alto%g it contin%ally increases,
!rom increasing at te same rate as its material 8ol%me, i.e., te material 8ol%me o! te means o!
prod%ction set in motion by te same amo%nt o! labo%r-po@er0 &n isolated cases te mass o! te
elements o! constant capital may e8en increase, @ile its 8al%e remains te same, or !alls0
5e !oregoing is bo%nd %p @it te depreciation o! existing capital Btat is, o! its material
elementsC, @ic occ%rs @it te de8elopment o! ind%stry0 5is is anoter contin%ally operating
!actor @ic cecks te !all o! te rate o! pro!it, alto%g it may %nder certain circ%mstances
encroac on te mass o! pro!it by red%cing te mass o! te capital yielding a pro!it0 5is again
so@s tat te same in!l%ences @ic tend to make te rate o! pro!it !all, also moderate te
e!!ects o! tis tendency0
IV. )elative "ver.Population
&ts propagation is inseparable !rom, and astened by, te de8elopment o! te prod%cti8ity o!
labo%r as expressed by a !all in te rate o! pro!it0 5e relati8e o8er-pop%lation becomes so m%c
more apparent in a co%ntry, te more te capitalist mode o! prod%ction is de8eloped in it0 5is,
again, is te reason @y, on te one and, te more or less imper!ect s%bordination o! labo%r to
capital contin%es in many brances o! prod%ction, and contin%es longer tan seems at !irst glance
compatible @it te general stage o! de8elopment0 5is is d%e to te ceapness and ab%ndance o!
disposable or %nemployed @age-labo%rers, and to te greater resistance, @ic some brances o!
prod%ction, by teir 8ery nat%re, render to te trans!ormation o! man%al @ork into macine
prod%ction0 3n te oter and, ne@ lines o! prod%ction are opened %p, especially !or te
prod%ction o! l%x%ries, and it is tese tat take as teir basis tis relati8e o8er-pop%lation, o!ten
set !ree in oter lines o! prod%ction tro%g te increase o! teir constant capital0 5ese ne@ lines
start o%t predominantly @it li8ing labo%r, and by degrees pass tro%g te same e8ol%tion as te
oter lines o! prod%ction0 &n eiter case te 8ariable capital makes %p a considerable portion o!
te total capital and @ages are belo@ te a8erage, so tat bot te rate and mass o! s%rpl%s-8al%e
166 ;apter J&4
in tese lines o! prod%ction are %n%s%ally ig0 $ince te general rate o! pro!it is !ormed by
le8elling te rates o! pro!it in te indi8id%al brances o! prod%ction, o@e8er, te same !actor
@ic brings abo%t te tendency in te rate o! pro!it to !all, again prod%ces a co%nterbalance to
tis tendency and more or less paralyses its e!!ects0
V. (oreign Trade
$ince !oreign trade partly ceapens te elements o! constant capital, and partly te necessities o!
li!e !or @ic te 8ariable capital is excanged, it tends to raise te rate o! pro!it by increasing te
rate o! s%rpl%s-8al%e and lo@ering te 8al%e o! constant capital0 &t generally acts in tis direction
by permitting an expansion o! te scale o! prod%ction0 &t tereby astens te process o!
acc%m%lation, on te one and, b%t ca%ses te 8ariable capital to srink in relation to te constant
capital, on te oter, and t%s astens a !all in te rate o! pro!it0 &n te same @ay, te expansion o!
!oreign trade, alto%g te basis o! te capitalist mode o! prod%ction in its in!ancy, as become its
o@n prod%ct, o@e8er, @it te !%rter progress o! te capitalist mode o! prod%ction, tro%g te
innate necessity o! tis mode o! prod%ction, its need !or an e8er-expanding market0 6ere @e see
once more te d%al nat%re o! tis e!!ect0 B)icardo as entirely o8erlooked tis side o! !oreign
trade0 /70 )icardo, :n the &rinciples of &olitical 0conomy, and 4aation, 4hird edition, ,ondon,
;<F=, Ch. LDD. J 0d.M*
?noter D%estion I really beyond te scope o! o%r analysis beca%se o! its special nat%re I is tis:
&s te general rate o! pro!it raised by te iger rate o! pro!it prod%ced by capital in8ested in
!oreign, and partic%larly colonial, tradeQ
;apitals in8ested in !oreign trade can yield a iger rate o! pro!it, beca%se, in te !irst place, tere
is competition @it commodities prod%ced in oter co%ntries @it in!erior prod%ction !acilities,
so tat te more ad8anced co%ntry sells its goods abo8e teir 8al%e e8en to%g ceaper tan te
competing co%ntries0 &n so !ar as te labo%r o! te more ad8anced co%ntry is ere realised as
labo%r o! a iger speci!ic @eigt, te rate o! pro!it rises, beca%se labo%r @ic as not been paid
as being o! a iger D%ality is sold as s%c0 5e same may obtain in relation to te co%ntry, to
@ic commodities are exported and to tat !rom @ic commodities are imported# namely, te
latter may o!!er more materialised labo%r in -ind tan it recei8es, and yet tereby recei8e
commodities ceaper tan it co%ld prod%ce tem0 P%st as a man%!act%rer @o employs a ne@
in8ention be!ore it becomes generally %sed, %ndersells is competitors and yet sells is
commodity abo8e its indi8id%al 8al%e, tat is, realises te speci!ically iger prod%cti8eness o!
te labo%r e employs as s%rpl%s-labo%r0 6e t%s sec%res a s%rpl%s-pro!it0 ?s concerns capitals
in8ested in colonies, etc0, on te oter and, tey may yield iger rates o! pro!it !or te simple
reason tat te rate o! pro!it is iger tere d%e to back@ard de8elopment, and like@ise te
exploitation o! labo%r, beca%se o! te %se o! sla8es, coolies, etc0 Wy so%ld not tese iger
rates o! pro!it, realised by capitals in8ested in certain lines and sent ome by tem, enter into te
eD%alisation o! te general rate o! pro!it and t%s tend, pro tanto, to raise it, %nless it is te
monopolies tat stand in te @ay0
1
5ere is so m%c less reason !or it, since tese speres o!
in8estment o! capital are s%bHect to te la@s o! !ree competition0 Wat )icardo !ancies is mainly
tis: @it te iger prices realised abroad commodities are bo%gt tere in ret%rn and sent ome0
5ese commodities are t%s sold on te ome market, @ic !act can at best be b%t a temporary
extra disad8antage o! tese !a8o%red speres o! prod%ction o8er oters0 5is ill%sion !alls a@ay as
soon as it is di8ested o! its money-!orm0 5e !a8o%red co%ntry reco8ers more labo%r in excange
!or less labo%r, alto%g tis di!!erence, tis excess is pocketed, as in any excange bet@een
labo%r and capital, by a certain class0 $ince te rate o! pro!it is iger, tere!ore, beca%se it is
generally iger in a colonial co%ntry, it may, pro8ided nat%ral conditions are !a8o%rable, go and
in and @it lo@ commodity-prices0 ? le8elling takes place b%t not a le8elling to te old le8el, as
)icardo !eels0
16> ;apter J&4
5is same !oreign trade de8elops te capitalist mode o! prod%ction in te ome co%ntry, @ic
implies te decrease o! 8ariable capital in relation to constant, and, on te oter and, ca%ses
o8er-prod%ction in respect to !oreign markets, so tat in te long r%n it again as an opposite
e!!ect0
We a8e t%s seen in a general @ay tat te same in!l%ences @ic prod%ce a tendency in te
general rate o! pro!it to !all, also call !ort co%nter-e!!ects, @ic amper, retard, and partly
paralyse tis !all0 5e latter do not do a@ay @it te la@, b%t impair its e!!ect0 3ter@ise, it @o%ld
not be te !all o! te general rate o! pro!it, b%t rater its relati8e slo@ness, tat @o%ld be
incompreensible0 5%s, te la@ acts only as a tendency0 ?nd it is only %nder certain
circ%mstances and only a!ter long periods tat its e!!ects become strikingly prono%nced0
Ae!ore @e go on, in order to a8oid mis%nderstandings, @e so%ld recall t@o, repeatedly treated,
points0
'irst: 5e same process @ic brings abo%t a ceapening o! commodities in te co%rse o! te
de8elopment o! te capitalist mode o! prod%ction, ca%ses a cange in te organic composition o!
te social capital in8ested in te prod%ction o! commodities, and conseD%ently lo@ers te rate o!
pro!it0 We m%st be care!%l, tere!ore, not to identi!y te red%ction in te relati8e cost o! an
indi8id%al commodity, incl%ding tat portion o! it @ic represents @ear and tear o! macinery,
@it te rise in te 8al%e o! te constant in relation to 8ariable capital, alto%g, con8ersely, e8ery
red%ction in te relati8e cost o! te constant capital ass%ming te 8ol%me o! its material elements
remains te same, or increases, tends to raise te rate o! pro!it, i.e., to red%ce pro tanto te 8al%e
o! te constant capital in relation to te srinking proportions o! te employed 8ariable capital0
Second: 5e !act tat te ne@ly added li8ing labo%r contained in te indi8id%al commodities,
@ic taken togeter make %p te prod%ct o! capital, decreases in relation to te materials tey
contain and te means o! labo%r cons%med by tem# te !act, tere!ore, tat an e8er-decreasing
D%antity o! additional li8ing labo%r is materialised in tem, beca%se teir prod%ction reD%ires less
labo%r @it te de8elopment o! te social prod%cti8eness I tis !act does not a!!ect te ratio, in
@ic te li8ing labo%r contained in te commodities breaks %p into paid and %npaid labo%r0
M%ite te contrary0 ?lto%g te total D%antity o! additional li8ing labo%r contained in te
commodities decreases, te %npaid portion increases in relation to te paid portion, eiter by an
absol%te or a relati8e srinking o! te paid portion# !or te same mode o! prod%ction @ic
red%ces te total D%antity o! additional li8ing labo%r in a commodity is accompanied by a rise in
te absol%te and relati8e s%rpl%s-8al%e0 5e tendency o! te rate o! pro!it to !all is bo%nd %p @it
a tendency o! te rate o! s%rpl%s-8al%e to rise, ence @it a tendency !or te rate o! labo%r
exploitation to rise0 -oting is more abs%rd, !or tis reason, tan to explain te !all in te rate o!
pro!it by a rise in te rate o! @ages, alto%g tis may be te case by @ay o! an exception0
$tatistics is not able to make act%al analyses o! te rates o! @ages in di!!erent epocs and
co%ntries, %ntil te conditions @ic sape te rate o! pro!it are toro%gly %nderstood0 5e rate
o! pro!it does not !all beca%se labo%r becomes less prod%cti8e, b%t beca%se it becomes more
prod%cti8e0 Aot te rise in te rate o! s%rpl%s-8al%e and te !all in te rate o! pro!it are b%t
speci!ic !orms tro%g @ic gro@ing prod%cti8ity o! labo%r is expressed %nder capitalism0
VI. The Increase "f Stoc4 Capital
5e !oregoing !i8e points may still be s%pplemented by te !ollo@ing, @ic, o@e8er, cannot be
more !%lly treated !or te present0 Wit te progress o! capitalist prod%ction, @ic goes and in
and @it accelerated acc%m%lation, a portion o! capital is calc%lated and applied only as interest-
bearing capital0 -ot in te sense in @ic e8ery capitalist @o lends o%t capital is satis!ied @it
interest, @ile te ind%strial capitalist pockets te in8estor"s pro!it0 5is as no bearing on te
le8el o! te general rate o! pro!it, beca%se !or te latter pro!it R interest U pro!it o! all kinds U
gro%nd rent, te di8ision into tese partic%lar categories being immaterial to it0 A%t in te sense
168 ;apter J&4
tat tese capitals, alto%g in8ested in large prod%cti8e enterprises, yield only large or small
amo%nts o! interest, so-called di8idends, a!ter all costs a8e been ded%cted0 &n rail@ays, !or
instance0 5ese do not tere!ore go into le8elling te general rate o! pro!it, beca%se tey yield a
lo@er tan a8erage rate o! pro!it0 &! tey did enter into it, te general rate o! pro!it @o%ld !all
m%c lo@er0 5eoretically, tey may be incl%ded in te calc%lation, and te res%lt @o%ld ten be a
lo@er rate o! pro!it tan te seemingly existing rate, @ic is decisi8e !or te capitalists# it @o%ld
be lo@er, beca%se te constant capital partic%larly in tese enterprises is largest in its relation to
te 8ariable capital0
Chapter 15. Exposition of the Internal
Contradictions of the Law
I. General
We a8e seen in te !irst part o! tis book tat te rate o! pro!it expresses te rate o! s%rpl%s-8al%e
al@ays lo@er tan it act%ally is0 We a8e H%st seen tat e8en a rising rate o! s%rpl%s-8al%e as a
tendency to express itsel! in a !alling rate o! pro!it0 5e rate o! pro!it @o%ld eD%al te rate o!
s%rpl%s-8al%e only i! c R =, i.e. , i! te total capital @ere paid o%t in @ages0 ? !alling rate o! pro!it
does not express a !alling rate o! s%rpl%s-8al%e, %nless te proportion o! te 8al%e o! te constant
capital to te D%antity o! labo%r-po@er @ic sets it in motion remains %ncanged or te amo%nt
o! labo%r-po@er increases in relation to te 8al%e o! te constant capital0
3n te plea o! analysing te rate o! pro!it, )icardo act%ally analyses te rate o! s%rpl%s-8al%e
alone, and tis only on te ass%mption tat te @orking-day is intensi8ely and extensi8ely a
constant magnit%de0
? !all in te rate o! pro!it and accelerated acc%m%lation are di!!erent expressions o! te same
process only in so !ar as bot re!lect te de8elopment o! prod%cti8eness0 ?cc%m%lation, in t%rn,
astens te !all o! te rate o! pro!it, inasm%c as it implies concentration o! labo%r on a large
scale, and t%s a iger composition o! capital0 3n te oter and, a !all in te rate o! pro!it again
astens te concentration o! capital and its centralisation tro%g expropriation o! minor
capitalists, te !e@ direct prod%cers @o still a8e anyting le!t to be expropriated0 5is
accelerates acc%m%lation @it regard to mass, alto%g te rate o! acc%m%lation !alls @it te
rate o! pro!it0
3n te oter and, te rate o! sel!-expansion o! te total capital, or te rate o! pro!it, being te
goad o! capitalist prod%ction BH%st as sel!-expansion o! capital is its only p%rposeC, its !all cecks
te !ormation o! ne@ independent capitals and t%s appears as a treat to te de8elopment o! te
capitalist prod%ction process0 &t breeds o8er-prod%ction, spec%lation, crises, and s%rpl%s-capital
alongside s%rpl%s-pop%lation0 5ose economists, tere!ore, @o, like )icardo, regard te
capitalist mode o! prod%ction as absol%te, !eel at tis point tat it creates a barrier itsel!, and !or
tis reason attrib%te te barrier to -at%re Bin te teory o! rentC, not to prod%ction0 A%t te main
ting abo%t teir orror o! te !alling rate o! pro!it is te !eeling tat capitalist prod%ction meets
in te de8elopment o! its prod%cti8e !orces a barrier @ic as noting to do @it te prod%ction
o! @ealt as s%c# and tis pec%liar barrier testi!ies to te limitations and to te merely istorical,
transitory caracter o! te capitalist mode o! prod%ction# testi!ies tat !or te prod%ction o!
@ealt, it is not an absol%te mode, moreo8er, tat at a certain stage it rater con!licts @it its
!%rter de8elopment0
5r%e, )icardo and is scool considered only ind%strial pro!it, @ic incl%des interest0 A%t te
rate o! gro%nd-rent like@ise as a tendency to !all, alto%g its absol%te mass increases, and may
also increase proportionately more tan ind%strial pro!it0 BE0 West, /0ssay on the +pplication of
Capital to ,and,'ondon, 181+. J 0d1 @o de8eloped te la@ o! gro%nd-rent before )icardo0C &!
@e consider te total social capital ;, and %se p1 !or te ind%strial pro!it tat remains a!ter
ded%cting interest and gro%nd-rent, i !or interest, and r !or gro%nd-rent, ten sN; R pN; R p1 U i U
rN; R p1N; U iN; U rN;0 We a8e seen tat @ile s, te total amo%nt o! s%rpl%s-8al%e, is contin%ally
increasing in te co%rse o! capitalist de8elopment, sN; is H%st as steadily declining, beca%se ;
gro@s still more rapidly tan s0 5ere!ore it is by no means a contradiction !or p1, i, and r to be
1>= ;apter J4
steadily increasing, eac indi8id%ally, @ile sN; R pN;, as @ell as p1N;, iN;, and rN;, so%ld eac
by itsel! be steadily srinking, or tat p1 so%ld increase in relation to i, or r in relation to p1 or to
p1 and i0 Wit a rising total s%rpl%s-8al%e or pro!it s R p, and a sim%ltaneo%sly !alling rate o! pro!it
sN; R pN;, te proportions o! te parts p1, i, and r, @ic make %p s R p, may cange at @ill @itin
te limits set by te total amo%nt o! s @ito%t tereby a!!ecting te magnit%de o! s or sN;0
5e m%t%al 8ariation o! p1, i, and r is merely a 8arying distrib%tion o! s among di!!erent classes0
;onseD%ently, p1N;, iN;, or rN;, te rate o! indi8id%al ind%strial pro!it, te rate o! interest, and te
ratio o! gro%nd-rent to te total capital, may rise in relation to one anoter, @ile sN;, te general
rate o! pro!it, !alls0 5e only condition is tat te s%m o! all tree R sN;0 &! te rate o! pro!it !alls
!rom +=T to <+T, beca%se te composition o! a certain capital @it, say, a rate o! s%rpl%s-8al%e R
1==T as canged !rom +=c U +=8 to >+c U <+8, ten a capital o! 1,=== @ill yield a pro!it o! +== in
te !irst case, and in te second a ;apital o! 2,=== @ill yield a pro!it o! 1,===0 We see tat s or p
a8e do%bled, @ile p" as !allen by one-al!0 ?nd i! tat +=T @as !ormerly di8ided into <=
pro!it, 1= interest, and <= rent, ten p1N; R <=T, iN; R 1=T, and rN; R <=T0 &! te proportions ad
remained te same a!ter te cange !rom +=T to <+T, ten p1N; R 1=T, iN; R +T, and rN; R
1=T0 &!, o@e8er, p1N; so%ld !all to 8T and iN; to 2T, ten rN; @o%ld rise to 13T0 5e relati8e
magnit%de o! r @o%ld a8e risen as against p1 and i, @ile p @o%ld a8e remained te same0
(nder bot ass%mptions, te s%m o! p1, i, and r @o%ld a8e increased, beca%se prod%ced by a
capital !o%r times as large0 F%rtermore, )icardo"s ass%mption tat originally ind%strial pro!it
Bpl%s interestC contains te entire s%rpl%s-8al%e is istorically and logically !alse0 &t is rater te
progress o! capitalist prod%ction @ic 1C gi8es te @ole pro!it directly to te ind%strial and
commercial capitalists !or !%rter distrib%tion, and <C red%ces rent to te excess o8er te pro!it0
3n tis capitalist basis, again, te rent gro@s, being a portion o! pro!it Bi.e., o! te s%rpl%s-8al%e
8ie@ed as te prod%ct o! te total capitalC, b%t not tat speci!ic portion o! te prod%ct, @ic te
capitalist pockets0
:i8en te necessary means o! prod%ction, i.e. , a s%!!icient acc%m%lation o! capital, te creation
o! s%rpl%s-8al%e is only limited by te labo%ring pop%lation i! te rate o! s%rpl%s-8al%e, i.e. , te
intensity o! exploitation, is gi8en# and no oter limit b%t te intensity o! exploitation i! te
labo%ring pop%lation is gi8en0 ?nd te capitalist process o! prod%ction consists essentially o! te
prod%ction o! s%rpl%s-8al%e, represented in te s%rpl%s-prod%ct or tat aliD%ot portion o! te
prod%ced commodities materialising %npaid labo%r0 &t m%st ne8er be !orgotten tat te prod%ction
o! tis s%rpl%s-8al%e I and te recon8ersion o! a portion o! it into capital, or te acc%m%lation,
!orms an integrate part o! tis prod%ction o! s%rpl%s-8al%e I is te immediate p%rpose and
compelling moti8e o! capitalist prod%ction0 &t @ill ne8er do, tere!ore, to represent capitalist
prod%ction as someting @ic it is not, namely as prod%ction @ose immediate p%rpose is
enHoyment or te man%!act%re o! te means o! enHoyment !or te capitalist0 5is @o%ld be
o8erlooking its speci!ic caracter, @ic is re8ealed in all its inner essence0
5e creation o! tis s%rpl%s-8al%e makes %p te direct process o! prod%ction, @ic, as @e a8e
said, as no oter limits b%t tose mentioned abo8e0 ?s soon as all te s%rpl%s-labo%r it @as
possible to sD%eeEe o%t as been embodied in commodities, s%rpl%s-8al%e as been prod%ced0 A%t
tis prod%ction o! s%rpl%s-8al%e completes b%t te !irst act o! te capitalist process o! prod%ction
I te direct prod%ction process0 ;apital as absorbed so and so m%c %npaid labo%r0 Wit te
de8elopment o! te process, @ic expresses itsel! in a drop in te rate o! pro!it, te mass o!
s%rpl%s-8al%e t%s prod%ced s@ells to immense dimensions0 -o@ comes te second act o! te
process0 5e entire mass o! commodities, i.e. , te total prod%ct, incl%ding te portion @ic
replaces te constant and 8ariable capital, and tat representing s%rpl%s-8al%e, m%st be sold0 &!
tis is not done, or done only in part, or only at prices belo@ te prices o! prod%ction, te labo%rer
as been indeed exploited, b%t is exploitation is not realised as s%c !or te capitalist, and tis
can be bo%nd %p @it a total or partial !ail%re to realise te s%rpl%s-8al%e pressed o%t o! im,
indeed e8en @it te partial or total loss o! te capital0 5e conditions o! direct exploitation, and
1>1 ;apter J4
tose o! realising it, are not identical0 5ey di8erge not only in place and time, b%t also logically0
5e !irst are only limited by te prod%cti8e po@er o! society, te latter by te proportional
relation o! te 8ario%s brances o! prod%ction and te cons%mer po@er o! society0 A%t tis last-
named is not determined eiter by te absol%te prod%cti8e po@er, or by te absol%te cons%mer
po@er, b%t by te cons%mer po@er based on antagonistic conditions o! distrib%tion, @ic red%ce
te cons%mption o! te b%lk o! society to a minim%m 8arying @itin more or less narro@ limits0 &t
is !%rtermore restricted by te tendency to acc%m%late, te dri8e to expand capital and prod%ce
s%rpl%s-8al%e on an extended scale0 5is is la@ !or capitalist prod%ction, imposed by incessant
re8ol%tions in te metods o! prod%ction temsel8es, by te depreciation o! existing capital
al@ays bo%nd %p @it tem, by te general competiti8e str%ggle and te need to impro8e
prod%ction and expand its scale merely as a means o! sel!-preser8ation and %nder penalty o! r%in0
5e market m%st, tere!ore, be contin%ally extended, so tat its interrelations and te conditions
reg%lating tem ass%me more and more te !orm o! a nat%ral la@ @orking independently o! te
prod%cer, and become e8er more %ncontrollable0 5is internal contradiction seeks to resol8e itsel!
tro%g expansion o! te o%tlying !ield o! prod%ction0 A%t te more prod%cti8eness de8elops, te
more it !inds itsel! at 8ariance @it te narro@ basis on @ic te conditions o! cons%mption rest0
&t is no contradiction at all on tis sel!-contradictory basis tat tere so%ld be an excess o! capital
sim%ltaneo%sly @it a gro@ing s%rpl%s o! pop%lation0 For @ile a combination o! tese t@o
@o%ld, indeed, increase te mass o! prod%ced s%rpl%s-8al%e, it @o%ld at te same time intensi!y
te contradiction bet@een te conditions %nder @ic tis s%rpl%s-8al%e is prod%ced and tose
%nder @ic it is realised0
&! a certain rate o! pro!it is gi8en, te mass o! pro!it @ill al@ays depend on te magnit%de o! te
ad8anced capital0 5e acc%m%lation, o@e8er, is ten determined by tat portion o! tis mass
@ic is recon8erted into capital0 ?s !or tis portion, being eD%al to te pro!it min%s te re8en%e
cons%med by te capitalists, it @ill depend not merely on te 8al%e o! tis mass, b%t also on te
ceapness o! te commodities @ic te capitalist can b%y @it it, commodities @ic pass partly
into is cons%mption, is re8en%e, and partly into is constant capital0 BWages are ere ass%med
to be gi8en0C
5e mass o! capital set in motion by te labo%rer, @ose 8al%e e preser8es by is labo%r and
reprod%ces in is prod%ct, is D%ite di!!erent !rom te 8al%e @ic e adds to it0 &! te mass o! te
capital R 1,=== and te added labo%r R 1==, te reprod%ced capital R 1,1==0 &! te mass R 1== and
te added labo%r R <=, te reprod%ced capital R 1<=0 &n te !irst case te rate o! pro!it R 1=T, in
te second R <=T0 ?nd yet more can be acc%m%lated o%t o! 1== tan o%t o! <=0 ?nd t%s te ri8er
o! capital rolls on Baside !rom its depreciation tro%g increase o! te prod%cti8enessC, or its
acc%m%lation does, not in proportion to te rate o! pro!it, b%t in proportion to te impet%s it
already possesses0 $o !ar as it is based on a ig rate o! s%rpl%s-8al%e, a ig rate o! pro!it is
possible @en te @orking-day is 8ery long, alto%g labo%r is not igly prod%cti8e0 &t is
possible, beca%se te @ants o! te labo%rers are 8ery small, ence a8erage @ages 8ery lo@,
alto%g te labo%r itsel! is %nprod%cti8e0 5e lo@ @ages @ill correspond to te labo%rers" lack o!
energy0 ;apital ten acc%m%lates slo@ly, in spite o! te ig rate o! pro!it0 ,op%lation is stagnant
and te @orking-time @ic te prod%ct costs, is great, @ile te @ages paid to te labo%rer etare
small0
5e rate o! pro!it does not sink beca%se te labo%rer is exploited any less, b%t beca%se generally
less labo%r is employed in proportion to te employed capital0
&!, as so@n, a !alling rate o! pro!it is bo%nd %p @it an increase in te mass o! pro!it, a larger
portion o! te ann%al prod%ct o! labo%r is appropriated by te capitalist %nder te category o!
capital Bas a replacement !or cons%med capitalC and a relati8ely smaller portion %nder te
category o! pro!it0 6ence te !antastic idea o! priest ;almers, /50 ;almers, :n &olitical
0conomy in Conneion with the Moral State and Moral &rospects of Society,$econd edition,
:lasgo@, 183<, p0 <<. J 0d1 tat te less o! te ann%al prod%ct is expended by capitalists as
1>< ;apter J4
capital, te greater te pro!its tey pocket0 &n @ic case te state c%rc comes to teir
assistance, to care !or te cons%mption o! te greater part o! te s%rpl%s-prod%ct, rater tan
a8ing it %sed as capital0 5e preacer con!o%nds ca%se @it e!!ect0 F%rtermore, te mass o!
pro!it increases in spite o! its slo@er rate @it te gro@t o! te in8ested capital0 6o@e8er, tis
reD%ires a sim%ltaneo%s concentration o! capital, since te conditions o! prod%ction ten demand
employment o! capital on a larger scale0 &t also reD%ires its centralisation, i.e. , te s@allo@ing %p
o! te small capitalists by te big and teir depri8ation o! capital0 &t is again b%t an instance o!
separating I raised to te second po@er I te conditions o! prod%ction !rom te prod%cers to
@ose n%mber tese small capitalists still belong, since teir o@n labo%r contin%es to play a role
in teir case0 5e labo%r o! a capitalist stands altogeter in in8erse proportion to te siEe o! is
capital, i.e. , to te degree in @ic e is a capitalist0 &t is tis same se8erance o! te conditions o!
prod%ction, on te one and, !rom te prod%cers, on te oter, tat !orms te conception o!
capital0 &t begins @it primiti8e acc%m%lation BA%c &, Kap0 JJ&4 /Englis edition: ,art LDDD. J
0d.1C, appears as a permanent process in te acc%m%lation and concentration o! capital, and
expresses itsel! !inally as centralisation o! existing capitals in a !e@ ands and a depri8ation o!
many o! teir capital Bto @ic expropriation is no@ cangedC0 5is process @o%ld soon bring
abo%t te collapse o! capitalist prod%ction i! it @ere not !or co%nteracting tendencies, @ic a8e
a contin%o%s decentralising e!!ect alongside te centripetal one0
II. Con5ict &et$een !pansion "f Production
And Production "f Surplus.Value
5e de8elopment o! te social prod%cti8eness o! labo%r is mani!ested in t@o @ays: !irst, in te
magnit%de o! te already prod%ced prod%cti8e !orces, te 8al%e and mass o! te conditions o!
prod%ction %nder @ic ne@ prod%ction is carried on, and in te absol%te magnit%de o! te
already acc%m%lated prod%cti8e capital# secondly, in te relati8e smallness o! te portion o! total
capital laid o%t in @ages, i.e. , in te relati8ely small D%antity o! li8ing labo%r reD%ired !or te
reprod%ction and sel!-expansion o! a gi8en capital, !or mass prod%ction0 5is also implies
concentration o! capital0
&n relation to employed labo%r-po@er te de8elopment o! te prod%cti8ity again re8eals itsel! in
t@o @ays: First, in te increase o! s%rpl%s-labo%r, i.e. , te red%ction o! te necessary labo%r-time
reD%ired !or te reprod%ction o! labo%r-po@er0 $econdly, in te decrease o! te D%antity o! labo%r-
po@er Bte n%mber o! labo%rersC generally employed to set in motion a gi8en capital0
5e t@o mo8ements not only go and in and, b%t m%t%ally in!l%ence one anoter and are
penomena in @ic te same la@ expresses itsel!0 .et tey a!!ect te rate o! pro!it in opposite
@ays0 5e total mass o! pro!it is eD%al to te total mass o! s%rpl%s-8al%e, te rate o! pro!it R sN; R
s%rpl%s-8al%eNad8anced total capital0 5e s%rpl%s-8al%e, o@e8er, as a total, is determined !irst by
its rate, and second by te mass o! labo%r sim%ltaneo%sly employed at tis rate, or, @at amo%nts
to te same, by te magnit%de o! te 8ariable capital0 3ne o! tese !actors, te rate o! s%rpl%s-
8al%e, rises, and te oter, te n%mber o! labo%rers, !alls Brelati8ely or absol%telyC0 &nasm%c as
te de8elopment o! te prod%cti8e !orces red%ces te paid portion o! employed labo%r, it raises
te s%rpl%s-8al%e, beca%se it raises its rate# b%t inasm%c as it red%ces te total mass o! labo%r
employed by a gi8en capital, it red%ces te !actor o! te n%mber by @ic te rate o! s%rpl%s-
8al%e is m%ltiplied to obtain its mass0 5@o labo%rers, eac @orking 1< o%rs daily, cannot
prod%ce te same mass o! s%rpl%s-8al%e as <2 @o @ork only < o%rs, e8en i! tey co%ld li8e on
air and ence did not a8e to @ork !or temsel8es at all0 &n tis respect, ten, te compensation o!
te red%ced n%mber o! labo%rers by intensi!ying te degree o! exploitation as certain
ins%rmo%ntable limits0 &t may, !or tis reason, @ell ceck te !all in te rate o! pro!it, b%t cannot
pre8ent it altogeter0
1>3 ;apter J4
Wit te de8elopment o! te capitalist mode o! prod%ction, tere!ore, te rate o! pro!it !alls, @ile
its mass increases @it te gro@ing mass o! te capital employed0 :i8en te rate, te absol%te
increase in te mass o! capital depends on its existing magnit%de0 A%t, on te oter and, i! tis
magnit%de is gi8en, te proportion o! its gro@t, i.e. , te rate o! its increment, depends on te
rate o! pro!it0 5e increase in te prod%cti8eness B@ic, moreo8er, @e repeat, al@ays goes and
in and @it a depreciation o! te a8ailable capitalC can directly only increase te 8al%e o! te
existing capital i! by raising te rate o! pro!it it increases tat portion o! te 8al%e o! te ann%al
prod%ct @ic is recon8erted into capital0 ?s concerns te prod%cti8ity o! labo%r, tis can only
occ%r Bsince tis prod%cti8ity as noting direct to do @it te value o! te existing capitalC by
raising te relati8e s%rpl%s-8al%e, or red%cing te 8al%e o! te constant capital, so tat te
commodities @ic enter eiter te reprod%ction o! labo%r-po@er, or te elements o! constant
capital, are ceapened0 Aot imply a depreciation o! te existing capital, and bot go and in
and @it a red%ction o! te 8ariable capital in relation to te constant0 Aot ca%se a !all in te
rate o! pro!it, and bot slo@ it do@n0 F%rtermore, inasm%c as an increased rate o! pro!it ca%ses
a greater demand !or labo%r, it tends to increase te @orking pop%lation and t%s te material,
@ose exploitation makes real capital o%t o! capital0
&ndirectly, o@e8er, te de8elopment o! te prod%cti8ity o! labo%r contrib%tes to te increase o!
te 8al%e o! te existing capital by increasing te mass and 8ariety o! %se-8al%es in @ic te
same excange-8al%e is represented and @ic !orm te material s%bstance, i.e. , te material
elements o! capital, te material obHects making %p te constant capital directly, and te 8ariable
capital at least indirectly0 More prod%cts @ic may be con8erted into capital, @ate8er teir
excange-8al%e, are created @it te same capital and te same labo%r0 5ese prod%cts may ser8e
to absorb additional labo%r, ence also additional s%rpl%s-labo%r, and tere!ore create additional
capital0 5e amo%nt o! labo%r @ic a capital can command does not depend on its 8al%e, b%t on
te mass o! ra@ and a%xiliary materials, macinery and elements o! !ixed capital and necessities
o! li!e, all o! @ic it comprises, @ate8er teir 8al%e may be0 ?s te mass o! te labo%r
employed, and t%s o! s%rpl%s-labo%r increases, tere is also a gro@t in te 8al%e o! te
reprod%ced capital and in te s%rpl%s-8al%e ne@ly added to it0
5ese t@o elements embraced by te process o! acc%m%lation, o@e8er, are not to be regarded
merely as existing side by side in repose, as )icardo does0 5ey contain a contradiction @ic
mani!ests itsel! in contradictory tendencies and penomena0 5ese antagonistic agencies
co%nteract eac oter sim%ltaneo%sly0
?longside te stim%lants o! an act%al increase o! te labo%ring pop%lation, @ic spring !rom te
increase o! te portion o! te total social prod%ct ser8ing as capital, tere are agencies @ic
create a merely relati8e o8er-pop%lation0
?longside te !all in te rate o! pro!it mass o! capitals gro@s, and and in and @it tis tere
occ%rs a depreciation o! existing capitals @ic cecks te !all and gi8es an accelerating motion
to te acc%m%lation o! capital-8al%es0
?longside te de8elopment o! prod%cti8ity tere de8elops a iger composition o! capital, i.e.,
te relati8e decrease o! te ratio o! 8ariable to constant capital0
5ese di!!erent in!l%ences may at one time operate predominantly side by side in space, and at
anoter s%cceed eac oter in time0 From time to time te con!lict o! antagonistic agencies !inds
8ent in crises0 5e crises are al@ays b%t momentary and !orcible sol%tions o! te existing
contradictions0 5ey are 8iolent er%ptions @ic !or a time restore te dist%rbed eD%ilibri%m0
5e contradiction, to p%t it in a 8ery general @ay, consists in tat te capitalist mode o!
prod%ction in8ol8es a tendency to@ards absol%te de8elopment o! te prod%cti8e !orces,
regardless o! te 8al%e and s%rpl%s-8al%e it contains, and regardless o! te social conditions %nder
@ic capitalist prod%ction takes place# @ile, on te oter and, its aim is to preser8e te 8al%e
o! te existing capital and promote its sel!-expansion to te igest limit Bi.e., to promote an e8er
1>2 ;apter J4
more rapid gro@t o! tis 8al%eC0 5e speci!ic !eat%re abo%t it is tat it %ses te existing 8al%e o!
capital as a means o! increasing tis 8al%e to te %tmost0 5e metods by @ic it accomplises
tis incl%de te !all o! te rate o! pro!it, depreciation o! existing capital, and de8elopment o! te
prod%cti8e !orces o! labo%r at te expense o! already created prod%cti8e !orces0
5e periodical depreciation o! existing capital I one o! te means immanent in capitalist
prod%ction to ceck te !all o! te rate o! pro!it and asten acc%m%lation o! capital-8al%e tro%g
!ormation o! ne@ capital I dist%rbs te gi8en conditions, @itin @ic te process o! circ%lation
and reprod%ction o! capital takes place, and is tere!ore accompanied by s%dden stoppages and
crises in te prod%ction process0
5e decrease o! 8ariable in relation to constant capital, @ic goes and in and @it te
de8elopment o! te prod%cti8e !orces, stim%lates te gro@t o! te labo%ring pop%lation, @ile
contin%ally creating an arti!icial o8er-pop%lation0 5e acc%m%lation o! capital in terms o! 8al%e is
slo@ed do@n by te !alling rate o! pro!it, to asten still more te acc%m%lation o! %se-8al%es,
@ile tis, in its t%rn, adds ne@ moment%m to acc%m%lation in terms o! 8al%e0
;apitalist prod%ction seeks contin%ally to o8ercome tese immanent barriers, b%t o8ercomes
tem only by means @ic again place tese barriers in its @ay and on a more !ormidable scale0
5e real barrier o! capitalist prod%ction is capital itself0 &t is tat capital and its sel!-expansion
appear as te starting and te closing point, te moti8e and te p%rpose o! prod%ction# tat
prod%ction is only prod%ction !or capital and not 8ice 8ersa, te means o! prod%ction are not mere
means !or a constant expansion o! te li8ing process o! te society o! prod%cers0 5e limits @itin
@ic te preser8ation and sel!-expansion o! te 8al%e o! capital resting on te expropriation and
pa%perisation o! te great mass o! prod%cers can alone mo8e I tese limits come contin%ally into
con!lict @it te metods o! prod%ction employed by capital !or its p%rposes, @ic dri8e
to@ards %nlimited extension o! prod%ction, to@ards prod%ction as an end in itsel!, to@ards
%nconditional de8elopment o! te social prod%cti8ity o! labo%r0 5e means I %nconditional
de8elopment o! te prod%cti8e !orces o! society I comes contin%ally into con!lict @it te limited
p%rpose, te sel!-expansion o! te existing capital0 5e capitalist mode o! prod%ction is, !or tis
reason, a istorical means o! de8eloping te material !orces o! prod%ction and creating an
appropriate @orld-market and is, at te same time, a contin%al con!lict bet@een tis its istorical
task and its o@n corresponding relations o! social prod%ction0
III. !cess Capital And !cess Population
? drop in te rate o! pro!it is attended by a rise in te minim%m capital reD%ired by an indi8id%al
capitalist !or te prod%cti8e employment o! labo%r# reD%ired bot !or its exploitation generally,
and !or making te cons%med labo%r-time s%!!ice as te labo%r-time necessary !or te prod%ction
o! te commodities, so tat it does not exceed te a8erage social labo%r-time reD%ired !or te
prod%ction o! te commodities0 ;oncentration increases sim%ltaneo%sly, beca%se beyond certain
limits a large capital @it a small rate o! pro!it acc%m%lates !aster tan a small capital @it a large
rate o! pro!it0 ?t a certain ig point tis increasing concentration in its t%rn ca%ses a ne@ !all in
te rate o! pro!it0 5e mass o! small dispersed capitals is tereby dri8en along te ad8ent%ro%s
road o! spec%lation, credit !ra%ds, stock s@indles, and crises0 5e so-called pletora o! capital
al@ays applies essentially to a pletora o! te capital !or @ic te !all in te rate o! pro!it is not
compensated tro%g te mass o! pro!it I tis is al@ays tr%e o! ne@ly de8eloping !res o!!soots
o! capital I or to a pletora @ic places capitals incapable o! action on teir o@n at te disposal
o! te managers o! large enterprises in te !orm o! credit0 5is pletora o! capital arises !rom te
same ca%ses as tose @ic call !ort relati8e o8er-pop%lation, and is, tere!ore, a penomenon
s%pplementing te latter, alto%g tey stand at opposite poles I %nemployed capital at one pole,
and %nemployed @orker pop%lation at te oter0
1>+ ;apter J4
38er-prod%ction o! capital, not o! indi8id%al commodities I alto%g o8er-prod%ction o! capital
al@ays incl%des o8er-prod%ction o! commodities I is tere!ore simply o8er-acc%m%lation o!
capital0 5o appreciate @at tis o8er-acc%m%lation is Bits closer analysis !ollo@s laterC, one need
only ass%me it to be absol%te0 Wen @o%ld o8er-prod%ction o! capital be absol%teQ
38erprod%ction @ic @o%ld a!!ect not H%st one or anoter, or a !e@ important speres o!
prod%ction, b%t @o%ld be absol%te in its !%ll scope, ence @o%ld extend to all !ields o!
prod%ctionQ
5ere @o%ld be absol%te o8er-prod%ction o! capital as soon as additional capital !or p%rposes o!
capitalist prod%ction R =0 5e p%rpose o! capitalist prod%ction, o@e8er, is sel!-expansion o!
capital, i.e., appropriation o! s%rpl%s-labo%r, prod%ction o! s%rpl%s-8al%e, o! pro!it0 ?s soon as
capital @o%ld, tere!ore, a8e gro@n in s%c a ratio to te labo%ring pop%lation tat neiter te
absol%te @orking-time s%pplied by tis pop%lation, nor te relati8e s%rpl%s @orking-time, co%ld
be expanded any !%rter Btis last @o%ld not be !easible at any rate in te case @en te demand
!or labo%r @ere so strong tat tere @ere a tendency !or @ages to riseC# at a point, tere!ore, @en
te increased capital prod%ced H%st as m%c, or e8en less, s%rpl%s-8al%e tan it did be!ore its
increase, tere @o%ld be absol%te o8er-prod%ction o! capital# i.e., te increased capital ; U c;
@o%ld prod%ce no more, or e8en less, pro!it tan capital ; be!ore its expansion by c;0 &n bot
cases tere @o%ld be a steep and s%dden !all in te general rate o! pro!it, b%t tis time d%e to a
cange in te composition o! capital not ca%sed by te de8elopment o! te prod%cti8e !orces, b%t
rater by a rise in te money-8al%e o! te 8ariable capital Bbeca%se o! increased @agesC and te
corresponding red%ction in te proportion o! s%rpl%s-labo%r to necessary labo%r0
&n reality, it @o%ld appear tat a portion o! te capital @o%ld lie completely or partially idle
Bbeca%se it @o%ld a8e to cro@d o%t some o! te acti8e capital be!ore it co%ld expand its o@n
8al%eC, and te oter portion @o%ld prod%ce 8al%es at a lo@er rate o! pro!it, o@ing to te press%re
o! %nemployed or b%t partly employed capital0 &t @o%ld be immaterial in tis respect i! a part o!
te additional capital @ere to take te place o! te old capital, and te latter @ere to take its
position in te additional capital0 We so%ld still al@ays a8e te old s%m o! capital on one side,
and te s%m o! additional capital on te oter0 5e !all in te rate o! pro!it @o%ld ten be
accompanied by an absol%te decrease in te mass o! pro!it, since te mass o! employed labo%r-
po@er co%ld not be increased and te rate o! s%rpl%s-8al%e raised %nder te conditions @e ad
ass%med, so tat te mass o! s%rpl%s-8al%e co%ld not be increased eiter0 ?nd te red%ced mass o!
pro!it @o%ld a8e to be calc%lated on an increased total capital0 A%t e8en i! it is ass%med tat te
employed capital contin%es to sel!-expand at te old rate o! pro!it, and te mass o! pro!it ence
remains te same, tis mass @o%ld still e calc%lated on an increased total capital, tis like@ise
implying a !all in te rate o! pro!it0 &! a total capital o! 1,=== yielded a pro!it o! 1==, and a!ter
being increased to 1,+== still yielded 1==, ten, in te second case, 1,=== @o%ld yield only 66W0
$el!-expansion o! te old capital, in te absol%te sense, @o%ld a8e been red%ced0 5e capital R
1,=== @o%ld yield no more %nder te ne@ circ%mstances tan !ormerly a capital R 666W0
&t is e8ident, o@e8er, tat tis act%al depreciation o! te old capital co%ld not occ%r @ito%t a
str%ggle, and tat te additional capital c; co%ld not ass%me te !%nctions o! capital @ito%t a
str%ggle0 5e rate o! pro!it @o%ld not !all %nder te e!!ect o! competition d%e to o8er-prod%ction
o! capital0 &t @o%ld rater be te re8erse# it @o%ld be te competiti8e str%ggle @ic @o%ld begin
beca%se te !allen rate o! pro!it and o8er-prod%ction o! capital originate !rom te same
conditions0 5e part o! c; in te ands o! old !%nctioning capitalists @o%ld be allo@ed to remain
more or less idle to pre8ent a depreciation o! teir o@n original capital and not to narro@ its place
in te !ield o! prod%ction0 3r tey @o%ld employ it, e8en at a momentary loss, to si!t te need o!
keeping additional capital idle on ne@comers and on teir competitors in general0
5at portion o! c; @ic is in ne@ ands @o%ld seek to ass%me a place !or itsel! at te expense
o! te old capital, and @o%ld accomplis tis in part by !orcing a portion o! te old capital to lie
1>6 ;apter J4
idle0 &t @o%ld compel te old capital to gi8e %p its old place and @itdra@ to Hoin completely or
partially %nemployed additional capital0
? portion o! te old capital as to lie %n%sed %nder all circ%mstances# it as to gi8e %p its
caracteristic D%ality as capital, so !ar as acting as s%c and prod%cing 8al%e is concerned0 5e
competiti8e str%ggle @o%ld decide @at part o! it @o%ld be partic%larly a!!ected0 $o long as
tings go @ell, competition e!!ects an operating !raternity o! te capitalist class, as @e a8e seen
in te case o! te eD%alisation o! te general rate o! pro!it, so tat eac sares in te common loot
in proportion to te siEe o! is respecti8e in8estment0 A%t as soon as it no longer is a D%estion o!
saring pro!its, b%t o! saring losses, e8eryone tries to red%ce is o@n sare to a minim%m and to
so8e it o!! %pon anoter0 5e class, as s%c, m%st ine8itably lose0 6o@ m%c te indi8id%al
capitalist m%st bear o! te loss, i.e., to @at extent e m%st sare in it at all, is decided by strengt
and c%nning, and competition ten becomes a !igt among ostile broters0 5e antagonism
bet@een eac indi8id%al capitalist"s interests and tose o! te capitalist class as a @ole, ten
comes to te s%r!ace, H%st as pre8io%sly te identity o! tese interests operated in practice tro%g
competition0
6o@ is tis con!lict settled and te conditions restored @ic correspond to te Kso%ndL operation
o! capitalist prod%ctionQ 5e mode o! settlement is already indicated in te 8ery emergence o! te
con!lict @ose settlement is %nder disc%ssion0 &t implies te @itdra@al and e8en te partial
destr%ction o! capital amo%nting to te !%ll 8al%e o! additional capital c;, or at least a part o! it0
?lto%g, as te description o! tis con!lict so@s, te loss is by no means eD%ally distrib%ted
among indi8id%al capitals, its distrib%tion being rater decided tro%g a competiti8e str%ggle in
@ic te loss is distrib%ted in 8ery di!!erent proportions and !orms, depending on special
ad8antages or pre8io%sly capt%red positions, so tat one capital is le!t %n%sed, anoter is
destroyed, and a tird s%!!ers b%t a relati8e loss, or is H%st temporarily depreciated, etc0
A%t te eD%ilibri%m @o%ld be restored %nder all circ%mstances tro%g te @itdra@al or e8en te
destr%ction o! more or less capital0 5is @o%ld extend partly to te material s%bstance o! capital,
i.e., a part o! te means o! prod%ction, o! !ixed and circ%lating capital, @o%ld not operate, not act
as capital# some o! te operating establisments @o%ld ten be bro%gt to a standstill0 ?lto%g,
in tis respect, time attacks and @orsens all means o! prod%ction Bexcept landC, te stoppage
@o%ld in reality ca%se !ar greater damage to te means o! prod%ction0 6o@e8er, te main e!!ect in
tis case @o%ld be tat tese means o! prod%ction @o%ld cease to !%nction as s%c, tat teir
!%nction as means o! prod%ction @o%ld be dist%rbed !or a sorter or longer period0
5e main damage, and tat o! te most ac%te nat%re, @o%ld occ%r in respect to capital, and in so
!ar as te latter possesses te caracteristic o! 8al%e it @o%ld occ%r in respect to te values o!
capitals0 5at portion o! te 8al%e o! a capital @ic exists only in te !orm o! claims on
prospecti8e sares o! s%rpl%s-8al%e, i.e., pro!it, in !act in te !orm o! promissory notes on
prod%ction in 8ario%s !orms, is immediately depreciated by te red%ction o! te receipts on @ic
it is calc%lated0 ? part o! te gold and sil8er lies %n%sed, i.e., does not !%nction as capital0 ,art o!
te commodities on te market can complete teir process o! circ%lation and reprod%ction only
tro%g an immense contraction o! teir prices, ence tro%g a depreciation o! te capital @ic
tey represent0 5e elements o! !ixed capital are depreciated to a greater or lesser degree in H%st
te same @ay0 &t m%st be added tat de!inite, pres%pposed, price relations go8ern te process o!
reprod%ction, so tat te latter is alted and tro@n into con!%sion by a general drop in prices0
5is con!%sion and stagnation paralyses te !%nction o! money as a medi%m o! payment, @ose
de8elopment is geared to te de8elopment o! capital and is based on tose pres%pposed price
relations0 5e cain o! payment obligations d%e at speci!ic dates is broken in a %ndred places0
5e con!%sion is a%gmented by te attendant collapse o! te credit system, @ic de8elops
sim%ltaneo%sly @it capital, and leads to 8iolent and ac%te crises, to s%dden and !orcible
depreciations, to te act%al stagnation and disr%ption o! te process o! reprod%ction, and t%s to a
real !alling o!! in reprod%ction0
1>> ;apter J4
A%t tere @o%ld a8e been still oter agencies at @ork at te same time0 5e stagnation o!
prod%ction @o%ld a8e laid o!! a part o! te @orking-class and @o%ld tereby a8e placed te
employed part in a sit%ation, @ere it @o%ld a8e to s%bmit to a red%ction o! @ages e8en belo@
te a8erage0 5is as te 8ery same e!!ect on capital as an increase o! te relati8e or absol%te
s%rpl%s-8al%e at a8erage @ages @o%ld a8e ad0 ,rosperity @o%ld a8e led to more marriages
among labo%rers and red%ced te decimation o! o!!spring0 Wile implying a real increase in
pop%lation, tis does not signi!y an increase in te act%al @orking pop%lation0 A%t it a!!ects te
relations o! te labo%rer to capital in te same @ay as an increase o! te n%mber o! act%ally
@orking labo%rers @o%ld a8e a!!ected tem0 3n te oter and, te !all in prices and te
competiti8e str%ggle @o%ld a8e dri8en e8ery capitalist to lo@er te indi8id%al 8al%e o! is total
prod%ct belo@ its general 8al%e by means o! ne@ macines, ne@ and impro8ed @orking metods,
ne@ combinations, i.e., to increase te prod%cti8ity o! a gi8en D%antity o! labo%r, to lo@er te
proportion o! 8ariable to constant capital, and tereby to release some labo%rers# in sort, to
create an arti!icial o8er-pop%lation0 (ltimately, te depreciation o! te elements o! constant
capital @o%ld itsel! tend to raise te rate o! pro!it0 5e mass o! employed constant capital @o%ld
a8e increased in relation to 8ariable, b%t its 8al%e co%ld a8e !allen0 5e ens%ing stagnation o!
prod%ction @o%ld a8e prepared I @itin capitalistic limits I a s%bseD%ent expansion o!
prod%ction0
?nd t%s te cycle @o%ld r%n its co%rse ane@0 ,art o! te capital, depreciated by its !%nctional
stagnation, @o%ld reco8er its old 8al%e0 For te rest, te same 8icio%s circle @o%ld be described
once more %nder expanded conditions o! prod%ction, @it an expanded market and increased
prod%cti8e !orces0
6o@e8er, e8en %nder te extreme conditions ass%med by %s tis absol%te o8er-prod%ction o!
capital is not absol%te o8er-prod%ction, not absol%te o8er-prod%ction o! means o! prod%ction0 &t is
o8er-prod%ction o! means o! prod%ction only in so !ar as te latter ser8e as capital, and
conseD%ently incl%de a sel!-expansion o! 8al%e, m%st prod%ce an additional 8al%e in proportion to
te increased mass0
.et it @o%ld still be o8er-prod%ction, beca%se capital @o%ld be %nable to exploit labo%r to te
degree reD%ired by a Kso%ndL, KnormalL de8elopment o! te process o! capitalist prod%ction, to a
degree @ic @o%ld at least increase te mass o! pro!it along @it te gro@ing mass o! te
employed capital# to a degree @ic @o%ld, tere!ore, pre8ent te rate o! pro!it !rom !alling as
m%c as te capital gro@s, or e8en more rapidly0
38er-prod%ction o! capital is ne8er anyting more tan o8er-prod%ction o! means o! prod%ction I
o! means o! labo%r and necessities o! li!e I @ic may ser8e as capital, i.e., may ser8e to exploit
labo%r at a gi8en degree o! exploitation# a !all in te intensity o! exploitation belo@ a certain
point, o@e8er, calls !ort dist%rbances, and stoppages in te capitalist prod%ction process, crises,
and destr%ction o! capital0 &t is no contradiction tat tis o8er-prod%ction o! capital is
accompanied by more or less considerable relati8e o8er-pop%lation0 5e circ%mstances @ic
increased te prod%cti8eness o! labo%r, a%gmented te mass o! prod%ced commodities, expanded
markets, accelerated acc%m%lation o! capital bot in terms o! its mass and its 8al%e, and lo@ered
te rate o! pro!it I tese same circ%mstances a8e also created, and contin%o%sly create, a relati8e
o8erpop%lation, an o8er-pop%lation o! labo%rers not employed by te s%rpl%s-capital o@ing to te
lo@ degree o! exploitation at @ic alone tey co%ld be employed, or at least o@ing to te lo@
rate o! pro!it @ic tey @o%ld yield at te gi8en degree o! exploitation0
&! capital is sent abroad, tis is not done beca%se it absol%tely co%ld not be applied at ome, b%t
beca%se it can be employed at a iger rate o! pro!it in a !oreign co%ntry0 A%t s%c capital is
absol%te excess capital !or te employed labo%ring pop%lation and !or te ome co%ntry in
general0 &t exists as s%c alongside te relati8e o8er-pop%lation, and tis is an ill%stration o! o@
bot o! tem exist side by side, and m%t%ally in!l%ence one anoter0
1>8 ;apter J4
3n te oter and, a !all in te rate o! pro!it connected @it acc%m%lation necessarily calls !ort a
competiti8e str%ggle0 ;ompensation o! a !all in te rate o! pro!it by a rise in te mass o! pro!it
applies only to te total social capital and to te big, !irmly placed capitalists0 5e ne@ additional
capital operating independently does not enHoy any s%c compensating conditions0 &t m%st still
@in tem, and so it is tat a !all in te rate o! pro!it calls !ort a competiti8e str%ggle among
capitalists, not 8ice 8ersa0 5o be s%re, te competiti8e str%ggle is accompanied by a temporary
rise in @ages and a res%ltant !%rter temporary !all o! te rate o! pro!it0 5e same occ%rs @en
tere is an o8er-prod%ction o! commodities, @en markets are o8erstocked0 $ince te aim o!
capital is not to minister to certain @ants, b%t to prod%ce pro!it, and since it accomplises tis
p%rpose by metods @ic adapt te mass o! prod%ction to te scale o! prod%ction, not 8ice
8ersa, a ri!t m%st contin%ally ens%e bet@een te limited dimensions o! cons%mption %nder
capitalism and a prod%ction @ic !ore8er tends to exceed tis immanent barrier0 F%rtermore,
capital consists o! commodities, and tere!ore o8er-prod%ction o! capital implies o8er-prod%ction
o! commodities0 6ence te pec%liar penomenon o! economists @o deny o8er-prod%ction o!
commodities, admitting o8er-prod%ction o! capital0 5o say tat tere is no general o8er-
prod%ction, b%t rater a disproportion @itin te 8ario%s brances o! prod%ction, is no more tan
to say tat %nder capitalist prod%ction te proportionality o! te indi8id%al brances o! prod%ction
springs as a contin%al process !rom disproportionality, beca%se te coesion o! te aggregate
prod%ction imposes itsel! as a blind la@ %pon te agents o! prod%ction, and not as a la@ @ic,
being %nderstood and ence controlled by teir common mind, brings te prod%cti8e process
%nder teir Hoint control0 &t amo%nts !%rtermore to demanding tat co%ntries in @ic capitalist
prod%ction is not de8eloped, so%ld cons%me and prod%ce at a rate @ic s%its te co%ntries @it
capitalist prod%ction0 &! it is said tat o8er-prod%ction is only relati8e, tis is D%ite correct# b%t te
entire capitalist mode o! prod%ction is only a relati8e one, @ose barriers are not absol%te0 5ey
are absol%te only !or tis mode, i.e., on its basis0 6o@ co%ld tere oter@ise be a sortage o!
demand !or te 8ery commodities @ic te mass o! te people lack, and o@ @o%ld it be
possible !or tis demand to be so%gt abroad, in !oreign markets, to pay te labo%rers at ome te
a8erage amo%nt o! necessities o! li!eQ 5is is possible only beca%se in tis speci!ic capitalist
interrelation te s%rpl%s-prod%ct ass%mes a !orm in @ic its o@ner cannot o!!er it !or
cons%mption, %nless it !irst recon8erts itsel! into capital !or im0 &! it is !inally said tat te
capitalists a8e only to excange and cons%me teir commodities among temsel8es, ten te
entire nat%re o! te capitalist mode o! prod%ction is lost sigt o!# and also !orgotten is te !act tat
it is a matter o! expanding te 8al%e o! te capital, not cons%ming it0 &n sort, all tese obHections
to te ob8io%s penomena o! o8er-prod%ction Bpenomena @ic pay no eed to tese
obHectionsC amo%nt to te contention tat te barriers o! capitalist prod%ction are not barriers o!
production generally, and tere!ore not barriers o! tis speci!ic, capitalist mode o! prod%ction0
5e contradiction o! te capitalist mode o! prod%ction, o@e8er, lies precisely in its tendency
to@ards an absol%te de8elopment o! te prod%cti8e !orces, @ic contin%ally come into con!lict
@it te speci!ic conditions o! prod%ction in @ic capital mo8es, and alone can mo8e0
5ere are not too many necessities o! li!e prod%ced, in proportion to te existing pop%lation0
M%ite te re8erse0 5oo little is prod%ced to decently and %manely satis!y te @ants o! te great
mass0
5ere are not too many means o! prod%ction prod%ced to employ te able-bodied portion o! te
pop%lation0 M%ite te re8erse0 &n te !irst place, too large a portion o! te prod%ced pop%lation is
not really capable o! @orking, and is tro%g !orce o! circ%mstances made dependent on
exploiting te labo%r o! oters, or on labo%r @ic can pass %nder tis name only %nder a
miserable mode o! prod%ction0 &n te second place, not eno%g means o! prod%ction are prod%ced
to permit te employment o! te entire able-bodied pop%lation %nder te most prod%cti8e
conditions, so tat teir absol%te @orking period co%ld be sortened by te mass and
e!!ecti8eness o! te constant capital employed d%ring @orking-o%rs0
1>* ;apter J4
3n te oter and, too many means o! labo%r and necessities o! li!e are prod%ced at times to
permit o! teir ser8ing as means !or te exploitation o! labo%rers at a certain rate o! pro!it0 5oo
many commodities are prod%ced to permit o! a realisation and con8ersion into ne@ capital o! te
8al%e and s%rpl%s-8al%e contained in tem %nder te conditions o! distrib%tion and cons%mption
pec%liar to capitalist prod%ction, i.e., too many to permit o! te cons%mmation o! tis process
@ito%t constantly rec%rring explosions0
-ot too m%c @ealt is prod%ced0 A%t at times too m%c @ealt is prod%ced in its capitalistic,
sel!-contradictory !orms0
5e limitations o! te capitalist mode o! prod%ction come to te s%r!ace:
1C &n tat te de8elopment o! te prod%cti8ity o! labo%r creates o%t o! te !alling rate o! pro!it a
la@ @ic at a certain point comes into antagonistic con!lict @it tis de8elopment and m%st be
o8ercome constantly tro%g crises0
<C &n tat te expansion or contraction o! prod%ction are determined by te appropriation o!
%npaid labo%r and te proportion o! tis %npaid labo%r to materialised labo%r in general, or, to
speak te lang%age o! te capitalists, by pro!it and te proportion o! tis pro!it to te employed
capital, t%s by a de!inite rate o! pro!it, rater tan te relation o! prod%ction to social
reD%irements, i.e., to te reD%irements o!" socially de8eloped %man beings0 &t is !or tis reason
tat te capitalist mode o! prod%ction meets @it barriers at a certain expanded stage o!
prod%ction @ic, i! 8ie@ed !rom te oter premise, @o%ld re8ersely a8e been altogeter
inadeD%ate0 &t comes to a standstill at a point !ixed by te prod%ction and realisation o! pro!it, and
not te satis!action o! reD%irements0
&! te rate o! pro!it !alls, tere !ollo@s, on te one and, an exertion o! capital in order tat te
indi8id%al capitalists, tro%g impro8ed metods, etc0, may depress te 8al%e o! teir indi8id%al
commodity belo@ te social a8erage 8al%e and tereby realise an extra pro!it at te pre8ailing
market-price0 3n te oter and, tere appears s@indling and a general promotion o! s@indling
by reco%rse to !renEied 8ent%res @it ne@ metods o! prod%ction, ne@ in8estments o! capital,
ne@ ad8ent%res, all !or te sake o! sec%ring a sred o! extra pro!it @ic is independent o! te
general a8erage and rises abo8e it0
5e rate o! pro!it, i.e., te relati8e increment o! capital, is abo8e all important to all ne@ o!!soots
o! capital seeking to !ind an independent place !or temsel8es0 ?nd as soon as !ormation o!
capital @ere to !all into te ands o! a !e@ establised big capitals, !or @ic te mass o! pro!it
compensates !or te !alling rate o! pro!it, te 8ital !lame o! prod%ction @o%ld be altogeter
exting%ised0 &t @o%ld die o%t0 5e rate o! pro!it is te moti8e po@er o! capitalist prod%ction0
5ings are prod%ced only so long as tey can be prod%ced @it a pro!it0 6ence te concern o! te
Englis economists o8er te decline o! te rate o! pro!it0 5e !act tat te bare possibility o! tis
appening so%ld @orry )icardo, so@s is pro!o%nd %nderstanding o! te conditions o!
capitalist prod%ction0 &t is tat @ic is eld against im, it is is %nconcern abo%t K%man
beings,L and is a8ing an eye solely !or te de8elopment o! te prod%cti8e !orces, @ate8er te
cost in %man beings and capital-values I it is precisely tat @ic is te important ting abo%t
im0 7e8elopment o! te prod%cti8e !orces o! social labo%r is te istorical task and H%sti!ication
o! capital0 5is is H%st te @ay in @ic it %nconscio%sly creates te material reD%irements o! a
iger mode o! prod%ction0 Wat @orries )icardo is te !act tat te rate o! pro!it, te stim%lating
principle o! capitalist prod%ction, te !%ndamental premise and dri8ing !orce o! acc%m%lation,
so%ld be endangered by te de8elopment o! prod%ction itsel!0 ?nd ere te D%antitati8e
proportion means e8eryting0 5ere is, indeed, someting deeper beind it, o! @ic e is only
8ag%ely a@are0 &t comes to te s%r!ace ere in a p%rely economic @ay I i.e., !rom te bo%rgeois
point o! 8ie@, @itin te limitations o! capitalist %nderstanding, !rom te standpoint o! capitalist
prod%ction itsel! I tat it as its barrier, tat it is relati8e, tat it is not an absol%te, b%t only a
18= ;apter J4
istorical mode o! prod%ction corresponding to a de!inite limited epoc in te de8elopment o! te
material reD%irements o! prod%ction0
IV. Supplementar# )emar4s
$ince te de8elopment o! te prod%cti8ity o! labo%r proceeds 8ery disproportionately in te
8ario%s lines o! ind%stry, and not only disproportionately in degree b%t !reD%ently also in opposite
directions, it !ollo@s tat te mass o! a8erage pro!it BR s%rpl%s-8al%eC m%st be s%bstantially belo@
te le8el one @o%ld nat%rally expect a!ter te de8elopment o! te prod%cti8eness in te most
ad8anced brances o! ind%stry0 5e !act tat te de8elopment o! te prod%cti8ity in di!!erent lines
o! ind%stry proceeds at s%bstantially di!!erent rates and !reD%ently e8en in opposite directions, is
not d%e merely to te anarcy o! competition and te pec%liarity o! te bo%rgeois mode o!
prod%ction0 ,rod%cti8ity o! labo%r is also bo%nd %p @it nat%ral conditions, @ic !reD%ently
become less prod%cti8e as prod%cti8ity gro@s I inasm%c as te latter depends on social
conditions0 6ence te opposite mo8ements in tese di!!erent speres I progress ere, and
retrogression tere0 ;onsider te mere in!l%ence o! te seasons, !or instance, on @ic te b%lk o!
ra@ materials depends !or its mass, te exa%stion o! !orest lands, coal and iron mines, etc0
Wile te circ%lating part o! constant capital, s%c as ra@ materials, etc0, contin%ally increases its
mass in proportion to te prod%cti8ity o! labo%r, tis is not te case @it !ixed capital, s%c as
b%ildings, macinery, and ligting and eating !acilities, etc0 ?lto%g in absol%te terms a
macine becomes dearer @it te gro@t o! its bodily mass, it becomes relati8ely ceaper0 &! !i8e
labo%rers prod%ce ten times as m%c o! a commodity as be!ore, tis does not increase te o%tlay
!or !ixed capital ten-!old# alto%g te 8al%e o! tis part o! constant capital increases @it te
de8elopment o! te prod%cti8eness, it does not by any means increase in te same proportion0 We
a8e !reD%ently pointed o%t te di!!erence in te ratio o! constant to 8ariable capital as expressed
in te !all o! te rate o! pro!it, and te di!!erence in te same ratio as expressed in relation to te
indi8id%al commodity and its price @it te de8elopment o! te prod%cti8ity o! labo%r0
/5e 8al%e o! a commodity is determined by te total labo%r-time o! past and li8ing labo%r
incorporated in it0 5e increase in labo%r prod%cti8ity consists precisely in tat te sare o! li8ing
labo%r is red%ced @ile tat o! past labo%r is increased, b%t in s%c a @ay tat te total D%antity o!
labo%r incorporated in tat commodity declines# in s%c a @ay, tere!ore, tat li8ing labo%r
decreases more tan past labo%r increases0 5e past labo%r contained in te 8al%e o! a commodity
I te constant part o! capital I consists partly o! te @ear and tear o! !ixed, partly o! circ%lating,
constant capital entirely cons%med by tat commodity, s%c as ra@ and a%xiliary materials0 5e
portion o! 8al%e deri8ing !rom ra@ and a%xiliary materials m%st decrease @it te increased
prod%cti8ity o! labo%r, beca%se @it regard to tese materials te prod%cti8ity expresses itsel!
precisely by red%cing teir 8al%e0 3n te oter and, it is most caracteristic o! rising labo%r
prod%cti8ity tat te !ixed part o! constant capital is strongly a%gmented, and @it it tat portion
o! its 8al%e @ic is trans!erred by @ear and tear to te commodities0 For a ne@ metod o!
prod%ction to represent a real increase in prod%cti8ity, it m%st trans!er a smaller additional portion
o! te 8al%e o! !ixed capital to eac %nit o! te commodity in @ear and tear tan te portion o!
8al%e ded%cted !rom it tro%g te sa8ing in li8ing labo%r# in sort, it m%st red%ce te 8al%e o!
te commodity0 &t m%st ob8io%sly do so e8en i!, as it occ%rs in some cases, an additional 8al%e
goes into te 8al%e o! te commodity !or more or dearer ra@ or a%xiliary materials o8er and
abo8e te additional portion !or @ear and tear o! te !ixed capital0 ?ll additions to te 8al%e m%st
be more tan o!!set by te red%ction in 8al%e res%lting !rom te decrease in li8ing labo%r0
5is red%ction o! te total D%antity o! labo%r going into a commodity seems, accordingly, to be
te essential criterion o! increased prod%cti8ity o! labo%r, no matter %nder @at social conditions
prod%ction is carried on0 ,rod%cti8ity o! labo%r, indeed, @o%ld al@ays be meas%red by tis
standard in a society, in @ic prod%cers reg%late teir prod%ction according to a preconcei8ed
181 ;apter J4
plan, or e8en %nder simple commodity-prod%ction0 A%t o@ does te matter stand %nder capitalist
prod%ctionQ
$%ppose, a certain line o! capitalist ind%stry prod%ces a normal %nit o! its commodity %nder te
!ollo@ing conditions: 5e @ear and tear o! !ixed capital amo%nts to Z silling per piece# ra@ and
a%xiliary materials go into it to te amo%nt o! 1>Z sillings per piece# @ages, < sillings# and
s%rpl%s-8al%e, < sillings at a rate o! s%rpl%s-8al%e o! 1==T0 5otal 8al%e R << sillings0 We
ass%me !or te sake o! simplicity tat te capital in tis line o! prod%ction as te a8erage
composition o! social capital, so tat te price o! prod%ction o! te commodity is identical @it its
8al%e, and te pro!it o! te capitalist @it te created s%rpl%s-8al%e0 5en te cost-price o! te
commodity R Z U 1>Z U < R <=s0, te a8erage rate o! pro!it <N<= R 1=T, and te price o!
prod%ction per piece o! te commodity, like its 8al%e R <<s0
$%ppose a macine is in8ented @ic red%ces by al! te li8ing labo%r reD%ired per piece o! te
commodity, b%t trebles tat portion o! its 8al%e acco%nted !or by te @ear and tear o! te !ixed
capital0 &n tat case, te calc%lation is: Wear and tear R 1Z s0, ra@ and a%xiliary materials, as
be!ore, 1>Zs0, @ages, 1s0, s%rpl%s-8al%e 1s0, total <1s0 5e commodity ten !alls 1s0 in 8al%e# te
ne@ macine as certainly increased te prod%cti8ity o! labo%r0 A%t te capitalist sees te matter
as !ollo@s: is cost-price is no@ 1Zs0 !or @ear, 1>Zs0 !or ra@ and a%xiliary materials, 1s0 !or
@ages, total <=s0, as be!ore0 $ince te rate o! pro!it is not immediately altered by te ne@
macine, e @ill recei8e 1=T o8er is cost-price, tat is, <s0 5e price o! prod%ction, ten,
remains %naltered R <<s0, b%t is 1s0 abo8e te 8al%e0 For a society prod%cing %nder capitalist
conditions te commodity as not ceapened0 5e ne@ macine is no impro8ement !or it0 5e
capitalist is, tere!ore, not interested in introd%cing it0 ?nd since its introd%ction @o%ld make is
present, not as yet @orn-o%t, macinery simply @ortless, @o%ld t%rn it into scrap-iron, ence
@o%ld ca%se a positi8e loss, e takes good care not to commit tis, @at is !or im a %topian,
mistake0
5e la@ o! increased prod%cti8ity o! labo%r is not, tere!ore, absol%tely 8alid !or capital0 $o !ar as
capital is concerned, prod%cti8eness does not increase tro%g a sa8ing in li8ing labo%r in
general, b%t only tro%g a sa8ing in te paid portion o! li8ing labo%r, as compared to labo%r
expended in te past, as @e a8e already indicated in passing in Aook & BKap0 J& &&, <, +0
2=*N3*8C0 /Englis edition: ;0 J4, <. J 0d.1 6ere te capitalist mode o! prod%ction is beset @it
anoter contradiction0 &ts istorical mission is %nconstrained de8elopment in geometrical
progression o! te prod%cti8ity o! %man labo%r0 &t goes back on its mission @ene8er, as ere, it
cecks te de8elopment o! prod%cti8ity0 &t t%s demonstrates again tat it is becoming senile and
tat it is more and more o%tli8ed01
1

(nder competition, te increasing minim%m o! capital reD%ired @it te increase in prod%cti8ity
!or te s%ccess!%l operation o! an independent ind%strial establisment, ass%mes te !ollo@ing
aspect: ?s soon as te ne@, more expensi8e eD%ipment as become %ni8ersally establised,
smaller capitals are ence!ort excl%ded !rom tis ind%stry0 $maller capitals can carry on
independently in te 8ario%s speres o! ind%stry only in te in!ancy o! mecanical in8entions0
4ery large %ndertakings, s%c as rail@ays, on te oter and, @ic a8e an %n%s%ally ig
proportion o! constant capital, do not yield te a8erage rate o! pro!it, b%t only a portion o! it, only
an interest0 3ter@ise te general rate o! pro!it @o%ld a8e !allen still lo@er0 A%t tis o!!ers direct
employment to large concentrations o! capital in te !orm o! stocks0
:ro@t o! capital, ence acc%m%lation o! capital, does not imply a !all in te rate o! pro!it, %nless
it is accompanied by te a!orementioned canges in te proportion o! te organic constit%ents o!
capital0 -o@ it so appens tat in spite o! te constant daily re8ol%tions in te mode o!
prod%ction, no@ tis and no@ tat larger or smaller portion o! te total capital contin%es to
acc%m%late !or certain periods on te basis o! a gi8en a8erage proportion o! tose constit%ents, so
18< ;apter J4
tat tere is no organic cange @it its gro@t, and conseD%ently no ca%se !or a !all in te rate o!
pro!it0 5is constant expansion o! capital, ence also an expansion o! prod%ction, on te basis o!
te old metod o! prod%ction @ic goes D%ietly on @ile ne@ metods are already being
introd%ced at its side, is anoter reason, @y te rate o! pro!it does not decline as m%c as te
total capital o! society gro@s0
5e increase in te absol%te n%mber o! labo%rers does not occ%r in all brances o! prod%ction,
and not %ni!ormly in all, in spite o! te relati8e decrease o! 8ariable capital laid o%t in @ages0 &n
agric%lt%re, te decrease o! te element o! li8ing labo%r may be absol%te0
?t any rate, it is b%t a reD%irement o! te capitalist mode o! prod%ction tat te n%mber o! @age-
@orkers so%ld increase absol%tely, in spite o! its relati8e decrease0 'abo%r-po@er becomes
red%ndant !or it as soon as it is no longer necessary to employ it !or 1< to 1+ o%rs daily0 ?
de8elopment o! prod%cti8e !orces @ic @o%ld diminis te absol%te n%mber o! labo%rers, i.e.,
enable te entire nation to accomplis its total prod%ction in a sorter time span, @o%ld ca%se a
re8ol%tion, beca%se it @o%ld p%t te b%lk o! te pop%lation o%t o! te r%nning0 5is is anoter
mani!estation o! te speci!ic barrier o! capitalist prod%ction, so@ing also tat capitalist
prod%ction is by no means an absol%te !orm !or te de8elopment o! te prod%cti8e !orces and !or
te creation o! @ealt, b%t rater tat at a certain point it comes into collision @it tis
de8elopment0 5is collision appears partly in periodical crises, @ic arise !rom te circ%mstance
tat no@ tis and no@ tat portion o! te labo%ring pop%lation becomes red%ndant %nder its old
mode o! employment0 5e limit o! capitalist prod%ction is te excess time o! te labo%rers0 5e
absol%te spare time gained by society does not concern it0 5e de8elopment o! prod%cti8ity
concerns it only in so !ar as it increases te s%rpl%s labo%r-time o! te @orking-class, not beca%se
it decreases te labo%r-time !or material prod%ction in general0 &t mo8es t%s in a contradiction0
We a8e seen tat te gro@ing acc%m%lation o! capital implies its gro@ing concentration0 5%s
gro@s te po@er o! capital, te alienation o! te conditions o! social prod%ction personi!ied in te
capitalist !rom te real prod%cers0 ;apital comes more and more to te !ore as a social po@er,
@ose agent is te capitalist0 5is social po@er no longer stands in any possible relation to tat
@ic te labo%r o! a single indi8id%al can create0 &t becomes an alienated, independent, social
po@er, @ic stands opposed to society as an obHect, and as an obHect tat is te capitalist"s so%rce
o! po@er0 5e contradiction bet@een te general social po@er into @ic capital de8elops, on te
one and, and te pri8ate po@er o! te indi8id%al capitalists o8er tese social conditions o!
prod%ction, on te oter, becomes e8er more irreconcilable, and yet contains te sol%tion o! te
problem, beca%se it implies at te same time te trans!ormation o! te conditions o! prod%ction
into general, common, social, conditions0 5is trans!ormation stems !rom te de8elopment o! te
prod%cti8e !orces %nder capitalist prod%ction, and !rom te @ays and means by @ic tis
de8elopment takes place0
-o capitalist e8er 8ol%ntarily introd%ces a ne@ metod o! prod%ction, no matter o@ m%c more
prod%cti8e it may be, and o@ m%c it may increase te rate o! s%rpl%s-8al%e, so long as it
red%ces te rate o! pro!it0 .et e8ery s%c ne@ metod o! prod%ction ceapens te commodities0
6ence, te capitalist sells tem originally abo8e teir prices o! prod%ction, or, peraps, abo8e
teir 8al%e0 6e pockets te di!!erence bet@een teir costs o! prod%ction and te market-prices o!
te same commodities prod%ced at iger costs o! prod%ction0 6e can do tis, beca%se te
a8erage labo%r-time reD%ired socially !or te prod%ction o! tese latter commodities is iger tan
te labo%r-time reD%ired !or te ne@ metods o! prod%ction0 6is metod o! prod%ction stands
abo8e te social a8erage0 A%t competition makes it general and s%bHect to te general la@0 5ere
!ollo@s a !all in te rate o! pro!it I peraps !irst in tis spere o! prod%ction, and e8ent%ally it
acie8es a balance @it te rest I @ic is, tere!ore, @olly independent o! te @ill o! te
capitalist0
183 ;apter J4
&t is still to be added to tis point, tat tis same la@ also go8erns tose speres o! prod%ction,
@ose prod%ct passes neiter directly nor indirectly into te cons%mption o! te labo%rers, or into
te conditions %nder @ic teir necessities are prod%ced# it applies, tere!ore, also to tose
speres o! prod%ction, in @ic tere is no ceapening o! commodities to increase te relati8e
s%rpl%s-8al%e or ceapen labo%r-po@er0 B?t any rate, a ceapening o! constant capital in all tese
lines may increase te rate o! pro!it, @it te exploitation o! labo%r remaining te same0C ?s soon
as te ne@ prod%ction metod begins to spread, and tereby to !%rnis tangible proo! tat tese
commodities can act%ally be prod%ced more ceaply, te capitalists @orking @it te old metods
o! prod%ction m%st sell teir prod%ct belo@ its !%ll price o! prod%ction, beca%se te 8al%e o! tis
commodity as !allen, and beca%se te labo%r-time reD%ired by tem to prod%ce it is greater tan
te social a8erage0 &n one @ord I and tis appears as an e!!ect o! competition I tese capitalists
m%st also introd%ce te ne@ metod o! prod%ction, in @ic te proportion o! 8ariable to constant
capital as been red%ced0
?ll te circ%mstances @ic lead to te %se o! macinery ceapening te price o! a commodity
prod%ced by it, come do@n in te last analysis to a red%ction o! te D%antity o! labo%r absorbed
by a single piece o! te commodity# and secondly, to a red%ction in te @ear-and-tear portion o!
te macinery, @ose 8al%e goes into a single piece o! te commodity0 5e less rapid te @ear o!
macinery, te more te commodities o8er @ic it is distrib%ted, and te more li8ing labo%r it
replaces be!ore its term o! reprod%ction arri8es0 &n bot cases te D%antity and 8al%e o! te !ixed
constant capital increase in relation to te 8ariable0
K?ll oter tings being eD%al, te po@er o! a nation to
sa8e !rom its pro!its 8aries @it te rate o! pro!its: is
great @en tey are ig, less, @en lo@# b%t as te
rate o! pro!its declines, all oter tings do not remain
eD%al0000 ? lo@ rate o! pro!its is ordinarily
accompanied by a rapid rate o! acc%m%lation,
relati8ely to te n%mbers o! te people, as in
England 000 a ig rate o! pro!it by a slo@er rate o!
acc%m%lation, relati8ely to te n%mbers o! te people0
Examples: ,oland, )%ssia, &ndia, etc0L B)icard Pones,
+n Dntroductory ,ecture on &olitical 0conomy,
'ondon, 1833, p0 += !!0C
Pones empasises correctly tat in spite o! te !alling rate o! pro!it te ind%cements and !ac%lties
to acc%m%late are a%gmented# !irst, on acco%nt o! te gro@ing relati8e o8erpop%lation# second,
beca%se te gro@ing prod%cti8ity o! labo%r is accompanied by an increase in te mass o! %se-
8al%es represented by te same excange-8al%e, ence in te material elements o! capital# tird,
beca%se te brances o! prod%ction become more 8aried# !o%rt, d%e to te de8elopment o! te
credit system, te stock companies, etc0, and te res%ltant case o! con8erting money into capital
@ito%t becoming an ind%strial capitalist# !i!t, beca%se te @ants and te greed !or @ealt
increase# and, sixt, beca%se te mass o! in8estments in !ixed capital gro@s, etc0
5ree cardinal !acts o! capitalist prod%ction:
1C ;oncentration o! means o! prod%ction in !e@ ands, @ereby tey cease to appear as te
property o! te immediate labo%rers and t%rn into social prod%ction capacities0 E8en i! initially
182 ;apter J4
tey are te pri8ate property o! capitalists0 5ese are te tr%stees o! bo%rgeois society, b%t tey
pocket all te proceeds o! tis tr%steesip0
<C 3rganisation o! labo%r itsel! into social labo%r: tro%g co-operation, di8ision o! labo%r, and
te %niting o! labo%r @it te nat%ral sciences0
&n tese t@o senses, te capitalist mode o! prod%ction abolises pri8ate property and pri8ate
labo%r, e8en to%g in contradictory !orms0
3C ;reation o! te @orld-market0
5e st%pendo%s prod%cti8ity de8eloping %nder te capitalist mode o! prod%ction relati8e to
pop%lation, and te increase, i! not in te same proportion, o! capital-8al%es Bnot H%st o! teir
material s%bstanceC, @ic gro@ m%c more rapidly tan te pop%lation, contradict te basis,
@ic constantly narro@s in relation to te expanding @ealt, and !or @ic all tis immense
prod%cti8eness @orks0 5ey also contradict te conditions %nder @ic tis s@elling capital
a%gments its 8al%e0 6ence te crises0
Part IV. Conversion of
Commodity-Capital and Money-
Capital into Commercial Capital
and Money-Dealing Capital
(Merchant's Capital)
Chapter 16. Commercial Capital
Mercant"s, or trading, capital breaks %p into t@o !orms or s%b-di8isions, namely, commercial
capital and money-dealing capital, @ic @e sall no@ de!ine more closely, in so !ar as tis is
necessary !or o%r analysis o! capital in its basic str%ct%re0 5is is all te more necessary, beca%se
modern political economy, e8en in te persons o! its best exponents, tro@s trading capital and
ind%strial capital indiscriminately togeter and, in e!!ect, @olly o8erlooks te caracteristic
pec%liarities o! te !ormer0
5e mo8ements o! commodity-capital a8e been analysed in Aook &&0 5o take te total capital o!
society, one part o! it I al@ays made %p o! di!!erent elements and e8en canging in magnit%de I
al@ays exists in te !orm o! commodities on te market, to be con8erted into money0 ?noter part
exists on te market in te !orm o! money, to be con8erted into commodities0 &t is al@ays in te
process o! tis transition, o! tis !ormal metamorposis0 &nasm%c as tis !%nction o! capital in
te process o! circ%lation is at all set apart as a special !%nction o! a special capital, as a !%nction
establised by 8irt%e o! te di8ision o! labo%r to a special gro%p o! capitalists, commodity-capital
becomes commercial capital0
We a8e explained BAook &&, ;apter 4&, K5e ;osts o! ;irc%lation,LC to @at extent te transport
ind%stry, storage and distrib%tion o! commodities in a distrib%table !orm, may be regarded as
prod%ction processes contin%ing @itin te process o! circ%lation0 5ese episodes incidental to
te circ%lation o! commodity-capital are sometimes con!%sed @it te distinct !%nctions o!
mercant"s or commercial capital0 $ometimes tey are, indeed, practically bo%nd %p @it tese
distinct, speci!ic !%nctions, alto%g @it te de8elopment o! te social di8ision o! labo%r te
!%nction o! mercant"s capital e8ol8es in a p%re !orm,i.e., di8orced !rom tose real !%nctions, and
independent o! tem0 5ose !%nctions are tere!ore irrele8ant to o%r p%rpose, @ic is to de!ine
te speci!ic di!!erence o! tis special !orm o! capital0 &n so !ar as capital solely employed in te
circ%lation process, special commercial capital, partly combines tose !%nctions @it its speci!ic
ones, it does not appear in its p%re !orm0 We obtain its p%re !orm a!ter stripping it o! all tese
incidental !%nctions0
We a8e seen tat te existence o! capital as commodity-capital and te metamorposis it
%ndergoes @itin te spere o! circ%lation in te market as commodity-capital I a metamorposis
186 ;apter J4&
@ic resol8es itsel! into b%ying and selling, con8erting commodity-capital into money-capital
and money-capital into commodity-capital I tat tis !orms a pase in te reprod%ction process o!
ind%strial capital, ence in its process o! prod%ction as a @ole0 We a8e also seen, o@e8er, tat
it is disting%ised in its !%nction as a capital o! circ%lation !rom its !%nction as prod%cti8e capital0
5ese are t@o di!!erent and separate !orms o! existence o! te same capital0 3ne portion o! te
total social capital is contin%ally on te market in te !orm o! capital o! circ%lation, passing
tro%g tis process o! transm%tation, alto%g !or eac indi8id%al capital its existence as
commodity-capital, and its metamorposis as s%c, merely represent e8er-8anising and e8er
rene@ed nodal points I i.e., stages o! transition in te contin%ity o! its prod%ction process, and
alto%g te elements o! commodity-capital in te market 8ary contin%o%sly !or tis reason,
being constantly @itdra@n !rom te commodity-market and eD%ally periodically ret%rned to it as
ne@ prod%cts o! te process o! prod%ction0
;ommercial capital is noting b%t a transm%ted !orm o! a part o! tis capital o! circ%lation
constantly to be !o%nd in te market, e8er in te process o! its metamorposis, and al@ays
encompassed by te spere o! circ%lation0 We say a part, beca%se a part o! te selling and b%ying
o! commodities al@ays takes place directly bet@een ind%strial capitalists0 We lea8e tis part
entirely o%t o! consideration in tis analysis, beca%se it contrib%tes noting to de!ining te
conception, or to %nderstanding te speci!ic nat%re o! mercant"s capital, and beca%se it as
!%rtermore been exa%sti8ely treated !or o%r p%rpose in Aook &&0
5e dealer in commodities, as a capitalist generally, appears on te market primarily as te
representati8e o! a certain s%m o! money, @ic be ad8ances as a capitalist, i.e., @ic e @ants
to t%rn !rom x Bits original 8al%eC into x U x Bte original s%m pl%s pro!itC0 A%t it is e8ident to
im I not being H%st a capitalist in general, b%t rater a special dealer in commodities I tat is
capital m%st !irst enter te market in te !orm o! money-capital, !or e does not prod%ce
commodities0 6e merely trades in tem, expedites teir mo8ement, and to operate @it tem e
m%st !irst b%y tem, and, tere!ore, m%st be in possession o! money-capital0
$%ppose tat a dealer in commodities o@ns V3,=== @ic e in8ests as a trading capital0 Wit
tese V3,=== e b%ys, say, 3=,=== yards o! linen !rom some linen man%!act%rer at <s0 per yard0 6e
ten sells te 3=,=== yards0 &! te ann%al a8erage rate o! pro!it R 1=T and e makes an ann%al
pro!it o! 1=T a!ter ded%cting all incidental expenses, ten by te end o! te year e as con8erted
is V3,=== into V3,3==0 6o@ e makes tis pro!it is a D%estion @ic @e sall disc%ss later0 ?t
present, @e intend to consider solely te !orm o! te mo8ements o! is capital0 Wit is V3,=== e
keeps b%ying linen and selling it# e constantly repeats tis operation o! b%ying in order to sell, M
I ; I M", te simple !orm o! capital as it obtains entirely in te process o! circ%lation,
%ninterr%pted by te prod%ction process, @ic lies o%tside its o@n mo8ement and !%nction0
Wat is no@ te relation o! tis commercial capital to commodity-capital as a mere !orm o!
existence o! ind%strial capitalQ $o !ar as te linen man%!act%rer is concerned, e as realised te
8al%e o! is linen @it te mercant"s money and tereby completed te !irst pase in te
metamorposis o! is commodity-capital I its con8ersion into money0 3ter conditions being
eD%al, e can no@ proceed to recon8ert tis money into yarn, coal, @ages, etc0, and into means o!
existence, etc0, !or te cons%mption o! is re8en%e0 6ence, lea8ing aside te re8en%e expendit%re,
e can go on @it is process o! reprod%ction0
A%t @ile te sale o! te linen, its metamorposis into money, as taken place !or im, as
prod%cer, it as not yet taken place !or te linen itsel!0 &t is still on te market as commodity-
capital a@aiting to %ndergo its !irst metamorposis I to be sold0 -oting as appened to tis
linen besides a cange in te person o! its o@ner0 ?s concerns its p%rpose, as concerns its place in
te process, it is still commodity-capital, a saleable commodity, @it te only di!!erence tat it is
no@ in te mercant"s ands instead o! te man%!act%rer"s0 5e !%nction o! selling it, o! e!!ecting
te !irst pase o! its metamorposis, as passed !rom te man%!act%rer to te mercant, as
18> ;apter J4&
become te special b%siness o! te mercant, @ereas pre8io%sly it @as a !%nction @ic te
prod%cer ad to per!orm imsel! a!ter a8ing completed te !%nction o! its prod%ction0
'et %s ass%me tat te mercant !ails to sell te 3=,=== yards o! linen d%ring te inter8al reD%ired
by te linen man%!act%rer to bring anoter 3=,=== yards to market at a 8al%e o! V3,===0 5e
mercant cannot b%y tem again, beca%se e still as in stock te %nsold 3=,=== yards @ic
a8e not as yet been recon8erted into money-capital0 ? stoppage ens%es, i.e., an interr%ption o!
reprod%ction0 5e linen prod%cer migt, o! co%rse, a8e additional money-capital at is disposal,
@ic e co%ld con8ert into prod%cti8e capital, regardless o! te sale o! te 3=,=== yards, in order
to contin%e te prod%ction process0 A%t tis @o%ld not alter te sit%ation0 $o !ar as te capital tied
%p in te 3=,=== yards o! linen is concerned, its process o! reprod%ction is, and remains,
interr%pted0 &t is, indeed, easily seen ere tat te mercant"s operations are really noting b%t
operations tat m%st be per!ormed at all e8ents to con8ert te prod%cer"s commodity-capital into
money0 5ey are operations @ic e!!ect te !%nctions o! commodity-capital in te circ%lation
and reprod%ction processes0 &! it de8ol8ed %pon te prod%cer"s clerk to attend excl%si8ely to te
sale, and also te p%rcase, instead o! an independent mercant, tis connection @o%ld not be
obsc%red !or a single moment0
;ommercial capital is, tere!ore, noting b%t te prod%cer"s commodity I capital @ic as to
%ndergo te process o! con8ersion into money I to per!orm its !%nction o! commodity-capital on
te market I te only di!!erence being tat instead o! representing an incidental !%nction o! te
prod%cer, it is no@ te excl%si8e operation o! a special kind o! capitalist, te mercant, and is set
apart as te b%siness o! a special in8estment o! capital0
5is becomes e8ident, !%rtermore, in te speci!ic !orm o! circ%lation o! commercial capital 5e
mercant b%ys a commodity and ten sells it: M I ; I M"0 &n te simple circ%lation o!
commodities, or e8en in te circ%lation o! commodities as it appears in te circ%lation process o!
ind%strial capital, ;" I M I ;, circ%lation is e!!ected by eac piece o! money canging ands
t@ice0 5e linen man%!act%rer sells is commodity-linen, con8erting it into money# te b%yer"s
money passes into is ands0 Wit tis same money e b%ys yarn, coal, labo%r, etc0 I expends te
money !or recon8erting te 8al%e o! linen into te commodities @ic make %p its prod%ction
elements0 5e commodity e b%ys is not te same commodity, not te same kind o! commodity
@ic e sells0 6e as sold prod%cts and bo%gt means o! prod%ction0 A%t it is di!!erent @it
respect to te mo8ements o! mercant"s capital0 Wit is V3,=== te linen mercant b%ys 3=,===
yards o! linen# e sells te same 3=,=== yards o! linen in order to retrie8e is money-capital
BV3,=== and te pro!itC !rom circ%lation0 &t is not te same pieces o! money, b%t rater te same
commodity @ic ere canges places t@ice# te commodity passes !rom te seller into te ands
o! te b%yer, and !rom te ands o! te b%yer, @o no@ becomes seller, into tose o! anoter
b%yer0 &t is sold t@ice, and may be sold repeatedly tro%g te medi%m o! a series o! mercants0
?nd it is precisely tro%g tis repeated sale, tro%g tis t@o-!old cange o! place o! te same
commodity, tat te money ad8anced !or its p%rcase by te !irst b%yer is retrie8ed, its re!l%x to
im e!!ected0 &n one case, ;" I M I ; e!!ects te t@o-!old cange o! place o! te same money, te
sale o! a commodity in one !orm and te p%rcase o! a commodity in anoter0 &n te oter case,
M I ; I M" e!!ects te t@o-!old cange o! place o! te same commodity, te @itdra@al o!
ad8anced money !rom circ%lation0 &t is e8ident tat te commodity as not been !inally sold @en
it passes !rom te prod%cer into te ands o! te mercant, in tat te latter merely carries on te
operation o! selling I or e!!ects te !%nction o! commodity-capital0 A%t at te same time it is
e8ident tat @at is ; I M, a mere !%nction o! is capital in its transient !orm o! commodity-
capital !or te prod%cti8e capitalist, is M I ; I M", a speci!ic increase in te 8al%e o! is ad8anced
money-capital, !or te mercant0 3ne pase o! te metamorposis o! commodities appears ere in
respect to te mercant in te !orm o! M I ; I M", ence as e8ol%tion o! a distinct kind o! capital0
5e mercant !inally sells is commodity, tat is, te linen, to te cons%mer, be it a prod%cti8e
cons%mer B!or instance, a bleacerC, or an indi8id%al @o acD%ires te linen !or is pri8ate %se0
188 ;apter J4&
5e mercant tereby reco8ers is ad8anced capital B@it a pro!itC, and can repeat is operation
ane@0 6ad te money ser8ed merely as a means o! payment in p%rcasing te linen, so tat te
mercant @o%ld a8e ad to pay only a!ter six @eeks, and ad e s%cceeded in selling be!ore tis
term @as o%t, e co%ld a8e paid te linen man%!act%rer @ito%t ad8ancing any money-capital o!
is o@n0 6ad e not sold it, e @o%ld a8e ad to ad8ance is V3,=== on te date o! expiration,
instead o! on deli8ery o! te linen0 ?nd i! a drop in te market-prices ad compelled im to sell
belo@ te p%rcase price, e @o%ld a8e ad to make good te sortage o%t o! is o@n capital0
Wat is it, ten, tat lends to commercial capital te caracter o! an independently operating
capital, @ereas in te ands o! te prod%cer @o does is o@n selling it is ob8io%sly merely a
special !orm o! is capital in a speci!ic pase o! te reprod%ction process d%ring its soHo%rn in te
spere o! circ%lationQ
'irst: 5e !act tat commodity-capital is !inally con8erted into money, tat it per!orms its initial
metamorposis, i.e., its appropriate !%nction on te market D%a commodity-capital @ile in te
ands o! an agent oter tan te prod%cer, and tat tis !%nction o! commodity-capital is e!!ected
by te mercant in is operations, is b%ying and selling, so tat tese operations ass%me te
appearance o! a separate %ndertaking distinct !rom te oter !%nctions o! ind%strial capital I and
ence o! an independent %ndertaking0 &t is a distinct !orm o! te social di8ision o! labo%r, so tat
part o! te !%nction ordinarily per!ormed as a special pase o! te reprod%ction process o! capital,
in tis case I circ%lation, appears as te excl%si8e !%nction o! speci!ic circ%lation agent distinct
!rom te prod%cer0 A%t tis alone @o%ld by no means gi8e tis partic%lar b%siness te aspect o! a
!%nction o! a speci!ic capital distinct !rom, and independent o!, ind%strial capital engaged in te
process o! reprod%ction# indeed, it does not so appear in cases @ere trade is carried on by
tra8elling salesmen or oter direct agents o! te ind%strial capitalist0 5ere!ore, tere m%st be a
second element in8ol8ed0
Second: 5is arises !rom te !act tat in is capacity as an independent circ%lation agent, te
mercant ad8ances money-capital Bis o@n or borro@edC0 5e transaction @ic !or ind%strial
capital in te reprod%ction process amo%nts merely to ; I M, i.e., con8erting commodity-capital
into money-capital, or mere sale, ass%mes !or te mercant te !orm o! M I ; I M", or p%rcase
and sale o! te same commodity, and t%s o! a re!l%x o! money-capital @ic lea8es im in te
p%rcase, and ret%rns to im in te sale0
&t is al@ays ; I M, te con8ersion o! commodity-capital into money-capital, @ic !or te
mercant ass%mes te !orm o! M I ; I M, inasm%c as e ad8ances capital to p%rcase
commodities !rom teir prod%cers# it is al@ays te !irst metamorposis o! commodity-capital,
alto%g !or a prod%cer, or !or ind%strial capital in process o! reprod%ction, te same transaction
may amo%nt to M I ;, to a recon8ersion o! money into commodities Bmeans o! prod%ctionC, to
te second pase o! te metamorposis0 For te linen prod%cer, te !irst metamorposis @as ; I
M, te con8ersion o! is commodity-capital into money-capital0 For te mercant te same act
appears as M I ;, as a con8ersion o! is money-capital into commodity-capital0 -o@, i! e sells
tis linen to a bleacer, it @ill mean M I ;, i.e., te con8ersion o! money capital into prod%cti8e
capital, tis being te second metamorposis o! is commodity-capital !or te bleacer, @ile !or
te mercant it means ; I M, te sale o! te linen e ad bo%gt0 A%t in !act it is only at tis
point tat te commodity-capital prod%ced by te linen man%!act%rer as been !inally sold0 &n
oter @ords, tis M I ; I M o! te mercant represents no more tan a middleman"s !%nction !or
; I M bet@een t@o man%!act%rers0 3r let %s ass%me tat te linen man%!act%rer b%ys yarn !rom a
yarn dealer @it a portion o! te 8al%e o! te sold linen0 5is is M I ; !or im0 A%t !or te
mercant selling te yarn it is ; I M, te resale o! te yarn0 ?s concerning te yarn in its capacity
o! commodity-capital, it is no more tan its !inal sale, @ereby it passes !rom te spere o!
circ%lation into tat o! cons%mption# it is ; I M, te cons%mmation o! its !irst metamorposis0
Weter te mercant b%ys, or sells to te ind%strial capitalist, is M I ; I M, te circ%it o!
mercant"s capital, al@ays expresses @at is H%st ; I M, or simply te completion o! its !irst
18* ;apter J4&
metamorposis, @it regard to te commodity-capital, a transient !orm o! ind%strial capital in
process o! reprod%ction0 5e M I ; o! mercant"s capital is ; I M only !or te ind%strial
capitalist, not !or te commodity-capital prod%ced by im0 &t is b%t te trans!er o! commodity-
capital !rom te ind%strial capitalist to te circ%lation agent0 &t is not %ntil te mercant"s capital
closes ; I M tat !%nctioning commodity-capital per!orms its !inal ; I M0 M I ; I M amo%nts
solely to t@o ; I M"s o! te same commodity-capital, t@o s%ccessi8e sales o! it, @ic merely
e!!ect its last and !inal sale0
5%s, commodity-capital ass%mes in commercial capital te !orm o! an independent type o!
capital beca%se te mercant ad8ances money-capital, @ic is realised and !%nctions as capital
only by ser8ing excl%si8ely to mediate te metamorposis o! commodity-capital, its !%nction as
commodity-capital, i.e., its con8ersion into money, and it accomplises tis by te contin%al
p%rcase and sale o! commodities0 5is is its excl%si8e operation0 5is acti8ity o! e!!ecting te
circ%lation process o! ind%strial capital is te excl%si8e !%nction o! te money-capital @it @ic
te mercant operates0 Ay means o! tis !%nction e con8erts is money into money-capital,
mo%lds is M into M I ; I M, and by te same process con8erts commodity-capital into
commercial capital0
$o long and so !ar as commercial capital exists in te !orm o! commodity-capital, it is ob8io%sly
noting else I !rom te standpoint o! te reprod%ction process o! te total social capital I b%t a
portion o! ind%strial capital in te market in process o! metamorposis, @ic exists and
!%nctions as commodity-capital0 &t is tere!ore only te money-capital ad8anced by te mercant
@ic is excl%si8ely destined !or p%rcase and sale and !or tis reason ne8er ass%mes any oter
!orm b%t tat o! commodity-capital and money-capital, ne8er tat o! prod%cti8e capital, and is
al@ays con!ined to te spere o! circ%lation o! capital I it is only tis money-capital @ic is no@
to be regarded @it re!erence to te entire reprod%ction process o! capital0
?s soon as te prod%cer, te linen man%!act%rer, as sold is 3=,=== yards to te mercant !or
V3,===, e %ses te money so obtained to b%y te necessary means o! prod%ction, so tat is
capital ret%rns to te prod%ction process0 6is process o! prod%ction contin%es @ito%t
interr%ption0 $o !ar as e is concerned, te con8ersion o! is commodity into money is
accomplised0 A%t !or te linen itsel!, as @e a8e seen, its metamorposis as not yet taken place0
&t as not yet been !inally recon8erted into money, as not yet passed as a %se-8al%e into eiter
prod%cti8e or indi8id%al cons%mption0 &t is no@ te linen mercant @o represents on te market
te same commodity-capital originally represented by te linen man%!act%rer0 For te latter te
process o! trans!ormation as been c%rtailed, only to be contin%ed in te mercant"s ands0
6ad te linen prod%cer been obliged to @ait %ntil is linen ad really ceased being a commodity,
%ntil it as passed into te ands o! its %ltimate b%yer, its prod%cti8e or indi8id%al cons%mer, is
process o! reprod%ction @o%ld a8e been interr%pted0 3r, to a8oid interr%pting it, e @o%ld a8e
ad to c%rtail is operations, to con8ert a smaller portion o! is linen into yarn, coal, labo%r, etc0,
in sort, into te elements o! prod%cti8e capital, and to retain a larger portion o! it as a money
reser8e, so tat @it one portion o! is capital on te market in te sape o! commodities, anoter
@o%ld contin%e te process o! prod%ction# one portion @o%ld be on te market in te !orm o!
commodities, @ile te oter ret%rned in te !orm o! money0 5is di8ision o! is capital is not
abolised by te mercant"s inter8ention0 A%t @ito%t it te portion o! money reser8e in te
capital o! circ%lation @o%ld al@ays a8e to be greater in relation to te part employed in te !orm
o! prod%cti8e capital, and te scale o! reprod%ction @o%ld a8e to be restricted accordingly0
&nstead, o@e8er, te man%!act%rer is enabled to constantly employ a larger portion o! is capital
in te act%al process o! prod%ction, and a smaller portion as money reser8e0
3n te oter and, o@e8er, anoter portion o! te social capital, in te !orm o! mercant"s
capital, is kept contin%ally @itin te spere o! circ%lation0 &t is employed all te time !or te sole
p%rpose o! b%ying and selling0 6ence tere seems to a8e been no more tan a replacement o!
persons olding tis capital in teir ands0
1*= ;apter J4&
&!, instead o! b%ying V3,=== @ort o! linen @it te p%rpose o! selling it again, te mercant ad
applied tese V3,=== prod%cti8ely, te prod%cti8e capital o! society @o%ld a8e increased0 5r%e,
te linen man%!act%rer @o%ld ten a8e been obliged to old back a larger portion o! is capital
as money reser8e, and like@ise te mercant, no@ trans!ormed into an ind%strial capitalist0 3n
te oter and, i! te mercant remains mercant, te man%!act%rer sa8es time in selling, @ic
e can de8ote to s%per8ising te prod%ction process, @ile te mercant m%st apply all is time to
selling0
&! mercant"s capital does not o8erstep its necessary proportions, it is to be in!erred,
1C tat as a res%lt o! te di8ision o! labo%r te capital de8oted excl%si8ely to b%ying and selling
Band tis incl%des not only te money reD%ired to b%y commodities, b%t also te money @ic
m%st be in8ested in labo%r to maintain te mercant"s establisment, and in is constant capital-
te storeo%ses, transport, etc0C is smaller tan it @o%ld be i! te ind%strial capitalist @ere
constrained to carry on te entire commercial part o! is b%siness on is o@n#
<C tat beca%se te mercant de8otes all is time excl%si8ely to tis b%siness, te prod%cer is able
to con8ert is commodities more rapidly into money, and, moreo8er, te commodity-capital itsel!
passes more rapidly tro%g its metamorposis tan it @o%ld in te ands o! te prod%cer#
3C tat in 8ie@ing te aggregate mercant"s capital in its relation to ind%strial capital, one t%rno8er
o! mercant"s capital may represent not only te t%rno8ers o! many capitals in one spere o!
prod%ction, b%t te t%rno8ers o! a n%mber o! capitals in di!!erent speres o! prod%ction0 5e
!ormer is te case @en, !or instance, te linen mercant, a!ter b%ying te prod%ct o! some linen
man%!act%rer @it is V3,===, sells it be!ore te same man%!act%rer brings anoter lot o! te same
D%antity to market, and b%ys, and again sells, te prod%ct o! anoter, or se8eral oter, linen
man%!act%rers, t%s e!!ecting te t%rno8ers o! di!!erent capitals in te same spere o! prod%ction0
5e latter is te case i!, !or example, te mercant a!ter selling is linen b%ys silk, t%s e!!ecting
te t%rno8er o! a capital in a di!!erent spere o! prod%ction0
&n general, it may be noted tat te t%rno8er o! ind%strial capital is limited not by te time o!
circ%lation alone, b%t also by te time o! prod%ction0 5e t%rno8er o! mercant"s capital dealing in
one kind o! commodity is not merely limited by te t%rno8er o! a single ind%strial capital, b%t by
tat o! all ind%strial capitals in te same branc o! prod%ction0 ?!ter te mercant as bo%gt and
sold te linen o! one prod%cer e can b%y and sell tat o! anoter, be!ore te !irst brings anoter
lot to te market0 5e same mercant"s capital may, tere!ore, s%ccessi8ely promote te di!!erent
t%rno8ers o! capitals in8ested in a certain branc o! prod%ction, @it te e!!ect tat its t%rno8er is
not identical @it te t%rno8ers o! a sole ind%strial capital, and does not tere!ore replace H%st te
single money reser8e @ic tat one ind%strial capitalist @o%ld a8e ad to old in petto0 5e
t%rno8er o! mercant"s capital in one spere o! prod%ction is nat%rally restricted by te total
prod%ction o! tat spere0 A%t it is not restricted by te scale o! prod%ction, or te period o!
t%rno8er, o! any one capital o! te same spere, so !ar as its period o! t%rno8er is D%ali!ied by its
time o! prod%ction0 $%ppose, ? s%pplies a commodity reD%iring tree monts !or its prod%ction0
?!ter te mercant as bo%gt and sold it, say, in one mont, e can b%y and sell te same
prod%ct o! some oter man%!act%rer0 3r a!ter e as sold, say, te corn o! one !armer, e can b%y
and sell tat o! anoter @it te same money, etc0 5e t%rno8er o! is capital is restricted by te
mass o! corn e is able to b%y and sell s%ccessi8ely @itin a certain period, !or instance, in one
year, @ile te t%rno8er o! te !armer"s capital is, regardless o! te time o! t%rno8er, restricted by
te time o! prod%ction, @ic lasts one year0
6o@e8er, te t%rno8er o! te same mercant"s capital may eD%ally @ell e!!ect te t%rno8ers o!
capitals in di!!erent brances o! prod%ction0
&n so !ar as te same mercant"s capital ser8es in di!!erent t%rno8ers to trans!orm di!!erent
commodity-capitals s%ccessi8ely into money, b%ying and selling tem one a!ter anoter, it
per!orms te same !%nction in its capacity o! money-capital @it regard to commodity-capital,
1*1 ;apter J4&
@ic money in general per!orms by means o! te n%mber o! its t%rno8ers in a gi8en period @it
regard to commodities0
5e t%rno8er o! mercant"s capital is not identical @it te t%rno8er, or a single reprod%ction, o!
an ind%strial capital o! eD%al siEe# it is rater eD%al to te s%m o! te t%rno8ers o! a n%mber o!
s%c capitals, @eter in te same or in di!!erent speres o! prod%ction0 5e more D%ickly
mercant"s capital is t%rned o8er, te smaller te portion o! total money-capital ser8ing as
mercant"s capital# and con8ersely, te more slo@ly it is t%rned o8er, te larger tis portion0 5e
less de8eloped prod%ction, te larger te s%m o! mercant"s capital in its relation to te s%m o! te
commodities tro@n into circ%lation# b%t te smaller in absol%te terms, or in comparison @it
more de8eloped conditions, and 8ice 8ersa0 &n s%c %nde8eloped conditions, tere!ore, te greater
part o! te act%al money-capital is in te ands o! mercants, @ose !ort%ne constit%tes money
@ealt 8is-O-8is te oters0
5e 8elocity o! circ%lation o! te money-capital ad8anced by te mercant depends 1C on te
speed @it @ic te process o! prod%ction is rene@ed and te di!!erent processes o! prod%ction
are linked togeter# and <C on te 8elocity o! cons%mption0
5o accomplis te t%rno8er @e a8e examined abo8e, mercant"s capital does not !irst a8e to
b%y commodities !or its !%ll amo%nt o! 8al%e, and ten to sell tem0 &nstead, te mercant
per!orms bot mo8ements sim%ltaneo%sly0 6is capital ten breaks %p into t@o parts0 3ne o! tem
consists o! commodity-capital, and te oter o! money-capital0 6e b%ys and con8erts is money
into commodities at one place0 Else@ere, e sells and con8erts anoter part o! is commodity-
capital into money0 3n one side, is capital ret%rns to im in te !orm o! money-capital, @ile on
te oter e gets commodity-capital0 5e larger te portion in one !orm, te smaller te portion in
te oter0 5is alternates and balances itsel!0 &! te %se o! money as a medi%m o! circ%lation
combines @it its %se as a means o! payment and te attendant de8elopment o! te credit system,
ten te money-capital part o! mercant"s capital is red%ced still more in relation to te 8ol%me o!
te transactions tis mercant"s capital e!!ects0 &! & b%y V3,=== @ort o! @ine on tree monts"
credit and sell all te @ine !or cas be!ore tis term expires, & do not need to ad8ance a single
penny !or tese transactions0 &n tis case it is also D%ite ob8io%s tat te money-capital, @ic
ere acts as mercant"s capital, is noting more tan ind%strial capital in its money-capital !orm,
in its process o! re!l%x in te !orm o! money0 B5e !act tat te man%!act%rer @o sold V3,===
@ort o! @ine on tree monts" credit may disco%nt is promissory note at te banker"s does not
alter te matter at all and as noting to do @it te mercant"s capital0C &! market-prices so%ld
!all in te meantime by, say, 1N1=, te mercant, !ar !rom making a pro!it, @o%ld reco8er only
V<,>== instead o! V3,===0 6e @o%ld a8e to p%t %p V3== o%t o! is o@n pocket0 5ese V3==
@o%ld ser8e merely as a reser8e to balance te di!!erence in price0 A%t te same applies to te
man%!act%rer0 &! e imsel! ad sold at !alling prices, e @o%ld like@ise a8e lost V3==, and
@o%ld not be able to res%me prod%ction on te same scale @ito%t reser8e capital0
5e linen mercant b%ys V3,=== @ort o! linen !rom te man%!act%rer0 5e latter pays, say,
V<,=== o! te V3,=== !or yarn0 6e b%ys tis yarn !rom a yarn dealer0 5e money @ic te
man%!act%rer pays to te yarn dealer is not te linen dealer"s money, !or te latter as recei8ed
commodities to tis amo%nt0 &t is te money-!orm o! te man%!act%rer"s o@n capital0 -o@ in te
ands o! te yarn dealer tese V<,=== appear as ret%rned money-capital0 A%t to @at extent are
tey tat as distinct !rom te V<,=== representing te discarded money-!orm o! te linen and te
ass%med money-!orm o! te yarnQ &! te yarn dealer bo%gt on credit and sold !or cas be!ore te
expiration o! is term o! payment, ten tese V<,=== do not contain one penny o! mercant"s
capital as distinct !rom te money-!orm @ic te ind%strial capital itsel! ass%mes in te co%rse o!
its circ%it0 &n so !ar as commercial capital is not, tere!ore, H%st a !orm o! ind%strial capital in te
mercant"s ands as commodity- or money-capital, it is noting b%t tat portion o! money-capital
@ic belongs directly to te mercant and circ%lates in te p%rcase and sale o! commodities0
3n a red%ced scale tis portion represents tat part o! capital ad8anced !or prod%ction @ic
1*< ;apter J4&
so%ld al@ays a8e to be in te ands o! te ind%strialist as money reser8e and means o!
p%rcase, and @ic so%ld al@ays a8e to circ%late as is money-capital0 5is portion, on a
red%ced scale, is no@ in te ands o! mercant capitalists and per!orms its !%nctions as s%c in
te process o! circ%lation0 &t is tat portion o! te total capital @ic, aside !rom @at is expended
as re8en%e, m%st contin%ally circ%late on te market as a means o! p%rcase in order to maintain
te contin%ity o! te process o! reprod%ction0 5e more rapid te process o! reprod%ction, and te
more de8eloped te !%nction o! money as a means o! payment, i.e., te more de8eloped te credit
system,
1
te smaller tat portion is in relation to te total capital0
Mercant"s capital is simply capital !%nctioning in te spere o! circ%lation0 5e process o!
circ%lation is a pase o! te total process o! reprod%ction0 A%t no 8al%e is prod%ced in te process
o! circ%lation, and, tere!ore, no s%rpl%s-8al%e0 3nly canges o! !orm o! te same mass o! 8al%e
take place0 &n !act, noting occ%rs tere o%tside te metamorposis o! commodities, and tis as
noting to do as s%c eiter @it te creation or cange o! 8al%es0 &! a s%rpl%s-8al%e is realised in
te sale o! prod%ced commodities, ten tis is only beca%se it already existed in tem0 &n te
second act, te re-excange o! money-capital against commodities Belements o! prod%ctionC, te
b%yer tere!ore does not realise any s%rpl%s-8al%e eiter0 6e merely initiates te prod%ction o!
s%rpl%s-8al%e tro%g excanging is money !or means o! prod%ction and labo%r-po@er0 A%t so
!ar as tese metamorposes reD%ire circ%lation time I time d%ring @ic capital does not prod%ce
at all, least o! all s%rpl%s-8al%e I it restricts te creation o! 8al%es, and te s%rpl%s-8al%e expresses
itsel! tro%g te rate o! pro!it in in8erse ratio to te d%ration o! te circ%lation period0 Mercant"s
capital, tere!ore, does not create eiter 8al%e or s%rpl%s-8al%e, at least not directly0 &n so !ar as it
contrib%tes to sortening te time o! circ%lation, it may elp indirectly to increase te s%rpl%s-
8al%e prod%ced by te ind%strial capitalists0 &n so !ar as it elps to expand te market and e!!ects
te di8ision o! labo%r bet@een capitals, ence enabling capital to operate on a larger scale, its
!%nction promotes te prod%cti8ity o! ind%strial capital, and its acc%m%lation0 &n so !ar as it
sortens circ%lation time, it raises te ratio o! s%rpl%s-8al%e to ad8anced capital, ence te rate o!
pro!it0 ?nd to te extent tat it con!ines a smaller portion o! capital to te spere o! circ%lation in
te !orm o! money-capital, it increases tat portion o! capital @ic is engaged directly in
prod%ction0
Chapter 17. Commercial Proft
We a8e seen in Aook && tat te p%re !%nctions o! capital in te spere o! ;irc%lation I te
operations @ic te ind%strial capitalist m%st per!orm, !irst, to realise te 8al%e o! is
commodities, and second, to recon8ert tis 8al%e into elements o! prod%ction, operations
e!!ecting te metamorposis o! commodity-capital, ;" I M I ;, ence te acts o! selling and
b%ying-prod%ce neiter 8al%e nor s%rpl%s-8al%e0 &t @as rater seen tat te time reD%ired !or tis
p%rpose, obHecti8ely in regard to commodities and s%bHecti8ely in regard to te capitalist, sets te
limit to te prod%ction o! 8al%e and s%rpl%s-8al%e0 Wat is tr%e o! te metamorposis o!
commodity-capital in general, is, o! co%rse, not in te least altered by te !act tat a part o! it may
ass%me te sape o! commercial capital, or tat te operations, e!!ecting te metamorposis o!
commodity-capital, appear as te special concern o! a special gro%p o! capitalists, or as te
excl%si8e !%nction o! a portion o! te money-capital0 &! selling and b%ying commodities I and tat
is @at te metamorposis o! commodity-capital ;" I M I ; amo%nts to I by ind%strial capitalists
temsel8es are not operations @ic create 8al%e or s%rpl%s-8al%e, tey @ill certainly not create
eiter o! tese @en carried o%t by persons oter tan te ind%strial capitalists0 F%rtermore, i!
tat portion o! te total social capital, @ic m%st contin%ally be on and as money-capital, in
order tat te process o! reprod%ction is not interr%pted by te process o! circ%lation and proceeds
contin%o%sly I i! tis money-capital creates neiter 8al%e nor s%rpl%s-8al%e, it cannot acD%ire te
properties o! creating tem by being contin%ally tro@n into circ%lation by some section o!
capitalists oter tan te ind%strial capitalists, to per!orm te same !%nction0 We a8e already
indicated to @at extent mercant"s capital may be indirectly prod%cti8e, and @e sall later
disc%ss tis point at greater lengt0
;ommercial capital, tere!ore I stripped o! all eterogeneo%s !%nctions, s%c as storing,
expressing, transporting, distrib%ting, retailing, @ic may be connected @it it, and con!ined to
its tr%e !%nction o! b%ying in order to sell I creates neiter 8al%e nor s%rpl%s-8al%e, b%t acts as
middleman in teir realisation and tereby sim%ltaneo%sly in te act%al excange o! commodities,
i.e., in teir trans!er !rom and to and, in te social metabolism0 -e8erteless, since te
circ%lation pase o! ind%strial capital is H%st as m%c a pase o! te reprod%ction process as
prod%ction is, te capital operating independently in te process o! circ%lation m%st yield te
a8erage ann%al pro!it H%st as @ell as capital operating in te 8ario%s brances o! prod%ction0
$o%ld mercant"s capital yield a iger percentage o! a8erage pro!it tan ind%strial capital, ten
a portion o! te latter @o%ld trans!orm itsel! into mercant"s capital0 $o%ld it yield a lo@er
a8erage pro!it, ten te con8erse @o%ld res%lt0 ? portion o! te mercant"s capital @o%ld ten be
trans!ormed into ind%strial capital0 -o species o! capital canges its p%rpose, or !%nction, @it
greater ease tan mercant"s capital0
$ince mercant"s capital does not itsel! prod%ce s%rpl%s-8al%e, it is e8ident tat te s%rpl%s-8al%e
@ic it pockets in te !orm o! a8erage pro!it m%st be a portion o! te s%rpl%s-8al%e prod%ced by
te total prod%cti8e capital0 A%t no@ te D%estion arises: 6o@ does mercant"s capital attract its
sare o! te s%rpl%s-8al%e or pro!it prod%ced by te prod%cti8e capitalQ
&t is H%st an ill%sion tat commercial pro!it is a mere addition to, or a nominal rise o!, te prices o!
commodities in excess o! teir 8al%e0
&t is plain tat te mercant can dra@ is pro!it only o%t o! te price o! te commodities e sells,
and plainer still tat te pro!it e makes in selling is commodities m%st be eD%al to te
di!!erence bet@een is p%rcase price and is selling price, i.e., eD%al to te excess o! te latter
o8er te !ormer0
1*2 ;apter J4&&
&t is possible tat additional costs Bcosts o! circ%lationC may enter into te commodities a!ter teir
p%rcase and be!ore teir sale, and it is also possible tat tis may not appen0 &! s%c costs
so%ld occ%r, it is plain tat te excess o! te selling price o8er te p%rcase price @o%ld not be
all pro!it0 5o simpli!y te analysis, @e sall ass%me at tis point tat no s%c costs occ%r0
For te ind%strial capitalist te di!!erence bet@een te selling price and te p%rcase price o! is
commodities is eD%al to te di!!erence bet@een teir price o! prod%ction and teir cost-price, or,
!rom te standpoint o! te total social capital, eD%al to te di!!erence bet@een te 8al%e o! te
commodities and teir cost-price !or te capitalists, @ic again comes do@n to te di!!erence
bet@een te total D%antity o! labo%r and te D%antity o! paid labo%r incorporated in tem0 Ae!ore
te commodities bo%gt by te ind%strial capitalist are tro@n back on te market as saleable
commodities, tey pass tro%g te process o! prod%ction, in @ic alone te portion o! teir
price to be realised as pro!it is created0 A%t it is di!!erent @it te mercant0 5e commodities are
in is ands only so long as tey are in te process o! circ%lation0 6e merely contin%es teir sale,
te realisation o! teir price @ic @as beg%n by te prod%cti8e capitalist, and tere!ore does not
ca%se tem to pass tro%g any intermediate process in @ic tey co%ld again absorb s%rpl%s-
8al%e0 Wile te ind%strial capitalist merely realises te pre8io%sly prod%ced s%rpl%s-8al%e, or
pro!it, in te process o! circ%lation, te mercant as not only to realise is pro!it d%ring and
tro%g circ%lation, b%t m%st !irst make it0 5ere appears to be no oter @ay o! doing tis o%tside
o! selling te commodities bo%gt by im !rom te ind%strial capitalist at teir prices o!
prod%ction, or, !rom te standpoint o! te total commodity-capital, at teir 8al%es in excess o!
teir prices o! prod%ction, making a nominal extra carge to teir prices, ence, selling tem,
!rom te standpoint o! te total commodity-capital, abo8e teir 8al%e, and pocketing tis excess
o! teir nominal 8al%e o8er teir real 8al%e# in sort, selling tem !or more tan tey are @ort0
5is metod o! adding an extra carge is easy to grasp0 For instance, one yard o! linen costs <s0 &!
& @ant to make a 1=T pro!it in reselling it, & m%st add 1N1= to te price, ence sell te yard at <s0
< <N+ d0 5e di!!erence bet@een its act%al price o! prod%ction and its selling price is ten R <
<N+d0, and tis represents a pro!it o! 1=T on <s0 5is amo%nts to my selling te yard to te b%yer
at a price @ic is in reality te price o! 1 1N1= yard0 3r, @at amo%nts to te same, it is as to%g
& sold to te b%yer only 1=N11 o! a yard !or <s0 and kept 1N11 o! a yard !or mysel!0 &n !act & can
b%y back 1N11 o! a yard !or < <N+d0 at te price o! <s0 < <N+d0 per yard0 5is @o%ld, tere!ore, be
H%st a ro%ndabo%t @ay o! saring in te s%rpl%s-8al%e and s%rpl%s-prod%ct by a nominal rise in te
price o! commodities0
5is is realisation o! commercial pro!it by raising te price o! commodities, as it appears at !irst
glance0 ?nd, indeed, tis @ole notion tat pro!it originates !rom a nominal rise in te price o!
commodities, or !rom teir sale abo8e teir 8al%e, springs !rom te obser8ations o! commercial
capital0
A%t it is D%ickly apparent on closer inspection tat tis is mere ill%sion0 ?ss%ming capitalist
prod%ction to be predominant, commercial pro!it cannot be realised in tis manner0 B&t is ere
al@ays a D%estion o! a8erages, not o! isolated cases0C Wy do @e ass%me tat te mercant can
realise a pro!it o! no more tan, say, 1=T on is commodities by selling tem 1=T abo8e teir
price o! prod%ctionQ Aeca%se @e ass%me tat te prod%cer o! tese commodities, te ind%strial
capitalist B@o appears as Kthe producerL be!ore te o%tside @orld, being te personi!ication o!
ind%strial capitalC, ad sold tem to te dealer at teir prices o! prod%ction0 &! te p%rcase price
o! commodities paid by te dealer is eD%al to teir price o! prod%ction, or, in te last instance,
eD%al to teir 8al%e, so tat te price o! prod%ction or, in te last instance, te 8al%e, represent te
mercant"s cost-price, ten, indeed, te excess o! is selling price o8er is p%rcase price I and
tis di!!erence alone is te so%rce o! is pro!it I m%st be an excess o! teir commercial price o8er
teir price o! prod%ction, so tat in te !inal analysis te mercant sells all commodities abo8e
teir 8al%es0 A%t @y @as it ass%med tat te ind%strial capitalist sells is commodities to te
mercant at teir prices o! prod%ctionQ 3r rater, @at @as taken !or granted in tat ass%mptionQ
1*+ ;apter J4&&
&t @as tat mercant"s capital did not go into !orming te general rate o! pro!it B@e are dealing
@it it as yet only in its capacity o! commercial capitalC0 We proceeded necessarily !rom tis
premise in disc%ssing te general rate o! pro!it, !irst, beca%se mercant"s capital as s%c did not
exist !or %s at te time, and, second, beca%se a8erage pro!it, and ence te general rate o! pro!it,
ad !irst to be de8eloped as a le8elling o! pro!its or s%rpl%s-8al%es act%ally prod%ced by te
ind%strial capitals in te di!!erent speres o! prod%ction0 A%t in te case o! mercant"s capital @e
are dealing @it a capital @ic sares in te pro!it @ito%t participating in its prod%ction0 6ence,
it is no@ necessary to s%pplement o%r earlier exposition0
$%ppose, te total ind%strial capital ad8anced in te co%rse o! te year R ><=c U 18=8 R *== Bsay
million VC, and tat s" R 1==T0 5e prod%ct tere!ore R ><=c U 18=8 U 18=s0 'et %s call tis prod%ct
or te prod%ced commodity-capital, ;, @ose 8al%e, or price o! prod%ction Bsince bot are
identical !or te totality o! commoditiesC R 1,=8=, and te rate o! pro!it !or te total social capital
o! *== R <=T0 5ese <=T are, according to o%r earlier analyses, te a8erage rate o! pro!it, since
te s%rpl%s-8al%e is not calc%lated ere on tis or tat capital o! any partic%lar composition, b%t
on te total ind%strial capital o! a8erage composition0 5%s, ; R 1,=8=, and te rate o! pro!it R
<=T0 'et %s no@ ass%me, o@e8er, tat aside !rom tese V*== o! ind%strial capital, tere are still
V1== o! mercant"s capital, @ic sares in te pro!it pro rata to its magnit%de H%st as te !ormer0
?ccording to o%r ass%mption, it is 1N1= o! te total capital o! 1,===0 5ere!ore, it participates to
te extent o! 1N1= in te total s%rpl%s-8al%e o! 18=, and t%s sec%res a pro!it o! 18T0 ?ct%ally,
ten, te pro!it to be distrib%ted among te oter 1N1= o! te total capital is only R 16<, or on te
capital o! *== like@ise R 18T0 6ence, te price at @ic ; is sold by te o@ners o! te ind%strial
capital o! *== to te mercants R ><=c U 18=8 U 16<s R 1,=6<0 &! te dealer ten adds te a8erage
pro!it o! 18T to is capital o! 1==, e sells te commodities at 1,=6< U 18 R 1,=8=, i.e., at teir
price o! prod%ction, or, !rom te standpoint o! te total commodity-capital, at teir 8al%e,
alto%g e makes is pro!it only d%ring and tro%g te circ%lation process, and only !rom an
excess o! is selling price o8er is p%rcase price0 .et e does not sell te commodities abo8e
teir 8al%e, or abo8e teir price o! prod%ction, precisely beca%se e as bo%gt tem !rom te
ind%strial capitalist belo@ teir 8al%e, or belo@ teir price o! prod%ction0
5%s, mercant"s capital enters te !ormation o! te general rate o! pro!it as a determinant pro
rata to its part in te total capital0 6ence, i! @e say in te gi8en case tat te a8erage rate o! pro!it
R 18T, it @o%ld R <=T, i! it @ere not tat 1N1= o! te total capital @as mercant"s capital and te
general rate o! pro!it tereby lo@ered by 1N1=0 5is leads to a closer and more compreensi8e
de!inition o! te price o! prod%ction0 Ay price o! prod%ction @e mean, H%st as be!ore, te price o!
a commodity R its costs Bte 8al%e o! te constant U 8ariable capital contained in itC U te a8erage
pro!it0 A%t tis a8erage pro!it is no@ determined di!!erently0 &t is determined by te total pro!it
prod%ced by te total prod%cti8e capital# b%t not as calc%lated on te total prod%cti8e capital
alone, so tat i! tis R *==, as ass%med abo8e, and te pro!it R 18=, ten te a8erage rate o! pro!it
R 18=N*== R <=T0 A%t, rater, as calc%lated on te total prod%cti8e U mercant"s capital, so tat
@it *== prod%cti8e and 1== mercant"s capital, te a8erage rate o! pro!it R 18=N1,=== R 18T0
5e price o! prod%ction is, tere!ore R k Bte costsC U 18, instead o! k U <=0 5e sare o! te total
pro!it !alling to mercant"s capital is t%s incl%ded in te a8erage rate o! pro!it0 5e act%al 8al%e,
or price o! prod%ction, o! te total commodity-capital is tere!ore R k U p U m B@ere m is
commercial pro!itC0 5e price o! prod%ction, or te price at @ic te ind%strial capitalist as s%c
sells is commodities, is t%s smaller tan te act%al price o! prod%ction o! te commodity# or in
terms o! all commodities taken togeter, te prices at @ic te class o! ind%strial capitalists sell
teir commodities are lo@er tan teir 8al%e0 6ence, in te abo8e case, *== BcostsC U 18T on *==,
or *== U 16<R 1,=6<0 &t !ollo@s, ten, tat in selling a commodity at 118 !or @ic e paid 1==
te mercant does, indeed, add 18T to te price0 A%t since tis commodity, !or @ic e paid
1==, is really @ort 118, e does not sell it abo8e its 8al%e0 We sall ence!ort %se te term price
o! prod%ction in tis, its more precise, sense0 &t is e8ident, tere!ore, tat te pro!it o! te
1*6 ;apter J4&&
ind%strial capitalist eD%als te excess o! te price o! prod%ction o! te commodity o8er its cost-
price, and tat commercial pro!it, as distinct !rom tis ind%strial pro!it, eD%als te excess o! te
selling price o8er te price o! prod%ction o! te commodity @ic, !or te mercant, is its
p%rcase price# b%t tat te act%al price o! te commodity R its price o! prod%ction U te
commercial pro!it0 P%st as ind%strial capital realises only s%c pro!its as already exist in te 8al%e
o! commodities as s%rpl%s-8al%e, so mercant"s capital realises pro!its only beca%se te entire
s%rpl%s-8al%e, or pro!it, as not as yet been !%lly realised in te price carged !or te commodities
by te ind%strial capitalist0
1
5e mercant"s selling price t%s exceeds te p%rcase price not
beca%se te !ormer exceeds te total 8al%e, b%t beca%se te latter is belo@ tis 8al%e0
Mercant"s capital, tere!ore, participates in le8elling s%rpl%s-8al%e to a8erage pro!it, alto%g it
does not take part in its prod%ction0 5%s, te general rate o! pro!it contains a ded%ction !rom
s%rpl%s-8al%e d%e to mercant"s capital, ence a ded%ction !rom te pro!it o! ind%strial capital0
&t !ollo@s !rom te !oregoing:
1C 5e larger te mercant"s capital in proportion to te ind%strial capital, te smaller te rate o!
ind%strial pro!it, and 8ice 8ersa0
<C &t @as demonstrated in te !irst part tat te rate o! pro!it is al@ays lo@er tan te rate o! te
act%al s%rpl%s-8al%e, i.e., it al@ays %nderstates te intensity o! exploitation, as in te abo8e case,
><=c U 18=8 U 18=s, te rate o! s%rpl%s-8al%e o! 1==T and a rate o! pro!it o! only <=T0 ?nd te
di!!erence becomes still greater, inasm%c as te a8erage rate o! pro!it appears smaller again,
dropping !rom <=T to 18T, i! te sare !alling to mercant"s capital is also taken into acco%nt0
5e a8erage rate o! pro!it o! te direct capitalist exploiter, tere!ore, expresses a rate o! pro!it
smaller tan it act%ally is0
?ss%ming all oter circ%mstances remaining te same, te relati8e 8ol%me o! mercant"s capital
B@it te exception o! te small dealer @o represents a ybrid !ormC is in in8erse proportion to
te 8elocity o! its t%rno8er, ence in in8erse proportion to te energy o! te process o!
reprod%ction in general0 &n te co%rse o! scienti!ic analysis, te !ormation o! a general rate o!
pro!it appears to res%lt !rom ind%strial capitals and teir competition, and is only later corrected,
s%pplemented, and modi!ied by te inter8ention o! mercant"s capital0 &n te co%rse o! its
istorical de8elopment, o@e8er, te process is really re8ersed0 &t is te commercial capital @ic
!irst determines te prices o! commodities more or less in accordance @it teir 8al%es, and it is
te spere o! circ%lation, te spere tat promotes te process o! reprod%ction, in @ic a general
rate o! pro!it initially takes sape0 &t is originally te commercial pro!it @ic determines te
ind%strial pro!it0 -ot %ntil te capitalist mode o! prod%ction as asserted itsel! and te prod%cer
imsel! as become mercant, is commercial pro!it red%ced to tat aliD%ot part o! te total
s%rpl%s-8al%e !alling to te sare o! mercant"s capital as an aliD%ot part o! te total capital
engaged in te social process o! reprod%ction0
&t @as seen in te s%pplementary eD%alisation o! pro!it tro%g te inter8ention o! mercant"s
capital tat no additional element entered te 8al%e o! commodities @it te mercant"s ad8anced
money-capital, and tat te extra carge to te price, @ereby te mercant makes is pro!it, @as
merely eD%al to tat portion o! te 8al%e o! te commodities, @ic prod%cti8e capital ad not
calc%lated in te price o! prod%ction, i.e., ad le!t o%t0 5e case o! tis money-capital is similar to
tat o! te ind%strial capitalist"s !ixed capital, since it is not cons%med and its 8al%e, tere!ore,
does not make %p an element o! te 8al%e o! commodity0 &t is in te p%rcase price o! commodity-
capital tat te mercant replaces its price o! prod%ction R M, in money0 6is o@n selling price, as
pre8io%sly so@n, is R M U M, @ere M stands !or te addition to te price o! commodities
determined by te general rate o! pro!it0 3nce e sells te commodities, is original money-
capital, @ic e ad8anced !or teir p%rcase, ret%rns to im togeter @it tis M0 We see once
more tat is money-capital is noting b%t te ind%strial capitalist"s commodity-capital
trans!ormed into money-capital, @ic a!!ects te magnit%de o! te 8al%e o! tis commodity-
1*> ;apter J4&&
capital no more tan @o%ld a direct sale o! te latter to te %ltimate cons%mer, instead o! to te
mercant0 &t, act%ally, merely anticipates te payment o! te cons%mer0 6o@e8er, tis is correct
only on te condition iterto ass%med, tat te mercant as no o8eread expenses, or tat aside
!rom te money-capital @ic e m%st ad8ance to b%y commodities !rom te prod%cer e need
not ad8ance any oter capital, circ%lating or !ixed, in te process o! commodity metamorposis0,
te process o! b%ying and selling0 A%t tis is not so in reality, as @e a8e seen in te analysis o!
te costs o! circ%lation BAook &&, ;ap0 4&C0 5ese costs o! circ%lation are partly expenses @ic
te mercant as to reclaim !rom oter agents o! circ%lation, and partly expenses arising directly
!rom is speci!ic b%siness0
-o matter @at te nat%re o! tese costs o! circ%lation I @eter tey arise !rom te p%rely
commercial nat%re o! te mercant"s establisment as s%c and ence belong to te mercant"s
speci!ic costs o! circ%lation, or represent items @ic are carges !or s%bseD%ent processes o!
prod%ction added in te process o! circ%lation, s%c as expressage, transport, storage, etc0 I tey
al@ays reD%ire o! te mercant, aside !rom is money-capital, ad8anced to te p%rcase o!
commodities, some additional capital !or te p%rcase and payment o! s%c means o! circ%lation0
?s m%c o! tis element o! cost as consists o! circ%lating capital passes @olly as an additional
element into te selling price o! te commodities# and as m%c o! it as consists o! !ixed capital
only to te extent o! its @ear and tear0 A%t only as an element @ic !orms a nominal 8al%e, e8en
i! as te p%rely commercial costs o! circ%lation, it does not add any real 8al%e to te commodities0
A%t @eter !ixed or circ%lating, tis entire additional capital participates in !orming te general
rate o! pro!it0
5e p%rely commercial costs o! circ%lation Bence, excl%ding costs o! expressage, sipping,
storage, etc0C resol8e temsel8es into costs reD%ired to realise te 8al%e o! commodities, to
trans!orm it !rom commodities into money, or !rom money into commodities, to e!!ect teir
excange0 We lea8e entirely o%t o! consideration all possible processes o! prod%ction @ic may
contin%e in te process o! circ%lation, and !rom @ic te mercant"s b%siness can be altogeter
separated# as, in !act, te act%al transport ind%stry and expressage may be, and are, ind%strial
brances entirely distinct !rom commercial# and p%rcaseable and saleable commodities may be
stored in docks or in oter p%blic premises, @it te res%ltant cost o! storage being carged to te
mercant by tird persons inasm%c as e as to ad8ance it0 ?ll tis takes place in act%al
@olesale commerce, @ere mercant"s capital appears in its p%rest !orm, %nmixed @it oter
!%nctions0 5e express company o@ner, te rail@ay director, and te sipo@ner, are not
Kmercants0L 5e costs @ic @e consider ere are tose o! b%ying and selling0 We a8e already
remarked earlier tat tese resol8e temsel8es into acco%nting, book-keeping, marketing,
correspondence, etc0 5e constant capital reD%ired !or tis p%rpose consists o! o!!ices, paper,
postage, etc0 5e oter costs break %p into 8ariable capital ad8anced !or te employment o!
mercantile @age-@orkers0 BExpressage, transport costs, ad8ances !or c%stoms d%ties, etc0, may
partly be considered as being ad8anced by te mercant in p%rcasing commodities and t%s
enter te p%rcase price as !ar as e is concerned0C
?ll tese costs are not inc%rred in prod%cing te %se-8al%e o! commodities, b%t in realising teir
8al%e0 5ey are p%re costs o! circ%lation0 5ey do not enter into te immediate process o!
prod%ction, b%t since tey are part o! te process o! circ%lation tey are also part o! te total
process o! reprod%ction0
5e only portion o! tese costs o! interest to %s at tis point is tat ad8anced as 8ariable capital0
B5e !ollo@ing D%estions so%ld also be analysed: First, o@ does te la@ tat only necessary
labo%r enters te 8al%e o! commodities operate in te process o! circ%lationQ $econd, o@ does
acc%m%lation obtain in mercant"s capitalQ 5ird, o@ does mercant"s capital !%nction in te
act%al aggregate reprod%ction process o! societyQC
5ese costs arise d%e to te prod%ct a8ing te economic !orm o! a commodity0
1*8 ;apter J4&&
&! te labo%r-time @ic te ind%strial capitalists temsel8es lose @ile directly selling
commodities to one anoter I ence, speaking obHecti8ely, te circ%lation time o! te
commodities I does not add 8al%e to tese commodities, it is e8ident tat tis labo%r-time does
not cange its nat%re in te least by !alling to te mercant instead o! te ind%strial capitalist0 5e
con8ersion o! commodities Bprod%ctsC into money, and o! money into commodities Bmeans o!
prod%ctionC is a necessary !%nction o! ind%strial capital and, tere!ore, a necessary operation o!
te capitalist I @o is act%ally b%t personi!ied capital endo@ed @it a conscio%sness o! its o@n
and a @ill0 A%t tese !%nctions neiter create 8al%e, nor prod%ce s%rpl%s-8al%e0 Ay per!orming
tese operations and carrying on te !%nctions o! capital in te spere o! circ%lation a!ter te
prod%cti8e capitalist as ceased to be in8ol8ed te mercant merely takes te place o! te
ind%strial capitalist0 5e labo%r-time reD%ired in tese operations is de8oted to certain necessary
operations o! te reprod%ction process o! capital, b%t yields no additional 8al%e0 &! te mercant
did not per!orm tese operations Bence, did not expend te labo%r-time entailedC, e @o%ld not
be applying is capital as a circ%lation agent o! ind%strial capital# e @o%ld not ten be contin%ing
te interr%pted !%nction o! te ind%strial capitalist, and conseD%ently co%ld not participate as a
capitalist pro rata to is ad8anced capital, in te mass o! pro!it prod%ced by ind%strial capitalists0
&n order to sare in te mass o! s%rpl%s-8al%e, to expand te 8al%e o! is ad8ance as capital, te
commercial capitalist need not employ @age-@orkers0 &! is b%siness and capital are small, e
may be te only @orker in it0 6e is paid @it tat portion o! te pro!it @ic !alls to im tro%g
te di!!erence bet@een te p%rcase price paid by im !or commodities and teir act%al price o!
prod%ction0
A%t, on te oter and, te pro!it realised by te mercant on a small amo%nt o! ad8anced capital
may be no larger, or may e8en be smaller, tan te @ages o! one o! te better-paid skilled @age-
@orkers0 &n !act, e br%ses so%lders @it many direct commercial agents o! te prod%cti8e
capitalist, s%c as b%yers, sellers, tra8ellers, @o enHoy te same or a iger income eiter in te
!orm o! @ages, or in te !orm o! a sare in te pro!it Bpercentages, bon%sesC made !rom eac sale0
&n te !irst case, te mercant pockets te mercantile pro!it as an independent capitalist# in te
oter, te salesman, te ind%strial capitalist"s @age-labo%rer, recei8es a portion o! te pro!it eiter
in te !orm o! @ages, or as a proportional sare in te pro!it o! te ind%strial capitalist, @ose
direct agent e is, @ile is employer pockets bot te ind%strial and te commercial pro!it0 A%t
in all tese cases, alto%g is income may appear to te circ%lation agent as an ordinary @age, as
payment !or @ork per!ormed, and alto%g, @ere it does not so appear, te pro!it may be no
larger tan te @age o! a better-paid labo%rer, is income is deri8ed solely !rom te mercantile
pro!it0 5is !ollo@s !rom is labo%r not being labo%r @ic prod%ces 8al%e0
5e lengtening o! te act o! circ%lation represents !or te ind%strial capitalist 1C a personal loss
o! time, since it pre8ents im !rom per!orming in person is !%nction as manager o! te
prod%cti8e process# <C a longer stay o! is prod%ct in money- or commodity-!orm, in te
circ%lation process, ence in a process @ere it does not expand 8al%e and @ere te direct
prod%ction process is interr%pted0 &! tis process is not to be interr%pted, prod%ction m%st eiter
be c%rtailed, or more money-capital m%st be ad8anced to maintain te process o! prod%ction on
te same scale0 5is means tat eac time eiter a smaller pro!it is made on te capital iterto
in8ested, or tat additional money-capital m%st be ad8anced to make te pre8io%s pro!it0 ?ll tis
remains %ncanged @en te mercant takes te place o! te ind%strial capitalist0 &nstead o! te
ind%strial capitalist de8oting more time to te process o! circ%lation, it is te mercant @o is so
engaged# instead o! te ind%strial capitalist it is te mercant @o ad8ances additional capital !or
circ%lation# or, @at amo%nts to te same ting, instead o! a large portion o! te ind%strial capital
being contin%ally di8erted into te process o! circ%lation, it is te mercant"s capital @ic is
@olly tied %p in it# and instead o! making a smaller pro!it, te ind%strial capitalist m%st yield a
portion o! is pro!it @olly to te mercant0 $o long as mercant"s capital remains @itin te
bo%nds in @ic it is necessary, te only di!!erence is tat tis di8ision o! te !%nctions o! capital
1** ;apter J4&&
red%ces te time excl%si8ely %sed %p in te process o! circ%lation, tat less additional capital is
ad8anced !or tis p%rpose, and tat te loss in total pro!it, represented by mercantile pro!it, is
smaller tan it @o%ld oter@ise a8e been0 &! in te abo8e example, ><=c U 18=8 U 18=s, assisted
by a mercant"s capital o! 1==, prod%ces a pro!it o! 16<, or 18T, !or te ind%strial capitalist,
ence implying a ded%ction o! 18, ten, b%t !or tis independent mercant"s capital, te additional
capital reD%ired @o%ld probably be <==, and @e so%ld a8e a total ad8ance by te ind%strial
capitalist o! 1,1== instead o! *==, @ic, based %pon a s%rpl%s-8al%e o! 18=, @o%ld yield a rate o!
pro!it o! only 16 2N11T0
&! te ind%strial capitalist @o acts as is o@n mercant ad8ances not only te additional capital
to b%y ne@ commodities be!ore is prod%ct in te process o! circ%lation as been recon8erted into
money, b%t also capital Bo!!ice expenses and @ages !or commercial employeesC to realise te
8al%e o! is commodity-capital, or, in oter @ords, !or te process o! circ%lation, ten tese
s%pplements !orm additional capital, b%t do not create s%rpl%s-8al%e0 5ey m%st be made good
o%t o! te 8al%e o! te commodities, beca%se a portion o! te 8al%e o! tese commodities m%st be
recon8erted into tese circ%lation costs0 A%t no additional s%rpl%s-8al%e is created tereby0 $o !ar
as tis concerns te total capital o! society, it means in !act tat a portion o! it m%st be set aside
!or secondary operations @ic are no part o! te sel!-expansion process, and tat tis portion o!
te social capital m%st be contin%ally reprod%ced !or tis p%rpose0 5is red%ces te rate o! pro!it
!or te indi8id%al capitalist and !or te entire class o! ind%strial capitalists, an e!!ect arising !rom
e8ery ne@ in8estment o! additional capital @ene8er s%c capital is reD%ired to set in motion te
same mass o! 8ariable capital0
&n so !ar as tese additional costs connected @it te b%siness o! circ%lation are trans!erred !rom
te ind%strial to te commercial capitalist, tere takes place a similar red%ction in te rate o!
pro!it, b%t to a lesser degree and in a di!!erent @ay0 &t no@ de8elops tat te mercant ad8ances
more capital tan @o%ld be necessary i! tese costs did not exist, and tat te pro!it on tis
additional capital increases te amo%nt o! te commercial pro!it, so tat more o! te mercant"s
capital Hoins ind%strial capital in le8elling te a8erage rate o! pro!it and tereby te a8erage pro!it
!alls0 &! in o%r abo8e example an additional capital o! += is ad8anced besides te mercant"s
capital o! 1== to co8er te costs in D%estion, ten te total s%rpl%s-8al%e o! 18= is distrib%ted @it
respect to a prod%cti8e capital o! *== pl%s a mercant"s capital o! 1+=, togeter R 1,=+=0 5e
a8erage rate o! pro!it, tere!ore, sinks to 1> 1N>T 5e ind%strial capitalist sells is commodities
to te mercant at *== U 1+2 <N> R 1,=+2< 1N>, and te mercant sells tem at 1,13= B1,=8= U +=
!or costs @ic e m%st reco8erC0 Moreo8er, it m%st be admitted tat te di8ision bet@een
mercant"s and ind%strial capital is accompanied by a centralisation o! te commercial expenses
and, conseD%ently, by teir red%ction0
5e D%estion no@ arises: Wat abo%t te commercial @age-@orkers employed by te commercial
capitalist, ere te mercantQ
&n one respect, s%c a commercial employee is a @age-@orker like any oter0 &n te !irst place, is
labo%r-po@er is bo%gt @it te 8ariable capital o! te mercant, not @it money expended as
re8en%e, and conseD%ently it is not bo%gt !or pri8ate ser8ice, b%t !or te p%rpose o! expanding
te 8al%e o! te capital ad8anced !or it0 &n te second place, te 8al%e o! is labo%r-po@er, and
t%s is @ages, are determined as tose o! oter @age-@orkers, i.e., by te cost o! prod%ction and
reprod%ction o! is speci!ic labo%r-po@er, not by te prod%ct o! is labo%r0
6o@e8er, @e m%st make te same distinction bet@een im and te @age-@orkers directly
employed by ind%strial capital @ic exists bet@een ind%strial capital and mercant"s capital, and
t%s bet@een te ind%strial capitalist and te mercant0 $ince te mercant, as a mere agent o!
circ%lation, prod%ces neiter 8al%e nor s%rpl%s-8al%e B!or te additional 8al%e @ic e adds to
te commodities tro%g is expenses resol8es itsel! into an addition o! pre8io%sly existing
8al%es, alto%g te D%estion ere poses itsel!, o@ e preser8es tis 8al%e o! is constant
capitalQC it !ollo@s tat te mercantile @orkers employed by im in tese same !%nctions cannot
<== ;apter J4&&
directly create s%rpl%s-8al%e !or im0 6ere, as in te case o! prod%cti8e labo%rers, @e ass%me tat
@ages are determined by te 8al%e o! te labo%r-po@er, and tat, ence, te mercant does not
enric imsel! by depressing @ages, so tat e does not enter into is cost acco%nt an ad8ance !or
labo%r @ic e as paid only in part# in oter @ords, tat e does not enric imsel! tro%g
ceating is clerks, etc0
5e di!!ic%lty as concerns mercantile @age-@orkers is by no means to explain o@ tey prod%ce
direct pro!its !or teir employer @ito%t creating any direct s%rpl%s-8al%e Bo! @ic pro!it is b%t a
transm%ted !ormC0 5is D%estion as, indeed, already been sol8ed in te general analysis o!
commercial pro!its0 P%st as ind%strial capital makes pro!it by selling labo%r embodied and realised
in commodities, !or @ic it as not paid any eD%i8alent, so mercant"s capital deri8es pro!it !rom
not paying in !%ll to prod%cti8e capital !or all te %npaid labo%r contained in te commodities Bin
commodities, in so !ar as capital in8ested in teir prod%ction !%nctions as an aliD%ot part o! te
total ind%strial capitalC, and by demanding payment !or tis %npaid portion still contained in te
commodities @en making a sale0 5e relation o! mercant"s capital to s%rpl%s-8al%e is di!!erent
!rom tat o! ind%strial capital0 5e latter prod%ces s%rpl%s-8al%e by directly appropriating te
%npaid labo%r o! oters0 5e !ormer appropriates a portion o! tis s%rpl%s-8al%e by a8ing tis
portion trans!erred !rom ind%strial capital to itsel!0
&t is only tro%g its !%nction o! realising 8al%es tat mercant"s capital acts as capital in te
process o! reprod%ction, and ence dra@s on te s%rpl%s-8al%e prod%ced by te total capital0 5e
mass o! te indi8id%al mercant"s pro!its depends on te mass o! capital tat e can apply in tis
process, and e can apply so m%c more o! it in b%ying and selling, te more te %npaid labo%r o!
is clerks0 5e 8ery !%nction, by 8irt%e o! @ic te mercant"s money becomes capital, is largely
done tro%g is employees0 5e %npaid labo%r o! tese clerks, @ile it does not create s%rpl%s-
8al%e, enables im to appropriate s%rpl%s-8al%e, @ic, in e!!ect, amo%nts to te same ting @it
respect to is capital0 &t is, tere!ore, a so%rce o! pro!it !or im0 3ter@ise commerce co%ld ne8er
be cond%cted on a large scale, capitalistically0
P%st as te labo%rer"s %npaid labo%r directly creates s%rpl%s-8al%e !or prod%cti8e capital, so te
%npaid labo%r o! te commercial @age-@orker sec%res a sare o! tis s%rpl%s-8al%e !or mercant"s
capital0
5e di!!ic%lty lies ere: $ince te mercant"s labo%r-time and labo%r do not create 8al%e, alto%g
tey sec%re !or im a sare o! already prod%ced s%rpl%s-8al%e, o@ does te matter stand @it te
8ariable capital @ic e lays o%t in p%rcasing commercial labo%r-po@erQ &s tis 8ariable capital
to be incl%ded in te cost o%tlays o! te ad8anced mercant"s capitalQ &! not, tis appears to
con!lict @it te la@ o! eD%alisation o! te rate o! pro!it# @at capitalist @o%ld ad8ance 1+= i! e
co%ld carge only 1== to ad8anced capitalQ &! so, it seems to con!lict @it te nat%re o!
mercant"s capital, since tis kind o! capital does not act as capital by setting in motion te labo%r
o! oters, as ind%strial capital does, b%t rater by doing its o@n @ork, i.e., per!orming te
!%nctions o! b%ying and selling, tis being precisely te means and te reason @y it recei8es a
portion o! te s%rpl%s-8al%e prod%ced by te ind%strial capital0
BWe m%st tere!ore analyse te !ollo@ing points: te mercant"s 8ariable capital# te la@ o!
necessary labo%r in te spere o! circ%lation# o@ te mercant"s labo%r maintains te 8al%e o! is
constant capital# te part played by mercant"s capital in te process o! reprod%ction as a @ole#
and, !inally, te d%plication in commodity-capital and money-capital, on te one and, and in
commercial capital and money-dealing capital on te oter0C
&! e8ery mercant ad only as m%c capital as e imsel! @ere able to t%rn o8er by is o@n
labo%r, tere @o%ld be in!inite !ragmentation o! mercant"s capital0 5is !ragmentation @o%ld
increase in te same proportion as prod%cti8e capital raised prod%ction and operated @it greater
masses in te !or@ard marc o! te capitalist mode o! prod%ction0 6ence, an increasing
disproportion o! te t@o0 ;apital in te spere o! circ%lation @o%ld become decentralised in te
<=1 ;apter J4&&
same proportion as it became centralised in te spere o! prod%ction0 5e p%rely commercial
b%siness o! te ind%strial capitalist, and t%s is p%rely commercial expenses, @o%ld expand
in!initely tereby, !or e @o%ld a8e to deal @it, say, 1,=== mercants, instead o! 1==0 5%s, te
ad8antages o! independently operating mercant"s capital @o%ld largely be lost0 ?nd not te
p%rely commercial expenses alone, b%t also te oter costs o! circ%lation, s%c as sorting,
expressage, etc0, @o%ld gro@0 5is, as !ar as te ind%strial capital is concerned0 -o@ let %s
consider mercant"s capital0 Firstly, te p%rely commercial operations0 &t does not take more time
to deal @it large !ig%res tan @it small ones0 &t takes ten times as m%c time to make 1=
p%rcases at V1== eac as it does to make one p%rcase at V1,===0 &t takes ten times as m%c
correspondence, paper, and postage, to correspond @it 1= small mercants as it does @it one
large mercant0 5e clearly de!ined di8ision o! labo%r in a commercial o!!ice, in @ic one keeps
te books, anoter looks a!ter money matters, a tird as carge o! correspondence, one b%ys,
anoter sells, a tird tra8els, etc0, sa8es immense D%antities o! labo%r-time, so tat te n%mber o!
@orkers employed in @olesale commerce are in no @ay related to te comparati8e siEe o! te
establisment0 5is is so, beca%se in commerce m%c more tan in ind%stry te same !%nction
reD%ires te same labo%r-time, @eter per!ormed on a large or a small scale0 5is is te reason
@y concentration appears earlier istorically in te mercant"s b%siness tan in te ind%strial
@orksop0 F%rter, regarding o%tlays in constant capital0 3ne %ndred small o!!ices cost
incomparably more tan one large o!!ice, 1== small @areo%ses more tan a large one, etc0 5e
costs o! transport, @ic enter te acco%nts o! a commercial establisment at least as costs to be
ad8anced, gro@ @it te !ragmentation0
5e ind%strial capitalist @o%ld a8e to lay o%t more in labo%r and in circ%lation costs in te
commercial part o! is b%siness0 5e same mercant"s capital, @en di8ided among many small
capitalists, @o%ld, o@ing to tis !ragmentation, reD%ire more labo%rers to per!orm its !%nctions,
and more mercant"s capital @o%ld, !%rtermore, be needed to t%rn o8er te same commodity-
capital0
$%ppose A is te entire mercant"s capital directly applied in b%ying and selling commodities, and
b te corresponding 8ariable capital paid o%t in @ages to te commercial employees0 5en A U b
is smaller tan te total mercant"s capital, A, @o%ld be i! e8ery mercant ad to get along
@ito%t assistants, ence @o%ld in8est noting in b0 6o@e8er, @e a8e not yet o8ercome te
di!!ic%lty0
5e selling price o! te commodities m%st s%!!ice 1C to pay te a8erage pro!it on A U b0 5is is
explained i! only by te !act tat A U b is generally a red%ction o! te original A, representing a
smaller mercant"s capital tan @o%ld be reD%ired @ito%t b0 A%t tis selling price m%st s%!!ice <C
to co8er not only te additional pro!it on b, b%t to replace also te paid @ages, te mercant"s
8ariable capital R b0 5is last consideration gi8es rise to te di!!ic%lty0 7oes b represent a ne@
constit%ent o! te price, or is it merely a part o! te pro!it made by means o! A U b, @ic appears
as @ages only so !ar as te mercantile @age-@orker is concerned, and as concerns te mercant
simply replaces 8ariable capitalQ &n te latter case, te mercant"s pro!it on is ad8anced capital A
U b @o%ld H%st eD%al te pro!it d%e to A by 8irt%e o! te general rate, pl%s b, @ic e pays o%t in
te !orm o! @ages, b%t @ic does not itsel! yield a pro!it0
5e cr%x o! te matter is, indeed, to !ind te limits Bmatematically speakingC o! b0 'et %s !irst
acc%rately de!ine te problem0 'et A stand !or capital in8ested directly in b%ying and selling
commodities, K !or te constant capital Bact%al andling costsC cons%med in tis !%nction, and b
!or te 8ariable capital in8ested by te mercant0
)eco8ering A o!!ers no di!!ic%lties at all0 For te mercant it is simply te realised p%rcase
price, and te price o! prod%ction !or te man%!act%rer0 &t is te price paid by te mercant, and in
reselling e reco8ers A as part o! is selling price# in addition to tis A, e makes a pro!it on A, as
pre8io%sly explained0 For example, let te commodity cost V1==0 $%ppose te pro!it is 1=T0 &n
<=< ;apter J4&&
tat case, te commodity is sold at 11=0 5e commodity pre8io%sly cost 1==, and te mercant"s
capital o! 1== merely adds 1= to it0
-o@ i! @e look at K, it is at most as large as, b%t in !act smaller tan, te portion o! constant
capital @ic te prod%cer @o%ld %se %p in b%ying and selling, b%t ten it @o%ld !orm an addition
to te constant capital e reD%ires directly in prod%ction0 5is portion, noneteless, m%st be
contin%ally reco8ered in te price o! te commodity, or, @at amo%nts to te same, a
corresponding portion o! te commodity m%st be contin%ally expended in tis !orm, or, !rom te
standpoint o! te total capital o! society, m%st be contin%ally reprod%ced in tis !orm0 5is portion
o! te ad8anced constant capital @o%ld a8e a limiting e!!ect on te rate o! pro!it, H%st as te
entire mass o! it directly in8ested in prod%ction0 &n so !ar as te ind%strial capitalist lea8es te
commercial part o! is b%siness to te mercant, e need not ad8ance tis part o! te capital0 5e
mercant ad8ances it in is stead0 &n a @ay, e does tis b%t nominally, since a mercant neiter
prod%ces, nor reprod%ces, te constant capital cons%med by im Bte act%al andling costsC0 &ts
prod%ction appears a separate b%siness, or at least a part o! te b%siness, o! some ind%strial
capitalists @o t%s play a role similar to tose @o s%pply constant capital to prod%cers o!
necessities o! li!e0 First, tere!ore, te mercant as tis constant capital reco8ered !or im and,
secondly, recei8es is pro!it on it0 5ro%g bot o! tese, tere!ore, te ind%strial capitalist"s
pro!it is red%ced0 A%t o@ing to economising and concentration @ic are bo%nd %p @it di8ision
o! labo%r, it srinks less tan it @o%ld i! e imsel! ad to ad8ance tis capital0 5e red%ction in
te rate o! pro!it is less, beca%se te capital t%s ad8anced is less0
$o !ar, ten, te selling price is made %p o! A U K U te pro!it on A U K0 5is portion o! it o!!ers
no !%rter di!!ic%lties0 A%t no@ b, te 8ariable capital ad8anced by te mercant, enters into it0
5e res%ltant selling price is A U K U b U te pro!it on A U K U te pro!it on b0
A merely reco8ers te p%rcase price and adds noting to it b%t te pro!it on A0 K adds te pro!it
on K, and K itsel!# b%t K U te pro!it on K, te part o! te circ%lation costs ad8anced in te !orm
o! constant capital U te corresponding a8erage pro!it, @o%ld be larger in te ands o! te
ind%strial capitalist tan in te mercant"s0 5e srinking o! te a8erage pro!it appears in te !orm
o! te !%ll a8erage pro!it calc%lated a!ter ded%cting A U K !rom te ad8anced ind%strial capital,
@it te ded%ction !rom te a8erage pro!it on A U K paid to te mercant, so tat tis ded%ction
appears as te pro!it o! a speci!ic capital, mercant"s capital0
A%t te sit%ation is di!!erent @it respect to b U te pro!it on b, or, in te present case, @ere te
rate o! pro!it is ass%med R 1=T, @it b U 1N1= b0 ?nd te real di!!ic%lty lies ere0
Wat te mercant b%ys @it b is, according to o%r ass%mption, noting b%t commercial labo%r,
ence labo%r reD%ired to per!orm te !%nctions o! circ%lating capital, ; I M and M I ;0 A%t
commercial labo%r is te labo%r generally necessary !or a capital to operate as mercant"s capital,
to elp con8ert commodities into money and money into commodities0 &t is labo%r @ic realises,
b%t does not create, 8al%es0 ?nd only in so !ar as a capital per!orms tese !%nctions I ence a
capitalist per!orms tese operations, or tis @ork @it is capital I does it ser8e as mercant"s
capital and participate in reg%lating te general rate o! pro!it, i.e., dra@ its di8idends o%t o! te
total pro!it0 A%t Bb U te pro!it on bC appears to incl%de, !irst, payment !or labo%r B!or it makes no
di!!erence @eter te ind%strial capitalist pays te mercant !or is o@n labo%r, or te labo%r o!
te clerks paid by te mercantC, and, secondly, te pro!it on te payment !or tis labo%r, @ic
te mercant @o%ld a8e to per!orm in person0 First, mercant"s capital gets its b re!%nded, and,
secondly, e makes te pro!it on it0 5is arises !rom te !act, tere!ore, tat, !irst, it reD%ires
payment !or te @ork @ereby it operates as merchant5s capital, and tat, secondly, it demands
te pro!it, beca%se it operates as capital, i.e., beca%se it per!orms @ork !or @ic pro!it is paid to
it as !%nctioning capital0 5is is, tere!ore, te D%estion to be sol8ed0
'et %s ass%me tat A R 1==, b R 1=, and te rate o! pro!it R 1=T0 We take it tat K R =, in order to
lea8e o%t o! consideration tis element o! te p%rcase price, @ic does not belong ere and as
<=3 ;apter J4&&
already been acco%nted !or0 6ence, te selling price @o%ld R A U p U b U p BR A U Ap" U b U bp"#
@ere p stands !or te rate o! pro!itC R 1== U 2= U 1= U 1R1<10
A%t i! b @ere not in8ested by te mercant in @ages I since b is paid only !or commercial labo%r,
ence labo%r reD%ired, to realise te 8al%e o! te commodity I capital tro@n on te market by
ind%strial capital I te matter @o%ld stand as !ollo@s: to b%y or sell !or A R 1==, te mercant
@o%ld de8ote is time, and @e @is to ass%me tat tis is te only time at is disposal0 5e
commercial labo%r represented by b, or 1=, i! paid !or by pro!it instead o! @ages, @o%ld
pres%ppose anoter mercant"s capital R 1==, since at 1=T tis makes b R 1=0 5is second A R
1== @o%ld not additionally go into te price o! commodities, b%t te 1=T @o%ld0 5ere @o%ld,
ence, be t@o operations at 1== R <==, tat @o%ld b%y commodities at <== U <= R <<=0
$ince mercant"s capital is absol%tely noting b%t an indi8id%alised !orm o! a portion o! ind%strial
capital engaged in te process o! circ%lation, all D%estions re!erring to it m%st be sol8ed by
representing te problem primarily in a !orm# in @ic te penomena pec%liar to mercant"s
capital do not yet appear independently, b%t still in direct connection @it ind%strial capital, as a
branc o! it0 ?s an o!!ice, distinct !rom a @orksop, mercantile capital operates contin%ally in te
circ%lation process0 &t is ere I in te o!!ice o! te ind%strial capitalist imsel! I tat @e m%st !irst
analyse te b no@ %nder consideration0
5e o!!ice is !rom te o%tset al@ays in!initesimally small compared to te ind%strial @orksop0
?s !or te rest, it is clear tat as te scale o! prod%ction is extended, commercial operations
reD%ired constantly !or te circ%lation o! ind%strial capital, in order to sell te prod%ct existing as
commodity-capital, to recon8ert te money so recei8ed into means o! prod%ction, and to keep
acco%nt o! te @ole process, m%ltiply accordingly0 ;alc%lation o! prices, book-keeping,
managing !%nds, correspondence I all belong %nder tis ead0 5e more de8eloped te scale o!
prod%ction, te greater, e8en i! not proportionately greater, te commercial operations o! te
ind%strial capital, and conseD%ently te labo%r and oter costs o! circ%lation in8ol8ed in realising
8al%e and s%rpl%s-8al%e0 5is necessitates te employment o! commercial @age-@orkers @o
make %p te act%al o!!ice sta!!0 5e o%tlay !or tese, alto%g made in te !orm o! @ages, di!!ers
!rom te 8ariable capital laid o%t in p%rcasing prod%cti8e labo%r0 &t increases te o%tlay o! te
ind%strial capitalist, te mass o! te capital to be ad8anced, @ito%t directly increasing s%rpl%s-
8al%e0 Aeca%se it is an o%tlay !or labo%r employed solely in realising 8al%e already created0 'ike
e8ery oter o%tlay o! tis kind, it red%ces te rate o! pro!it be-ca%se te ad8anced capital
increases, b%t not te s%rpl%s-8al%e0 &! s%rpl%s-8al%e s remains constant @ile ad8anced capital ;
increases to ; U ;, ten te rate o! pro!it sN; is replaced by te smaller rate o! pro!it sN; U ;0
5e ind%strial capitalist endea8o%rs, tere!ore, to c%t tese expenses o! circ%lation do@n to a
minim%m, H%st as is expenses !or constant capital0 6ence, ind%strial capital does not maintain te
same attit%de to its commercial @age-labo%rers as it does to its prod%cti8e @age-labo%rers0 5e
more prod%cti8e @age-labo%rers it employs %nder oter@ise eD%al circ%mstances, te greater te
o%tp%t, and te greater te s%rpl%s-8al%e, or pro!it0 ;on8ersely, o@e8er, te larger te scale o!
prod%ction, te greater te D%antity o! 8al%e and s%rpl%s-8al%e to be realised, te greater te
prod%ced commodity-capital, te greater are te absol%te, i! not relati8e, o!!ice costs, gi8ing rise
to a kind o! di8ision o! labo%r0 5o @at extent pro!it is te precondition !or tese o%tlays, is seen,
among oter tings, !rom te !act tat @it te increase o! commercial salaries, a part o! tem is
!reD%ently paid by a sare in te pro!it0 &t is in te nat%re o! tings tat labo%r consisting merely
o! intermediate operations connected partly @it calc%lating 8al%es, partly @it realising tem,
and partly @it recon8erting te realised money into means o! prod%ction, is a labo%r @ose
magnit%de tere!ore depends on te D%antity o! te prod%ced 8al%es tat a8e to e realised, and
does not act as te ca%se, like directly prod%cti8e labo%r, b%t rater as an e!!ect, o! te respecti8e
magnit%des and masses o! tese 8al%es0 5e same applies to te oter costs o! circ%lation0 5o do
m%c meas%ring, @eiging, packing, and transporting, m%c m%st be on and0 5e amo%nt o!
<=2 ;apter J4&&
packing, transporting, etc0, depends on te D%antity o! commodities @ic are te obHects o! tis
acti8ity, not 8ice 8ersa0
5e commercial @orker prod%ces no s%rpl%s-8al%e directly0 A%t te price o! is labo%r is
determined by te 8al%e o! is labo%r-po@er, ence by its costs o! prod%ction, @ile te
application o! tis labo%r-po@er, its exertion, expendit%re o! energy, and @ear and tear, is as in te
ease o! e8ery oter @age-labo%rer by no means limited by its 8al%e0 6is @age, tere!ore, is not
necessarily proportionate to te mass o! pro!it @ic e elps te capitalist to realise0 Wat e
costs te capitalist and @at e brings in !or im, are t@o di!!erent tings0 6e creates no direct
s%rpl%s-8al%e, b%t adds to te capitalist"s income by elping im to red%ce te cost o! realising
s%rpl%s-8al%e, inasm%c as e per!orms partly %npaid labo%r0 5e commercial @orker, in te strict
sense o! te term, belongs to te better-paid class o! @age-@orkers I to tose @ose labo%r is
classed as skilled and stands abo8e a8erage labo%r0 .et te @age tends to !all, e8en in relation to
a8erage labo%r, @it te ad8ance o! te capitalist mode o! prod%ction0 5is is d%e partly to te
di8ision o! labo%r in te o!!ice, implying a one-sided de8elopment o! te labo%r capacity, te cost
o! @ic does not !all entirely on te capitalist, since te labo%rer"s skill de8elops by itsel!
tro%g te exercise o! is !%nction, and all te more rapidly as di8ision o! labo%r makes it more
one-sided0 $econdly, beca%se te necessary training, kno@ledge o! commercial practices,
lang%ages, etc0, is more and more rapidly, easily, %ni8ersally and ceaply reprod%ced @it te
progress o! science and p%blic ed%cation te more te capitalist mode o! prod%ction directs
teacing metods, etc0, to@ards practical p%rposes0 5e %ni8ersality o! p%blic ed%cation enables
capitalists to recr%it s%c labo%rers !rom classes tat !ormerly ad no access to s%c trades and
@ere acc%stomed to a lo@er standard o! li8ing0 Moreo8er, tis increases s%pply, and ence
competition0 Wit !e@ exceptions, te labo%r-po@er o! tese people is tere!ore de8al%ated @it
te progress o! capitalist prod%ction0 5eir @age !alls, @ile teir labo%r capacity increases0 5e
capitalist increases te n%mber o! tese labo%rers @ene8er e as more 8al%e and pro!its to
realise0 5e increase o! tis labo%r is al@ays a res%lt, ne8er a ca%se o! more s%rpl%s-8al%e0
<

5ere is d%plication, tere!ore0 3n te one and, te !%nctions as commodity-capital and money-
capital Bence !%rter designated as mercant"s capitalC are general de!inite !orms ass%med by
ind%strial capital0 3n te oter and, speci!ic capitals, and tere!ore speci!ic gro%ps o! capitalists,
are excl%si8ely de8oted to tese !%nctions# and tese !%nctions t%s de8elop into speci!ic speres
o! sel!-expansion o! capital0
&n te case o! mercantile capital, te commercial !%nctions and circ%lation costs are !o%nd only in
indi8id%alised !orm0 5at side o! ind%strial capital @ic is de8oted to circ%lation, contin%o%sly
exists not only in te sape o! commodity-capital and money-capital, b%t also in te o!!ice
alongside te @orksop0 A%t it becomes independent in te case o! mercantile capital0 &n te
latter"s case, te o!!ice is its only @orksop0 5e portion o! capital employed in te !orm o!
circ%lation costs appears m%c larger in te case o! te big mercant tan in tat o! te
ind%strialist, beca%se besides teir o@n o!!ices connected @it e8ery ind%strial @orksop, tat
part o! capital @ic @o%ld a8e to be so applied by te entire class o! ind%strial capitalists is
concentrated in te ands o! a !e@ mercants, @o in carrying o%t te !%nctions o! circ%lation
also pro8ide !or te gro@ing expenses incidental to teir contin%ation0
5o ind%strial capital te costs o! circ%lation appear as %nprod%cti8e expenses, and so tey are0 5o
te mercant tey appear as a so%rce o! is pro!it, proportional, gi8en te general rate o! pro!it, to
teir siEe0 5e o%tlay to be made !or tese circ%lation costs is, tere!ore, a prod%cti8e in8estment
!or mercantile capital0 ?nd !or tis reason, te commercial labo%r @ic it b%ys is like@ise
immediately prod%cti8e !or it0
Chapter 18. The Turnover of Merchant's Capital.
Prices.
5e t%rno8er o! ind%strial capital is a combination o! its period o! prod%ction and time o!
circ%lation, and tere!ore embraces te entire process o! prod%ction0 5e t%rno8er o! mercant"s
capital, on te oter and, being in reality noting b%t an alienated mo8ement o! commodity-
capital, represents only te !irst pase in te metamorposis o! a commodity, ; I M, as te
re!l%ent mo8ement o! a speci!ic capital# M I ;, ; I M, is, !rom te mercantile point o! 8ie@, te
t%rno8er o! mercant"s capital0 5e mercant b%ys, con8erting is money into commodities, ten
sells, con8erting te latter back into money, and so !ort in constant repetition0 Witin circ%lation,
te metamorposis o! ind%strial capital al@ays presents itsel! in te !orm o! ;1 I M I ;<# te
money realised by te sale o! te prod%ced commodity ;1 is %sed to p%rcase ne@ means o!
prod%ction, ;<0 5is amo%nts to a practical excange o! ;1 !or ;<, and te same money t%s
canges ands t@ice0 &ts mo8ement mediates te excange o! t@o di!!erent kinds o! commodities,
;1 and ;<0 A%t in te case o! te mercant, it is, con8ersely, te same commodity @ic canges
ands t@ice in M I ; I M"0 &t merely promotes te re!l%x o! is money0
&!, !or example, a certain mercant"s capital is V1==, and !or tese V1== te mercant b%ys
commodities and sells tem !or V11=, ten is capital o! V1== as completed one t%rno8er, and
te n%mber o! s%c t%rno8ers per year depends on te n%mber o! times tis mo8ement M I ; I
M" is repeated0
We ere lea8e entirely o%t o! consideration te costs @ic may be concealed in te di!!erence
bet@een te p%rcase price and te selling price, since tese do not alter in any @ay te !orm,
@ic @e are no@ analysing0
5e n%mber o! t%rno8ers o! a gi8en mercant"s capital, tere!ore, is analogo%s in tis case to te
repeated cycles o! money as a mere medi%m o! circ%lation0 P%st as te same taler b%ys ten times
its 8al%e in commodities in making ten cycles, so te same money-capital o! te mercant, @en
t%rned o8er ten times, b%ys ten times its 8al%e in commodities, or realises a total commodity-
capital o! ten times its 8al%e# a mercant"s capital o! 1==, !or instance, a ten-!old 8al%e R 1,===0
A%t tere is tis di!!erence: &n te cycle o! money as a medi%m o! circ%lation it is te same piece
o! money tat passes tro%g di!!erent ands, t%s repeatedly per!orming te same !%nction and
ence making %p !or te mass o! te circ%lating pieces o! money by its 8elocity0 A%t in te
mercant"s case it is te same money capital, te same money-8al%e, regardless o! @at pieces o!
money it may be composed, @ic repeatedly b%ys and sells commodity-capital to te amo%nt o!
its 8al%e and @ic tere!ore ret%rns to te same ands, te same point o! depart%re as M U M,
i.e., 8al%e pl%s s%rpl%s-8al%e0 5is caracterises its t%rno8er as a capital t%rno8er0 &t al@ays
@itdra@s more money !rom circ%lation tan it tro@s in0 &t is sel!-e8ident, at any rate, tat an
accelerated t%rno8er o! mercant"s capital Bgi8en a de8eloped credit system, te !%nction o!
money as a means o! payment predominatesC implies a more rapid circ%lation o! te same
D%antity o! money0
? repeated t%rno8er o! commercial capital, o@e8er, ne8er connotes more tan repeated b%ying
and selling# @ile a repeated t%rno8er o! ind%strial capital connotes te periodicity and reno8ation
o! te entire reprod%ction process B@ic incl%des te process o! cons%mptionC0 For mercant"s
capital tis appears merely as an external condition0 &nd%strial capital m%st contin%ally bring
commodities to te market and @itdra@ tem !rom it, in order tat rapid t%rno8er o! mercant"s
capital may remain possible0 &! te process o! reprod%ction is slo@, ten so is te t%rno8er o!
<=6 ;apter J4&&&
mercant"s capital0 5r%e, mercant"s capital promotes te t%rno8er o! prod%cti8e capital, b%t only
in so !ar as it sortens its time o! circ%lation0 &t as no direct in!l%ence on te time o! prod%ction,
@ic is also a barrier to te period o! t%rno8er o! ind%strial capital0 5is is te !irst barrier !or te
t%rno8er o! mercant"s capital0 $econdly, aside !rom te barrier !ormed by reprod%cti8e
cons%mption, te t%rno8er o! mercant"s capital is %ltimately limited by te 8elocity and 8ol%me
o! te total indi8id%al cons%mption, since all te commodity-capital @ic is part o! te
cons%mption-!%nd depends on it0
6o@e8er Baside !rom te t%rno8ers in te @orld o! commerce, in @ic one mercant al@ays
sells te same commodity to anoter, and tis sort o! circ%lation may appear igly prospero%s in
times o! spec%lationC, te mercant"s capital, in te !irst place, c%rtails pase ; I M !or prod%cti8e
capital0 $econdly, %nder te modern credit system it disposes o! a large portion o! te total social
money-capital, so tat it can repeat its p%rcases e8en be!ore it as de!initely sold @at as
pre8io%sly been p%rcased0 ?nd it is immaterial in tis case, @eter o%r mercant sells directly
to te %ltimate cons%mer, or tere are a doEen oter intermediate mercants bet@een tem0 3@ing
to te immense elasticity o! te reprod%ction process, @ic may al@ays be p%sed beyond any
gi8en bo%nds, it does not enco%nter any obstacle in prod%ction itsel!, or at best a 8ery elastic one0
?side !rom te separation o! ; I M and M I ;, @ic !ollo@s !rom te nat%re o! te
commodities, a !ictitio%s demand is ten created0 &n spite o! its independent stat%s, te mo8ement
o! mercant"s capital is ne8er more tan te mo8ement o! ind%strial capital @itin te spere o!
circ%lation0 A%t by 8irt%e o! its independent stat%s it mo8es, @itin certain limits, independently
o! te bo%nds o! te reprod%ction process and tereby e8en dri8es te latter beyond its bo%nds0
5is internal dependence and external independence p%s mercant"s capital to a point @ere te
internal connection is 8iolently restored tro%g a crisis0
6ence te penomenon tat crises do not come to te s%r!ace, do not break o%t, in te retail
b%siness !irst, @ic deals @it direct cons%mption, b%t in te speres o! @olesale trade, and o!
banking, @ic places te money-capital o! society at te disposal o! te !ormer0
5e man%!act%rer may act%ally sell to te exporter, and te exporter, in is t%rn, to is !oreign
c%stomer# te importer may sell is ra@ materials to te man%!act%rer, and te latter may sell is
prod%cts to te @olesale mercant, etc0 A%t at some partic%lar imperceptible point te goods lie
%nsold, or else, again, all prod%cers and middlemen may grad%ally become o8erstocked0
;ons%mption is ten generally at its igest, eiter beca%se one ind%strial capitalist sets a
s%ccession o! oters in motion# or beca%se te labo%rers employed by tem are !%lly employed
and a8e more to spend tan %s%al0 5e capitalists" expendit%res increase togeter @it teir
gro@ing income0 Aesides, as @e a8e seen BAook &&, ,art &&&C, contin%o%s circ%lation takes place
bet@een constant capital and constant capital Be8en regardless o! accelerated acc%m%lationC0 &t is
at !irst independent o! indi8id%al cons%mption beca%se it ne8er enters te latter0 A%t tis
cons%mption de!initely limits it ne8erteless, since constant capital is ne8er prod%ced !or its o@n
sake b%t solely beca%se more o! it is needed in speres o! prod%ction @ose prod%cts go into
indi8id%al cons%mption0 6o@e8er, tis may go on %ndist%rbed !or some time, stim%lated by
prospecti8e demand, and in s%c brances, tere!ore, te b%siness o! mercants and ind%strialists
goes briskly !ort0 5e crisis occ%rs @en te ret%rns o! mercants @o sell in distant markets Bor
@ose s%pplies a8e also acc%m%lated on te ome marketC become so slo@ and meagre tat te
banks press !or payment, or promissory notes !or p%rcased commodities become d%e be!ore te
latter a8e been resold0 5en !orced sales take place, sales in order to meet payments0 5en
comes te cras, @ic brings te ill%sory prosperity to an abr%pt end0
A%t te s%per!iciality and meaninglessness o! te t%rno8er o! mercant"s capital are still greater,
beca%se te t%rno8er o! one and te same mercant"s capital may sim%ltaneo%sly or s%ccessi8ely
promote te t%rno8ers o! se8eral prod%cti8e capitals0
5e t%rno8er o! mercant"s capital does not H%st promote te t%rno8ers o! se8eral ind%strial
capitals, it can also expedite te opposite pases o! te metamorposis o! commodity-capital0 For
<=> ;apter J4&&&
instance, te mercant b%ys linen !rom te man%!act%rer and sells it to te bleacer0 &n tis case,
tere!ore te t%rno8er o! te same mercant"s capital I in !act, te same ; I M, a realisation o!
te linen I represents t@o opposite pases !or t@o di!!erent ind%strial capitals0 &nasm%c as te
mercant sells !or prod%cti8e cons%mption, is ; I M is al@ays M I ; !or one ind%strial
capitalist, and is M I ; al@ays ; I M !or anoter ind%strial capitalist0
&! @e lea8e o%t K, te circ%lation costs, as @e do in tis capter, i!, in oter @ords, @e lea8e aside
tat portion o! capital @ic te mercant ad8ances along @it te money reD%ired to p%rcase
commodities, it !ollo@s tat @e also omit K, te additional pro!it made on tis additional
capital0 5is is t%s te strictly logical and matematically correct mode o! analysis i! @e @ant to
see o@ pro!it and t%rno8er o! mercant"s capital a!!ect prices0
&! te price o! prod%ction o! 1 lb0 o! s%gar @ere V1, te mercant co%ld b%y 1== lbs0 o! s%gar @it
V1==0 &! e b%ys and sells tis D%antity in te co%rse o! te year, and i! te a8erage ann%al rate o!
pro!it is 1+T, e @o%ld add V1+ to te V1==, and 3s0 to V1, te price o! prod%ction o! 1 lb0 o!
s%gar0 5at is, e @o%ld sell 1 lb0 o! s%gar at V103s0 A%t i! te price o! prod%ction o! 1 lb0 o! s%gar
so%ld !all to 1s0, te mercant co%ld b%y <,=== lbs0 o! s%gar @it V1==, and sell te s%gar at 1s0 1
2N+d0 per lb0 5e ann%al pro!it on capital in8ested in te s%gar b%siness @o%ld still be V1+ on eac
V1==0 A%t te mercant as to sell 1== lbs0 in te !irst case, and <,=== lbs0 in te second0 5e ig
or lo@ le8el o! te price o! prod%ction as noting to do @it te rate o! pro!it0 A%t it @o%ld
greatly and decisi8ely a!!ect tat aliD%ot part o! te selling price o! eac lb0 o! s%gar, @ic
resol8es itsel! in mercantile pro!it, i.e., te addition to te price @ic te mercant makes on a
certain D%antity o! commodities or prod%cts0 &! te price o! prod%ction o! a commodity is small,
so, too, te amo%nt te mercant ad8ances in its p%rcase price, i.e., !or a certain D%antity o! it0
6ence, @it a gi8en rate o! pro!it, te amo%nt o! pro!it e makes on tis D%antity o! ceap
commodities is small as @ell0 3r, @at amo%nts to te same, e can ten b%y @it a certain
amo%nt o! capital, say, 1==, a larger D%antity o! tese ceap commodities, and te total pro!it o!
1+, @ic e makes per 1==, breaks %p into small !ractions o8er eac indi8id%al piece or portion
belonging to tis mass o! commodities0 &! te opposite takes place, ten te re8erse is tr%e0 5is
depends entirely on te greater or smaller prod%cti8ity o! te ind%strial capital in @ose prod%cts
e trades0 &! @e except te cases in @ic te mercant is a monopolist and sim%ltaneo%sly
monopolises prod%ction, as did te 7%tc East &ndia ;ompany in its day, noting can be more
ridic%lo%s tan te c%rrent idea tat it depends on te mercant @eter e sells many
commodities at a small pro!it or !e@ commodities at a large pro!it on eac indi8id%al piece o! te
commodities0 5e t@o limits o! is selling price are: on te one and, te price o! prod%ction o!
te commodities, o8er @ic e as no control# on te oter and, te a8erage rate o! pro!it, o8er
@ic e as H%st as little control0 5e only ting %p to im to decide is @eter e @ants to deal
in dear or in ceap commodities, and e8en ere te siEe o! is a8ailable capital and oter
circ%mstances also a8e teir e!!ect0 5ere!ore, it depends @olly on te degree o! de8elopment
o! te capitalist mode o! prod%ction, not on te mercant"s good@ill, @at co%rse e sall !ollo@0
? p%rely commercial company like te old 7%tc East &ndia ;ompany, @ic ad a monopoly o!
prod%ction, co%ld !ancy tat it co%ld contin%e a metod adapted at best to te beginnings o!
capitalist prod%ction, %nder entirely canged conditions0
1
5e !ollo@ing circ%mstances, among oters, elp to maintain tat pop%lar preH%dice, @ic, like
all !alse conceptions o! pro!it, etc0, arises !rom te obser8ation o! p%re commerce and mercants"
preH%dice:
'irst: penomena o! competition, @ic, o@e8er, apply merely to te distrib%tion o! mercantile
pro!it among indi8id%al mercants, te sareolders o! te total mercant"s capital# i! one, !or
example, sells ceaper, in order to dri8e is competitors o!! te !ield0
Secondly: an economist o! te calibre o! ,ro!essor )oscer may still imagine in 'eipEig tat it
@as Kcommon sense and %manitarianL /)oscer, Die Grundlagen der $ationalK-onomie, 30
<=8 ;apter J4&&&
?%!lage, 18+8, $0 1*<0 I 0d.1 gro%nds, @ic prod%ced te cange in selling prices, and tat it
@as not a res%lt o! a re8ol%tionised mode o! prod%ction0
4hirdly: i! prod%ction prices !all d%e to greater prod%cti8ity o! labo%r, and selling prices !all !or
te same reason, te demand, and @it it te market-prices, o!ten rise e8en !aster tan te s%pply,
so tat selling prices yield more tan te a8erage pro!it0
'ourthly: a mercant may red%ce is selling price B@ic is ne8er more tan a red%ction o! te
%s%al pro!it tat e adds to te priceC so as to t%rn o8er a larger capital more rapidly0 ?ll tese are
matters tat only concern competition bet@een te mercants temsel8es0
We a8e already so@n in Aook & /Englis edition: 4ol0 1, pp0 +1*-<=0 I 0d10 tat ig or lo@
commodity-prices do not determine eiter te mass o! s%rpl%s-8al%e prod%ced by a gi8en capital,
or te rate o! s%rpl%s-8al%e# alto%g te price o! a commodity, and @it it te sare o! s%rpl%s-
8al%e in tis price, are greater or smaller, depending on te relati8e D%antity o! commodities
prod%ced by a gi8en D%antity o! labo%r0 5e prices o! e8ery speci!ied D%antity o! a commodity
are, so !ar as tey correspond to te 8al%es, determined by te total D%antity o! labo%r
incorporated in tis commodity0 &! little labo%r is incorporated in m%c commodity, te %nit price
o! te commodity is lo@ and te s%rpl%s-8al%e in it is small0 6o@ tis labo%r incorporated in a
commodity breaks %p into paid and %npaid labo%r and @at portion o! its price, tere!ore,
represents s%rpl%s-8al%e, as noting to do @it tis total D%antity o! labo%r, nor, conseD%ently,
@it te price o! te commodity0 A%t te rate o! s%rpl%s-8al%e does not depend on te absol%te
magnit%de o! te s%rpl%s-8al%e contained in te %nit price o! te commodity0 &t depends on its
relati8e magnit%de, its proportion to te @ages contained in te same commodity0 5e rate o!
s%rpl%s-8al%e may tere!ore be large, @ile te absol%te magnit%de o! s%rpl%s-8al%e in eac %nit
o! te commodity is small0 5is absol%te magnit%de o! s%rpl%s-8al%e in eac piece o! te
commodity depends primarily on te prod%cti8ity o! labo%r, and only secondarily on its di8ision
into paid and %npaid labo%r0
-o@, in te case o! te commercial selling price, te price o! prod%ction is a gi8en external
precondition0
5e ig commercial commodity-prices in !ormer times @ere d%e 1C to te ig prices o!
prod%ction, i.e., te %nprod%cti8eness o! labo%r# <C to te absence o! a general rate o! pro!it, @it
mercant"s capital absorbing a m%c larger D%ota o! s%rpl%s-8al%e tan @o%ld a8e !allen to its
sare i! capitals enHoyed greater general mobility0 5e ending o! tis sit%ation, in bot its aspects,
is tere!ore te res%lt o! te de8elopment o! te capitalist mode o! prod%ction0
5e t%rno8ers o! mercant"s capital 8ary in d%ration, teir ann%al n%mber conseD%ently being
greater or smaller, in di!!erent brances o! commerce0 Witin te same branc te t%rno8er is
more or less rapid in te di!!erent pases o! te economic cycle0 .et tere is an a8erage n%mber o!
t%rno8ers, determined by experience0
We a8e already seen tat te t%rno8er o! mercant"s capital di!!ers !rom tat o! ind%strial capital0
5is is in te nat%re o! tings0 3ne single pase in te t%rno8er o! ind%strial capital appears as a
complete t%rno8er o! an independently constit%ted mercant"s capital, or yet o! its part0 &t also
stands in a di!!erent relation to pro!it and price determination0
&n te case o! ind%strial capital, its t%rno8er expresses, on te one and, te periodicity o!
reprod%ction, and, tere!ore, te mass o! commodities tro@n on te market in a certain period
depends on it0 3n te oter and, its time o! circ%lation creates a barrier, an extensible one, and
exerts more or less o! a restraint on te creation o! 8al%e and s%rpl%s-8al%e, beca%se it a!!ects te
8ol%me o! te prod%ction process0 5e t%rno8er, tere!ore, acts as a determining element on te
mass o! ann%ally prod%ced s%rpl%s-8al%e, and ence on te !ormation o! te general rate o! pro!it,
b%t it acts as a limiting, rater tan positi8e, element0 For mercant"s capital, on te contrary, te
a8erage rate o! pro!it is a gi8en magnit%de0 5e mercant"s capital does not directly participate in
creating pro!it or s%rpl%s-8al%e, and Hoins in saping te general rate o! pro!it only in so !ar as it
<=* ;apter J4&&&
dra@s a di8idend proportionate to its sare in te total capital, o%t o! te mass o! pro!it prod%ced
by ind%strial capital0
5e greater te n%mber o! t%rno8ers o! an ind%strial capital %nder conditions described in Aook
&&, ,art &&, te greater te mass o! pro!it it creates0 5r%e, tro%g te !ormation o! a general rate o!
pro!it, te total pro!it is distrib%ted among te di!!erent capitals not in proportion to teir act%al
part in its prod%ction, b%t in proportion to te aliD%ot part tey make %p o! te total capital, i.e., in
proportion to teir magnit%de0 A%t tis does not alter te essence o! te matter0 5e greater te
n%mber o! t%rno8ers o! te total ind%strial capital, te greater te mass o! pro!its, te mass o!
ann%ally prod%ced s%rpl%s-8al%e, and, tere!ore, oter circ%mstances remaining %ncanged, te
rate o! pro!it0 &t is di!!erent @it mercant"s capital0 5e rate o! pro!it is a gi8en magnit%de @it
respect to it, determined on te one and by te mass o! pro!it prod%ced by ind%strial capital, and
on te oter by te relati8e magnit%de o! te total mercant"s capital, by its D%antitati8e relation to
te s%m o! capital ad8anced in te processes o! prod%ction and circ%lation0 5e n%mber o! its
t%rno8ers does, indeed, decisi8ely a!!ect its relation to te total capital, or te relati8e magnit%de
o! mercant"s capital reD%ired !or te circ%lation, !or it is e8ident tat te absol%te magnit%de o!
te reD%ired mercant"s capital and te 8elocity o! its t%rno8ers stand in in8erse proportion0 A%t,
all oter conditions remaining eD%al, te relati8e magnit%de o! mercant"s capital, or te part it
makes %p o! te total capital, is determined by its absol%te magnit%de0 &! te total capital is
1=,===, and te mercant"s capital 1N1= o! tat s%m, it is R 1,===# i! te total capital is 1,===, ten
1N1= o! it R 1==0 5e absol%te magnit%de o! mercant"s capital 8aries, depending on te
magnit%de o! te total capital, alto%g its relati8e magnit%de remains te same0 A%t ere @e
ass%me tat its relati8e magnit%de, say, 1N1= o! te total capital, is gi8en0 5is relati8e magnit%de,
o@e8er, is again determined by te t%rno8er0 &! it is t%rned o8er rapidly, its absol%te magnit%de,
!or example, @ill R V1,=== in te !irst case, R 1== in te second, and ence its relati8e magnit%de
R 1N1=0 Wit a slo@er t%rno8er its absol%te magnit%de is, say, R <,=== in te !irst case, and R <==
in te second0 &ts relati8e magnit%de @ill ten a8e increased !rom 1N1= to 1N+ o! te total capital0
;irc%mstances @ic red%ce te a8erage t%rno8er o! mercant"s capital, like te de8elopment o!
means o! transportation, !or instance, red%ce pro tanto te absol%te magnit%de o! mercant"s
capital, and tereby increase te general rate o! pro!it0 &! te opposite takes place, ten te re8erse
is tr%e0 ? de8eloped capitalist mode o! prod%ction, compared @it earlier conditions, exerts a
t@o-!old in!l%ence on mercant"s capital0 3n te one and, te same D%antity o! commodities is
t%rned o8er @it a smaller mass o! act%ally !%nctioning mercant"s capital# o@ing to te more
rapid t%rno8er o! mercant"s capital, and te more rapid reprod%ction process, on @ic tis
depends, te relation o! mercant"s capital to ind%strial capital diminises0 3n te oter and,
@it te de8elopment o! te capitalist mode o! prod%ction all prod%ction becomes te prod%ction
o! commodities, @ic places all prod%cts into te ands o! agents o! circ%lation0 &t is to be added
tat %nder te pre8io%s mode o! prod%ction, @ic prod%ced on a small scale, a 8ery large portion
o! te prod%cers sold teir goods directly to te cons%mers, or @orked on teir personal orders,
sa8e !or te mass o! prod%cts cons%med directly, in kind, by te prod%cer imsel!, and te mass
o! ser8ices per!ormed in kind0 Wile, tere!ore, %nder !ormer modes o! prod%ction commercial
capital @as greater in relation to te commodity-capital @ic it t%rned o8er, it @as:
1C absol%tely smaller, beca%se a disproportionately smaller part o! te total prod%ct @as prod%ced
as commodities, and passed as commodity-capital into circ%lation, !alling into te ands o!
mercants0 &t @as smaller, beca%se te commodity-capital @as smaller0 A%t at te same time it
@as proportionately larger, not only beca%se its t%rno8er @as slo@er and not only in relation to
te mass o! commodities t%rned o8er by it0 &t @as larger also beca%se te price o! tis mass o!
commodities, and ence te mercant"s capital to be ad8anced !or it, @ere greater tan %nder
capitalist prod%ction on acco%nt o! a lo@er prod%cti8ity o! labo%r, so tat te same 8al%e @as
incorporated in a smaller mass o! commodities0
<1= ;apter J4&&&
<C &t is not only tat a larger mass o! commodities is prod%ced on te basis o! capitalist
prod%ction Btaking into acco%nt also te red%ced 8al%e o! tis mass o! commoditiesC, b%t te same
mass o! prod%cts, !or instance, o! corn, also !orms a greater commodity mass, i.e., more and more
o! it becomes an obHect o! commerce0 ?s a conseD%ence, tere is an increase not only o! te mass
o! mercant"s capital, b%t o! all capital applied in circ%lation, s%c as in marine sipping,
rail@ays, telegrap, etc0
3C 6o@e8er, and tis is an aspect @ic belongs to te disc%ssion o! Kcompetition among
capitalsL: idle or only al!-!%nctioning mercant"s capital gro@s @it te progress o! te capitalist
mode o! prod%ction, @it te ease o! entering retail trade, @it spec%lation, and te red%ndance o!
released capital0
A%t, ass%ming te relati8e magnit%de o! mercant"s capital to total capital to be gi8en, te
di!!erence o! t%rno8ers in te 8ario%s brances o! commerce does not a!!ect eiter te magnit%de
o! te total pro!it !alling to te sare o! mercant"s capital, or te general rate o! pro!it0 5e
mercant"s pro!it is not determined by te mass o! commodity-capital t%rned o8er by im, b%t by
te dimensions o! te money-capital ad8anced by im to promote tis t%rno8er0 &! te general
ann%al rate o! pro!it is 1+T, and te mercant ad8ances V1==, @ic e t%rns o8er once a year, e
@ill sell is commodities at 11+0 &! is capital t%rns o8er !i8e times a year, e @ill sell a
commodity-capital e bo%gt at 1== at 1=3 !i8e times a year, ence in a year a commodity-capital
o! +== at +1+0 5is gi8es te same ann%al pro!it o! 1+ on is ad8anced capital o! 1==0 &! tis @ere
not so, mercant"s capital @o%ld yield a m%c iger pro!it, proportionate to te n%mber o! its
t%rno8ers, tan ind%strial capital, @ic @o%ld be in con!lict @it te la@ o! te general rate o!
pro!it0
6ence, te n%mber o! t%rno8ers o! mercant"s capital in te 8ario%s brances o! commerce as a
direct in!l%ence on te mercantile prices o! commodities0 5e amo%nt added to te mercantile
price, te aliD%ot part o! mercantile pro!it o! a gi8en capital, @ic !alls %pon te price o!
prod%ction o! a commodity, is in in8erse proportion to te n%mber o! t%rno8ers, or te 8elocity o!
t%rno8er, o! mercants" capitals in te 8ario%s lines o! commerce0 &! a certain mercant"s capital is
t%rned o8er !i8e times a year, it @ill add to a commodity-capital o! eD%al 8al%e b%t 1N+ o! @at
anoter mercant"s capital, @ic t%rns o8er H%st once a year, adds to a commodity-capital o!
eD%al 8al%e0
5e modi!ication o! selling prices by te a8erage period o! t%rno8er o! capitals in di!!erent
brances o! commerce amo%nts to tis: 5e same mass o! pro!its, determined !or any gi8en
magnit%de o! mercant"s capital by te general ann%al rate o! pro!it, ence determined
independently o! te speci!ic caracter o! te commercial operations o! tis capital, is di!!erently
distrib%ted I proportionately to te rate o! t%rno8er I o8er masses o! commodities o! eD%al 8al%e,
so tat, !or instance, i! a mercant"s capital is t%rned o8er !i8e times a year, 1+N+ R 3T i! once a
year, 1+T, is added to te price o! te commodities0
5e same percentage o! commercial pro!it in di!!erent brances o! commerce, tere!ore, increases
te selling prices o! commodities by D%ite di!!erent percentages o! teir 8al%es, all depending on
teir periods o! t%rno8er0
3n te oter and, in te case o! ind%strial capital, te period o! t%rno8er does not in any @ay
a!!ect te magnit%de o! te 8al%e o! indi8id%al commodities prod%ced, alto%g it does a!!ect te
mass o! 8al%es and s%rpl%s-8al%es prod%ced in a gi8en time by a gi8en capital, beca%se it a!!ects
te mass o! exploited labo%r0 5is is concealed, to be s%re, and seems to be oter@ise as soon as
one t%rns to prices o! prod%ction0 A%t tis is d%e solely to te !act tat, according to pre8io%sly
analysed la@s, te prices o! prod%ction o! 8ario%s commodities de8iate !rom teir 8al%es0 &! @e
look %pon te process o! prod%ction as a @ole, and %pon te mass o! commodities prod%ced by
te total ind%strial capital, @e sall at once !ind te general la@ 8indicated0
<11 ;apter J4&&&
Wile, tere!ore, a closer inspection o! te in!l%ence o! te period o! t%rno8er on te !ormation o!
8al%es by ind%strial capital leads %s back to te general la@ and to te basis o! political economy,
tat te 8al%es o! commodities are determined by te labo%r-time contained in tem, te in!l%ence
o! te t%rno8ers o! mercant"s capital on mercantile prices re8eals penomena @ic, @ito%t
bene!it o! a 8ery !ar-reacing analysis o! te connecting links, seem to point to a p%rely arbitrary
determination o! prices# namely, tat tey are !ixed by a capital simply bent %pon pocketing a
certain D%antity o! pro!it in a year0 7%e partic%larly to tis in!l%ence o! t%rno8ers, it appears tat
@itin certain limits te process o! circ%lation as s%c determines commodity-prices
independently o! te process o! prod%ction0 ?ll s%per!icial and !alse conceptions o! te process o!
reprod%ction as a @ole are deri8ed !rom examinations o! mercant"s capital and !rom te
conceptions @ic its pec%liar mo8ements call !ort in te minds o! circ%lation agents0
&!, as te reader @ill a8e realised to is great dismay, te analysis o! te act%al intrinsic relations
o! te capitalist process o! prod%ction is a 8ery complicated matter and 8ery extensi8e# i! it is a
@ork o! science to resol8e te 8isible, merely external mo8ement into te tr%e intrinsic
mo8ement, it is sel!-e8ident tat conceptions @ic arise abo%t te la@s o! prod%ction in te
minds o! agents o! capitalist prod%ction and circ%lation @ill di8erge drastically !rom tese real
la@s and @ill merely be te conscio%s expression o! te 8isible mo8ements0 5e conceptions o!
te mercant, stockbroker, and banker, are necessarily D%ite distorted0 5ose o! te man%!act%rers
are 8itiated by te acts o! circ%lation to @ic teir capital is s%bHect, and by te le8elling o! te
general rate o! pro!it0
<
;ompetition like@ise ass%mes a completely distorted role in teir minds0
&! te limits o! 8al%e and s%rpl%s-8al%e are gi8en, it is easy to grasp o@ competition o! capitals
trans!orms 8al%es into prices o! prod%ction and !%rter into mercantile prices, and s%rpl%s-8al%e
into a8erage pro!it0 A%t @ito%t tese limits, it is absol%tely %nintelligible @y competition
so%ld red%ce te general rate o! pro!it to one le8el instead o! anoter, e.g., make it 1+T instead
o! 1,+==T0 ;ompetition can at best only red%ce te general rate o! pro!it to one le8el0 A%t it
contains no element by @ic it co%ld determine tis le8el itsel!0
From te standpoint o! mercant"s capital, tere!ore, it is te t%rno8er @ic appears to determine
prices0 3n te oter and, @ile te rate o! t%rno8er o! ind%strial capital, in so !ar as it enables a
certain capital to exploit more or less labo%r, exerts a determining and limiting in!l%ence on te
mass o! pro!it, and t%s on te general rate o! pro!it, tis rate o! pro!it obtains !or mercant"s
capital as an external !act, its internal connection @it te prod%ction o! s%rpl%s-8al%e being
entirely obliterated0 &!, %nder oter@ise eD%al circ%mstances and partic%larly te same organic
composition, te same ind%strial capital is t%rned o8er !o%r times a year instead o! t@ice, it
prod%ces t@ice as m%c s%rpl%s-8al%e and, conseD%ently, pro!it0 ?nd tis is apparent as soon, and
as long, as tis capital as a monopoly on an impro8ed metod o! prod%ction, @ic makes tis
accelerated t%rno8er possible0 ;on8ersely, di!!erences in te periods o! t%rno8er in di!!erent
brances o! commerce mani!est temsel8es in te !act tat pro!it made on te t%rno8er o! a gi8en
commodity-capital is in in8erse proportion to te n%mber o! times te money-capital t%rns o8er
tis commodity-capital0 $mall pro!its and D%ick ret%rns appear to te sopkeeper to be te
principle @ic e !ollo@s o%t o! seer principle0
For te rest, it is sel!-e8ident tat regardless o! alternating, m%t%ally compensating, speedier and
slo@er t%rno8ers, tis la@ o! t%rno8er o! mercant"s capital olds good in eac branc o!
commerce only !or te a8erage t%rno8ers made by te entire mercant"s capital in8ested in eac
partic%lar branc0 5e capital o! ?, @o deals in te same branc as A, may make more or less
tan te a8erage n%mber o! t%rno8ers0 &n tis case te oters make less or more0 5is does not
alter te t%rno8er o! te total mass o! mercant"s capital in8ested in tis line0 A%t it is o! decisi8e
moment !or te indi8id%al mercant or sopkeeper0 &n tis case e makes an extra pro!it, H%st as
ind%strial capitalists make extra pro!its i! tey prod%ce %nder better tan a8erage conditions0 &!
competition compels im, e can sell ceaper tan is competitors @ito%t lo@ering is pro!it
belo@ te a8erage0 &! te conditions @ic @o%ld enable im to t%rn o8er is capital more rapidly,
<1< ;apter J4&&&
are temsel8es !or sale, s%c as a !a8o%rable sop location, e can pay extra rent !or it, i.e.,
con8ert a portion o! is s%rpl%s-pro!it into gro%nd-rent0
Chapter 19. Money-Dealing Capital
5e p%rely tecnical mo8ements per!ormed by money in te circ%lation process o! ind%strial,
and, as @e may no@ add, o! commercial capital Bsince it takes o8er a part o! te circ%lation
mo8ement o! ind%strial capital as its o@n, pec%liar mo8ementC, i! indi8id%alised as a !%nction o!
some partic%lar capital per!orming H%st tese, and only tese, operations as its speci!ic operations,
con8ert tis capital into money-dealing capital0 ? portion o! ind%strial capital, and, more
precisely, also o! commercial capital, not only obtains all te time in te !orm o! money, as
money-capital in general, b%t as money-capital engaged precisely in tese tecnical !%nctions0 ?
de!inite part o! te total capital dissociates itsel! !rom te rest and stands apart in te !orm o!
money-capital, @ose capitalist !%nction consists excl%si8ely in per!orming tese operations !or
te entire class o! ind%strial and commercial capitalists0 ?s in te case o! commercial capital, a
portion o! ind%strial capital engaged in te circ%lation process in te !orm o! money-capital
separates !rom te rest and per!orms tese operations o! te reprod%ction process !or all te oter
capital0 5e mo8ements o! tis money-capital are, tere!ore, once more merely mo8ements o! an
indi8id%alised part o! ind%strial capital engaged in te reprod%ction process0
&t is only @en, and in so !ar as, capital is ne@ly in8ested I @ic also applies to acc%m%lation I
tat capital in money-!orm appears as te starting-point and te end res%lt o! te mo8ement0 A%t
!or all capitals already engaged in te process, tese !irst and last points appear merely as points
o! transit0 $ince, as already seen in te case o! simple commodity-circ%lation, !rom te moment
o! lea8ing te spere o! prod%ction to te moment o! its re-entry ind%strial capital %ndergoes te
metamorposis ;" I M I ;, M in !act represents te end res%lt o! one pase o! te
metamorposis, H%st to become te starting-point o! te re8erse pase, @ic s%pplements it0 ?nd
alto%g te ; I M o! ind%strial capital is al@ays M I ; I M !or mercant"s capital, te act%al
process !or te latter is contin%ally also ; I M I ; once it as beg%n to !%nction0 A%t it per!orms
te acts ; I M and M I ; sim%ltaneo%sly0 5is is to say tat tere is not H%st one capital in te
stage ; I M @ile anoter is in te stage M I ;, b%t tat te same capital b%ys contin%ally and
sells contin%ally at one and te same time beca%se o! te contin%ity o! te prod%ction process0 &t
is to be !o%nd al@ays in bot stages at one and te same time0 Wile one o! its parts t%rns into
money, later to be recon8erted into commodities, anoter t%rns sim%ltaneo%sly into commodities,
to be recon8erted into money0
&t all depends on te !orm o! te commodity excange @eter te money ser8es ere as a means
o! circ%lation or o! payment0 &n bot cases te capitalist as to pay o%t money constantly to many
persons, and to recei8e money contin%ally !rom many persons0 5is p%rely tecnical operation o!
disb%rsing and recei8ing money is in itsel! labo%r @ic, as long as te money ser8es as a means
o! payment, necessitates dra@ing %p payment balances and acts o! balancing acco%nts0 5is
labo%r is a cost o! circ%lation, i.e., not labo%r creating 8al%e0 &t is sortened in being carried o%t
by a special section o! agents, or capitalists, !or te rest o! te capitalist class0
? de!inite portion o! te capital m%st be on and constantly as a oard, as potential money-capital
I a reser8e o! means o! p%rcase, a reser8e o! means o! payment, and idle capital in te !orm o!
money @aiting to be p%t to @ork0 ?noter portion streams back contin%ally in tis !orm0 ?side
!rom collecting, paying, and book-keeping, tis entails sa!ekeeping te oard, @ic is an
operation all in itsel!0 &t is, indeed, a contin%o%s con8ersion o! te oard into means o! circ%lation
and means o! payment, and its restoration by means o! money sec%red tro%g sales and !rom
payments d%e0 5is constant mo8ement o! te part o! capital existing as money, dissociated !rom
te !%nction o! capital itsel!, tis p%rely tecnical !%nction, ca%ses its o@n labo%r and expense,
classi!ied as costs o! circ%lation0
<12 ;apter J&J
5e di8ision o! labo%r brings it abo%t tat tese tecnical operations, dependent %pon te
!%nctions o! capital, so%ld be per!ormed !or te entire capitalist class as m%c as possible by a
special section o! agents or capitalists as teir excl%si8e !%nction I or tat tese operations so%ld
be concentrated in teir ands0 We a8e ere, as in mercant"s capital, di8ision o! labo%r in a t@o-
!old sense0 &t becomes a specialised b%siness, and beca%se per!ormed as a specialised b%siness !or
te money-mecanism o! te @ole class, it is concentrated and cond%cted on a large scale0 ?
!%rter di8ision o! labo%r takes place @itin it, bot tro%g di8ision into 8ario%s independent
brances, and tro%g segmentation o! @ork @itin tese brances Blarge o!!ices, n%mero%s
book-keepers and casiers, and !ar-reacing di8ision o! labo%rC0 ,aying and recei8ing money,
settling acco%nts, keeping c%rrent acco%nts, storing money, etc0 I all tis, dissociated !rom te
acts necessitating tese tecnical operations, makes money-dealing capital o! te capital ad8anced
!or tese !%nctions0
5e 8ario%s operations, @ose indi8id%alisation into speci!ic b%sinesses gi8es rise to te money
trade, spring !rom te di!!erent p%rposes o! money itsel! and !rom its !%nctions, @ic capital in
its money-!orm m%st tere!ore like@ise carry o%t0
& a8e pointed o%t earlier tat !inance de8eloped originally !rom te excange o! prod%cts
bet@een di!!erent comm%nities0
1

5rading in money, commerce in te money-commodity, !irst de8eloped tere!ore o%t o!
international commerce0 E8er since di!!erent national coins a8e existed mercants b%ying in
!oreign co%ntries a8e ad to excange teir national coins !or local coins, and 8ice 8ersa, or to
excange di!!erent coins !or %ncoined p%re sil8er or gold I te @orld-money0 6ence te excange
b%siness @ic is to be regarded as one o! te nat%ral !o%ndations o! modern !inance0
<
3%t o! it
de8eloped banks o! excange, in @ic sil8er Bor goldC ser8es as @orld-money I no@ called bank
money or commercial money I as distinct !rom c%rrency0 Excange transactions, in te sense o!
mere notes o! payment to tra8ellers !rom a money-canger in one co%ntry to a canger in anoter
co%ntry, de8eloped back in )ome and :reece o%t o! te act%al money-canging0
5rading in gold and sil8er as commodities Bra@ materials !or te making o! l%x%ry articlesC is te
nat%ral basis o! te b%llion trade, or te trade @ic acts as a medi%m !or te !%nctions o! money
as %ni8ersal money0 5ese !%nctions, as pre8io%sly explained BA%c &, Kap0 &&&, 3, c / Englis
edition: ;0 &&&, 3, c0 J 0d.1C, are t@o-!old: c%rrency mo8ement back and !ort bet@een te
8ario%s national speres o! circ%lation in order to balance international payments and in
connection @it te migrations o! capital in D%est o! interest# sim%ltaneo%sly, !lo@ o! precio%s
metals !rom teir so%rces o! prod%ction 8ia te @orld-market and teir distrib%tion among te
8ario%s national speres o! circ%lation0 :oldsmits acted as bankers still d%ring te greater part o!
te 1>t cent%ry in England0 We sall completely disregard te @ay in @ic te balancing o!
international acco%nts de8eloped !%rter in te bill Hobbing, etc0, and e8eryting re!erring to
transactions in 8al%able papers# in sort, @e sall lea8e o%t o! consideration all special !orms o!
te credit system, @ic do not as yet concern %s ere0
-ational money discards its local caracter in te capacity o! %ni8ersal money# one national
c%rrency is expressed in anoter, and t%s all o! tem are !inally red%ced to teir content o! gold
or sil8er, @ile te latter, being te t@o commodities circ%lating as @orld-money, are
sim%ltaneo%sly red%ced to teir reciprocal 8al%e-ratio, @ic canges contin%ally0 &t is tis
intermediate operation @ic te money trader makes is special occ%pation0 Money-canging
and te b%llion trade are t%s te original !orms o! te money trade, and spring !rom te t@o-!old
!%nctions o! money I as national money and @orld-money0
5e capitalist process o! prod%ction, H%st as commerce in general, e8en %nder pre-capitalist
metods, imply:
'irst, te acc%m%lation o! money as a oard, i.e., ere as tat part o! capital @ic m%st al@ays
be on and in te !orm o! money as a reser8e !%nd o! means o! payment and p%rcase0 5is is te
<1+ ;apter J&J
!irst !orm o! a oard, as it reappears %nder te capitalist mode o! prod%ction, and as it appears
generally @it te de8elopment o! mercant"s capital, at least !or te p%rposes o! tis capital0
Aot remarks apply to national, as @ell as international, circ%lation0 5e oard is in contin%o%s
!l%x, po%rs ceaselessly into circ%lation, and ret%rns ceaselessly !rom it0 5e second !orm o! a
oard is tat o! idle, temporarily %nemployed capital in te sape o! money, incl%ding ne@ly
acc%m%lated and not yet in8ested money-capital0 5e !%nctions entailed by tis !ormation o! a
oard are primarily tose o! sa!ekeeping, bookkeeping, etc0
Secondly, o@e8er, tis in8ol8es o%tlays o! money !or p%rcases, collecting money !rom sales,
making and recei8ing payments, balancing payments, etc0 5e money-dealer per!orms all tese
ser8ices at !irst as a simple cashier o! te mercants and ind%strial capitalists0
3

5e money trade becomes !%lly de8eloped, e8en in its !irst stages, as soon as its ordinary
!%nctions are s%pplemented by lending and borro@ing and by credit0 3! tis more in te next part,
@ic deals @it interest-bearing capital0
5e b%llion trade itsel!, te trans!er o! gold or sil8er !rom one co%ntry to anoter, is merely te
res%lt o! trading in commodities0 &t is determined by te rate o! excange @ic expresses te
standing o! international payments and te interest rates in te di!!erent markets0 5e b%llion
trader as s%c acts merely as an intermediary o! te res%lts0
&n disc%ssing money and te @ay its mo8ements and !orms de8elop o%t o! simple commodity-
circ%lation, @e sa@ BAook 1 ;0 &&&C tat te mo8ements o! te mass o! money circ%lating as
means o! p%rcase and payment depend on te metamorposis o! commodities, on te 8ol%me
and 8elocity o! tis metamorposis, @ic @e no@ kno@ to be b%t a pase in te entire process o!
reprod%ction0 ?s !or sec%ring te money materials I gold and sil8er I !rom teir so%rces o!
prod%ction, tis resol8es itsel! into a direct excange o! commodities, an excange o! gold and
sil8er as commodities !or oter commodities0 6ence, it is itsel! as m%c a pase o! te excange
o! commodities as te sec%ring o! iron or oter metals0 6o@e8er, so !ar as te mo8ement o!
precio%s metals on te @orld-market is concerned B@e ere lea8e aside mo8ements expressing te
trans!er o! capital by loans I a type o! trans!er @ic also obtains in te sape o! commodity-
capitalC, it is D%ite as m%c determined by te international excange o! commodities as te
mo8ement o! money as a national means o! p%rcase and payment is determined by te excange
o! commodities in te ome market0 5e in!lo@ and o%t!lo@ o! precio%s metals !rom one national
spere o! circ%lation to anoter, inasm%c as tis is ca%sed merely by a depreciation o! te
national c%rrency, or by a do%ble standard, are alien to money circ%lation as s%c and merely
represent corrections o! de8iations bro%gt abo%t arbitrarily by state decrees0 Finally, as concerns
te !ormations o! oards @ic constit%te reser8e !%nds !or means o! p%rcase and payment, be it
!or ome or !oreign trade, and @ic also merely represent a !orm o! temporarily idle capital,
tey are in bot cases necessary precipitates o! te circ%lation process0
&! te entire circ%lation o! money is in 8ol%me, !orm and mo8ement p%rely a res%lt o! commodity-
circ%lation, @ic, in its t%rn, !rom te capitalist point o! 8ie@, is only te circ%lation process o!
capital Balso embracing te excange o! capital !or re8en%e, and o! re8en%e !or re8en%e, so !ar as
o%tlay o! re8en%e is e!!ected tro%g retail tradeC, it is sel!-e8ident tat dealing in money does not
merely promote te circ%lation o! money, a mere res%lt and penomenon o! commodity-
circ%lation0 5is circ%lation o! money itsel!, a pase in commodity-circ%lation, is taken !or
granted in money-dealing0 Wat te latter promotes is merely te tecnical operations o! money
circ%lation @ic it concentrates, sortens, and simpli!ies0 7ealing in money does not !orm te
oards0 &t pro8ides te tecnical means by @ic te !ormation o! oards may, so !ar as it is
8ol%ntary Bence, not an expression o! %nemployed capital or o! dist%rbances in te reprod%ction
processC, be red%ced to its economic minim%m beca%se, i! managed !or te capitalist class as a
@ole, te reser8e !%nds o! means o! p%rcase and payment need not be as large as tey @o%ld
a8e to be i! eac capitalist @ere to manage is o@n0 5e money-dealers do not b%y te precio%s
metals0 5ey merely andle teir distrib%tion as soon as te commodity trade as bo%gt tem0
<16 ;apter J&J
5ey !acilitate te settling o! balances, inasm%c as money ser8es as te means o! payment, and
red%ce tro%g te arti!icial mecanism o! tese settlements te amo%nt o! money reD%ired !or
tis p%rpose0 A%t tey do not determine eiter te connections, or te 8ol%me, o! te m%t%al
payments0 5e bills o! excange and te ceD%es, !or instance, @ic are excanged !or one
anoter in banks and clearing o%ses, represent D%ite independent transactions and are te res%lts
o! gi8en operations, and it is merely a D%estion o! a better tecnical settlement o! tese res%lts0 $o
!ar as money circ%lates as a means o! p%rcase, te 8ol%me and n%mber o! p%rcases and sales
a8e no connection @ate8er @it money-dealing0 5e latter can do no more tan sorten te
tecnical operations tat go @it b%ying and selling, and t%s red%ce te amo%nt o! cas money
reD%ired to t%rn o8er te commodities0
Money-dealing in its p%re !orm, @ic @e consider ere, i.e0, set apart !rom te credit system, is
t%s concerned only @it te tecniD%e o! a certain pase o! commodity-circ%lation, namely, tat
o! money circ%lation and te di!!erent !%nctions o! money arising in its circ%lation0
5is s%bstantially disting%ises dealing in money !rom te dealing in commodities, @ic
promotes te metamorposis o! commodities and teir excange, or e8en gi8es tis process o! te
commodity-capital te appearance o! a process o! a capital set apart !rom ind%strial capital0
Wile, tere!ore, commercial capital as its o@n !orm o! circ%lation, M I ; I M, in @ic te
commodity canges ands t@ice and t%s pro8ides a re!l%x o! money, as distinct !rom ; I M I ;,
in @ic money canges ands t@ice and t%s promotes commodity excange, tere is no s%c
special !orm in te case o! money-dealing capital0
&n so !ar as money-capital is ad8anced by a separate class o! capitalists in tis tecnical
promotion o! money circ%lation I a capital @ic on a red%ced scale represents te additional
capital te mercants and ind%strial capitalists @o%ld oter@ise a8e to ad8ance temsel8es !or
tese p%rposes I te general !orm o! capital, M I M", occ%rs ere as @ell0 Ay ad8ancing M, te
ad8ancing capitalist sec%res M U cM0 A%t promotion o! M I M" does not ere concern te
material, b%t only te tecnical, processes o! te metamorposis0
&t is e8ident tat te mass o! money-capital @it @ic te money-dealers operate is te money-
capital o! mercants and ind%strial capitalists in te process o! circ%lation, and tat te money-
dealers" operations are act%ally operations o! mercants and ind%strial capitalists, in @ic tey
act as middlemen0
&t is eD%ally e8ident tat te money-dealers" pro!it is noting b%t a ded%ction !rom te s%rpl%s-
8al%e, since tey operate @it already realised 8al%es Be8en @en realised in te !orm o! creditors"
claimsC0
P%st as in te commodity trade, tere is a d%plication o! !%nctions, beca%se a part o! te tecnical
operations connected @it money circ%lation m%st be carried o%t by te dealers and prod%cers o!
commodities temsel8es0
Chapter 20. Historical Facts about Merchant's
Capital
5e partic%lar !orm in @ic commercial and money-dealing capitals acc%m%late money @ill be
disc%ssed in te next part0
&t is sel!-e8ident !rom @at as gone be!ore tat noting co%ld be more abs%rd tan to regard
mercant"s capital, @eter in te sape o! commercial or o! money-dealing capital, as a
partic%lar 8ariety o! ind%strial capital, s%c as, say, mining, agric%lt%re, cattle-raising,
man%!act%ring, transport, etc0, @ic are side lines o! ind%strial capital occasioned by te di8ision
o! social labo%r, and ence di!!erent speres o! in8estment0 5e simple obser8ation tat in te
circ%lation pase o! its reprod%ction process e8ery ind%strial capital per!orms as commodity-
capital and as money-capital te 8ery !%nctions @ic appear as te excl%si8e !%nctions o! te
t@o !orms o! mercant"s capital, so%ld r%le o%t s%c a cr%de notion0 3n te oter and, in
commercial and money-dealing capital te di!!erences bet@een ind%strial capital as prod%cti8e
capital and te same capital in te spere o! circ%lation are indi8id%alised tro%g te !act tat te
de!inite !orms and !%nctions @ic capital ass%mes !or te moment appear as independent !orms
and !%nctions o! a separate portion o! te capital and are excl%si8ely bo%nd %p @it it0 5e
transm%ted !orm o! ind%strial capital and te material di!!erences bet@een prod%cti8e capitals
applied in di!!erent brances o! ind%stry, @ic arise !rom te nat%re o! tese 8ario%s brances,
are @orlds apart0
?side !rom te cr%dity @it @ic te economist generally considers distinctions o! !orm, @ic
really concern im only !rom teir s%bstanti8e side, tis misconception by te 8%lgar economist is
explained on t@o additional co%nts0 First, is inability to explain te pec%liar nat%re o! mercantile
pro!it# and, secondly, is apologetic endea8o%rs to ded%ce commodity-capital and money-capital,
and later commercial capital and money-dealing capital as !orms arising necessarily !rom te
process o! prod%ction as s%c, @ereas tey are d%e to te speci!ic !orm o! te capitalist mode o!
prod%ction, @ic abo8e all pres%pposes te circ%lation o! commodities, and ence o! money, as
its basis0
&! commercial capital and money-dealing capital do not di!!er !rom grain prod%ction any more
tan tis di!!ers !rom cattle-raising and man%!act%ring, it is plain as day tat prod%ction and
capitalist prod%ction are altogeter identical, and tat, among oter tings, te distrib%tion o! te
social prod%cts among te members o! a society, be it !or prod%cti8e or indi8id%al cons%mption,
m%st H%st as consistently be andled by mercants and bankers as te cons%mption o! meat by
cattle-raising and tat o! cloting by teir man%!act%re0
1

5e great economists, s%c as $mit, )icardo, etc0, are perplexed o8er mercantile capital being a
special 8ariety, since tey consider te basic !orm o! capital, capital as ind%strial capital, and
circ%lation capital Bcommodity-capital and money-capitalC solely beca%se it is a pase in te
reprod%ction process o! e8ery capital0 5e r%les concerning te !ormation o! 8al%e, pro!it, etc0,
immediately ded%ced by tem !rom teir st%dy o! ind%strial capital, do not extend directly to
mercant"s capital0 For tis reason, tey lea8e mercant"s capital entirely aside and mention it
only as a kind o! ind%strial capital0 Were8er tey make a special analysis o! it, as )icardo does
in dealing @it !oreign trade, tey seek to demonstrate tat it creates no 8al%e Band conseD%ently
no s%rpl%s-8al%eC0 A%t @ate8er is tr%e o! !oreign trade, is also tr%e o! ome trade0
<18 ;apter JJ
6iterto @e a8e considered mercant"s capital merely !rom te standpoint, and @itin te limits,
o! te capitalist mode o! prod%ction0 6o@e8er, not commerce alone, b%t also mercant"s capital,
is older tan te capitalist mode o! prod%ction, is, in !act, istorically te oldest !ree state o!
existence o! capital0
$ince @e a8e already seen tat money-dealing and te capital ad8anced !or it reD%ire noting
more !or teir de8elopment tan te existence o! @olesale commerce, and !%rter o! commercial
capital, it is only te latter @ic @e m%st occ%py o%rsel8es @it ere0
$ince mercant"s capital is penned in te spere o! circ%lation, and since its !%nction consists
excl%si8ely o! promoting te excange o! commodities, it reD%ires no oter conditions !or its
existence I aside !rom te %nde8eloped !orms arising !rom direct barter I o%tside tose necessary
!or te simple circ%lation o! commodities and money0 3r rater, te latter is te condition o! its
existence0 -o matter @at te basis on @ic prod%cts are prod%ced, @ic are tro@n into
circ%lation as commodities I @eter te basis o! te primiti8e comm%nity, o! sla8e prod%ction,
o! small peasant and petty bo%rgeois, or te capitalist basis, te caracter o! prod%cts as
commodities is not altered, and as commodities tey m%st pass tro%g te process o! excange
and its attendant canges o! !orm0 5e extremes bet@een @ic mercant"s capital acts as
mediator exist !or it as gi8en, H%st as tey are gi8en !or money and !or its mo8ements0 5e only
necessary ting is tat tese extremes so%ld be on and as commodities, regardless o! @eter
prod%ction is @olly a prod%ction o! commodities, or @eter only te s%rpl%s o! te independent
prod%cers" immediate needs, satis!ied by teir o@n prod%ction, is tro@n on te market0
Mercant"s capital promotes only te mo8ements o! tese extremes, o! tese commodities, @ic
are preconditions o! its o@n existence0
5e extent to @ic prod%cts enter trade and go tro%g te mercants" ands depends on te
mode o! prod%ction, and reaces its maxim%m in te %ltimate de8elopment o! capitalist
prod%ction, @ere te prod%ct is prod%ced solely as a commodity, and not as a direct means o!
s%bsistence0 3n te oter and, on te basis o! e8ery mode o! prod%ction, trade !acilitates te
prod%ction o! s%rpl%s-prod%cts destined !or excange, in order to increase te enHoyments, or te
@ealt, o! te prod%cers Bere meant are te o@ners o! te prod%ctsC0 6ence, commerce imparts
to prod%ction a caracter directed more and more to@ards excange-8al%e0
5e metamorposis o! commodities, teir mo8ement, consists 1C materially, o! te excange o!
di!!erent commodities !or one anoter, and <C !ormally, o! te con8ersion o! commodities into
money by sale, and o! money into commodities by p%rcase0 ?nd te !%nction o! mercant"s
capital resol8es itsel! into tese 8ery acts o! b%ying and selling commodities0 &t tere!ore merely
promotes te excange o! commodities# yet tis excange is not to be concei8ed at te o%tset as a
bare excange o! commodities bet@een direct prod%cers0 (nder sla8ery, !e%dalism and 8assalage
Bso !ar as primiti8e comm%nities are concernedC it is te sla8e-o@ner, te !e%dal lord, te trib%te-
collecting state, @o are te o@ners, ence sellers, o! te prod%cts0 5e mercant b%ys and sells
!or many0 ,%rcases and sales are concentrated in is ands and conseD%ently are no longer
bo%nd to te direct reD%irements o! te b%yer Bas mercantC0
A%t @ate8er te social organisation o! te speres o! prod%ction @ose commodity excange te
mercant promotes, is @ealt exists al@ays in te !orm o! money, and is money al@ays ser8es
as capital0 &ts !orm is al@ays M I ; I M"0 Money, te independent !orm o! excange-8al%e, is te
point o! depart%re, and increasing te excange-8al%e an end in itsel!0 ;ommodity excange as
s%c and te operations e!!ecting it I separated !rom prod%ction and per!ormed by non-prod%cers
I are H%st a means o! increasing @ealt not as mere @ealt, b%t as @ealt in its most %ni8ersal
social !orm, as excange-8al%e0 5e compelling moti8e and determining p%rpose are te
con8ersion o! M into M U cM0 5e transactions M I ; and ; I M", @ic promote M I M",
appear merely as stages o! transition in tis con8ersion o! M into M U cM0 5is M I ; I M", te
caracteristic mo8ement o! mercant"s capital, disting%ises it !rom ; I M I ;, trade in
<1* ;apter JJ
commodities directly bet@een prod%cers, @ic as !or its %ltimate end te excange o! %se-
8al%es0
5e less de8eloped te prod%ction, te more @ealt in money is concentrated in te ands o!
mercants or appears in te speci!ic !orm o! mercants" @ealt0
Witin te capitalist mode o! prod%ction I i.e., as soon as capital as establised its s@ay o8er
prod%ction and imparted to it a @olly canged and speci!ic !orm I mercant"s capital appears
merely as a capital @it a specific !%nction0 &n all pre8io%s modes o! prod%ction, and all te more,
@ere8er prod%ction ministers to te immediate @ants o! te prod%cer, mercant"s capital appears
to per!orm te !%nction par ecellence o! capital0
5ere is, tere!ore, not te least di!!ic%lty in %nderstanding @y mercant"s capital appears as te
istorical !orm o! capital long be!ore capital establised its o@n domination o8er prod%ction0 &ts
existence and de8elopment to a certain le8el are in temsel8es istorical premises !or te
de8elopment o! capitalist prod%ction 1C as premises !or te concentration o! money @ealt, and <C
beca%se te capitalist mode o! prod%ction pres%pposes prod%ction !or trade, selling on a large
scale, and not to te indi8id%al c%stomer, ence also a mercant @o does not b%y to satis!y is
personal @ants b%t concentrates te p%rcases o! many b%yers in is one p%rcase0 3n te oter
and, all de8elopment o! mercant"s capital tends to gi8e prod%ction more and more te caracter
o! prod%ction !or excange-8al%e and to t%rn prod%cts more and more into commodities0 .et its
de8elopment, as @e sall presently see, is incapable by itsel! o! promoting and explaining te
transition !rom one mode o! prod%ction to anoter0
Witin capitalist prod%ction mercant"s capital is red%ced !rom its !ormer independent existence
to a special pase in te in8estment o! capital, and te le8elling o! pro!its red%ces its rate o! pro!it
to te general a8erage0 &t !%nctions only as an agent o! prod%cti8e capital0 5e special social
conditions tat take sape @it te de8elopment o! mercant"s capital, are ere no longer
paramo%nt0 3n te contrary, @ere8er mercant"s capital still predominates @e !ind back@ard
conditions0 5is is tr%e e8en @itin one and te same co%ntry, in @ic, !or instance, te
speci!ically mercant to@ns present !ar more striking analogies @it past conditions tan
ind%strial to@ns0
<

5e independent and predominant de8elopment o! capital as mercant"s capital is tantamo%nt to
te non-s%bHection o! prod%ction to capital, and ence to capital de8eloping on te basis o! an
alien social mode o! prod%ction @ic is also independent o! it0 5e independent de8elopment o!
mercant"s capital, tere!ore, stands in in8erse proportion to te general economic de8elopment
o! society0
&ndependent mercantile @ealt as a predominant !orm o! capital represents te separation o! te
circ%lation process !rom its extremes, and tese extremes are te excanging prod%cers
temsel8es0 5ey remain independent o! te circ%lation process, H%st as te latter remains
independent o! tem0 5e prod%ct becomes a commodity by @ay o! commerce0 &t is commerce
@ic ere t%rns prod%cts into commodities, not te prod%ced commodity @ic by its
mo8ements gi8es rise to commerce0 5%s, capital appears ere !irst as capital in te process o!
circ%lation0 &t is in te circ%lation process tat money de8elops into capital0 &t is in circ%lation tat
prod%cts !irst de8elop as excange-8al%es, as commodities and as money0 ;apital can, and m%st,
!orm in te process o! circ%lation, be!ore it learns to control its extremes I te 8ario%s speres o!
prod%ction bet@een @ic circ%lation mediates0 Money and commodity circ%lation can mediate
bet@een speres o! prod%ction o! @idely di!!erent organisation, @ose internal str%ct%re is still
cie!ly adH%sted to te o%tp%t o! %se-8al%es0 5is indi8id%alisation o! te circ%lation process, in
@ic speres o! prod%ction are interconnected by means o! a tird, as a t@o-!old signi!icance0
3n te one and, tat circ%lation as not as yet establised a old on prod%ction, b%t is related to
it as to a gi8en premise0 3n te oter and, tat te prod%ction process as not as yet absorbed
circ%lation as a mere pase o! prod%ction0 Aot, o@e8er, are te case in capitalist prod%ction0
<<= ;apter JJ
5e prod%ction process rests @olly %pon circ%lation, and circ%lation is a mere transitional pase
o! prod%ction, in @ic te prod%ct created as a commodity is realised and its elements o!
prod%ction, like@ise created as commodities, are replaced0 5at !orm o! capital I mercant"s
capital I @ic de8eloped directly o%t o! circ%lation appears ere merely as one o! te !orms o!
capital occ%rring in its reprod%ction process0
5e la@ tat te independent de8elopment o! mercant"s capital is in8ersely proportional to te
degree o! de8elopment o! capitalist prod%ction is partic%larly e8ident in te istory o! te
carrying trade, as among te 4enetians, :enoese, 7%tc, etc0, @ere te principal gains @ere not
t%s made by exporting domestic prod%cts, b%t by promoting te excange o! prod%cts o!
commercially and oter@ise economically %nde8eloped societies, and by exploiting bot
prod%cing co%ntries0
3
6ere, mercant"s capital is in its p%re !orm, separated !rom te extremes I
te speres o! prod%ction bet@een @ic it mediates0 5is is te main so%rce o! its de8elopment0
A%t tis monopoly o! te carrying trade disintegrates, and @it it tis trade itsel!, proportionately
to te economic de8elopment o! te peoples, @om it exploits at bot ends o! its co%rse, and
@ose lack o! de8elopment @as te basis o! its existence0 &n te case o! te carrying trade tis
appears not only as te decline o! a special branc o! commerce, b%t also tat o! te
predominance o! te p%rely trading nations, and o! teir commercial @ealt in general, @ic
rested %pon te carrying trade0 5is is b%t a special !orm, in @ic is expressed te s%bordination
o! mercants to ind%strial capital @it te ad8ance o! capitalist prod%ction0 5e bea8io%r o!
mercant"s capital @ere8er it r%les o8er prod%ction is strikingly ill%strated not only by te
colonial economy Bte so-called colonial systemC in general, b%t D%ite speci!ically by te metods
o! te old 7%tc East &ndia ;ompany0
$ince te mo8ement o! mercant"s capital is M I ; I M", te mercant"s pro!it is made, !irst, in
acts @ic occ%r only @itin te circ%lation process, ence in te t@o acts o! b%ying and selling#
and, secondly, it is realised in te last act, te sale0 &t is tere!ore pro!it %pon alienation0 &rima
facie, a p%re and independent commercial pro!it seems impossible so long as prod%cts are sold at
teir 8al%e0 5o b%y ceap in order to sell dear is te r%le o! trade0 6ence, not te excange o!
eD%i8alents0 5e conception o! 8al%e is incl%ded in it in so !ar as te 8ario%s commodities are all
8al%es, and tere!ore money0 &n respect to D%ality tey are all expressions o! social labo%r0 A%t
tey are not 8al%es o! eD%al magnit%de0 5e D%antitati8e ratio in @ic prod%cts are excanged is
at !irst D%ite arbitrary0 5ey ass%me te !orm o! commodities inasm%c as tey are
excangeables, i.e., expressions o! one and te same tird0 ;ontin%ed excange and more reg%lar
reprod%ction !or excange red%ces tis arbitrariness more and more0 A%t at !irst not !or te
prod%cer and cons%mer, b%t !or teir go-bet@een, te mercant, @o compares money-prices and
pockets te di!!erence0 &t is tro%g is o@n mo8ements tat e establises eD%i8alence0
Mercant"s capital is originally merely te inter8ening mo8ement bet@een extremes @ic it does
not control, and bet@een premises @ic it does not create0
P%st as money originates !rom te bare !orm o! commodity-circ%lation, ; I M I ;, not only as a
meas%re o! 8al%e and a medi%m o! circ%lation, b%t also as te absol%te !orm o! commodity, and
ence o! @ealt, or oard, so tat its conser8ation and acc%m%lation as money becomes an end in
itsel!, so, too, does money, te oard, as someting tat preser8es and increases itsel! tro%g
mere alienation, originate !rom te bare !orm o! te circ%lation o! mercant"s capital, M I ; I M"0
5e trading nations o! ancient times existed like te gods o! Epic%r%s in te intermediate @orlds
o! te %ni8erse, or rater like te Pe@s in te pores o! ,olis society0 5e trade o! te !irst
independent !lo%rising mercant to@ns and trading nations rested as a p%re carrying trade %pon
te barbarism o! te prod%cing nations, bet@een @om tey acted te middleman0
&n te pre-capitalist stages o! society commerce r%led ind%stry0 &n modern society te re8erse is
tr%e0 3! co%rse, commerce @ill a8e more or less o! a co%nter-e!!ect on te comm%nities bet@een
@ic it is carried on0 &t @ill s%bordinate prod%ction more and more to excange-8al%e by making
<<1 ;apter JJ
l%x%ries and s%bsistence more dependent on sale tan on te immediate %se o! te prod%cts0
5ereby it dissol8es te old relationsips0 &t m%ltiplies money circ%lation0 &t encompasses no
longer merely te s%rpl%s o! prod%ction, b%t bites deeper and deeper into te latter, and makes
entire brances o! prod%ction dependent %pon it0 -e8erteless tis disintegrating e!!ect depends
8ery m%c on te nat%re o! te prod%cing comm%nity0
$o long as mercant"s capital promotes te excange o! prod%cts bet@een %nde8eloped societies,
commercial pro!it not only appears as o%t-bargaining and ceating, b%t also largely originates
!rom tem0 ?side !rom te !act tat it exploits te di!!erence bet@een te prices o! prod%ction o!
8ario%s co%ntries Band in tis respect it tends to le8el and !ix te 8al%es o! commoditiesC, tose
modes o! prod%ction bring it abo%t tat mercant"s capital appropriates an o8er@elming portion
o! te s%rpl%s-prod%ct partly as a mediator bet@een comm%nities @ic still s%bstantially prod%ce
!or %se-8al%e, and !or @ose economic organisation te sale o! te portion o! teir prod%ct
entering circ%lation, or !or tat matter any sale o! prod%cts at teir 8al%e, is o! secondary
importance# and partly, beca%se %nder tose earlier modes o! prod%ction te principal o@ners o!
te s%rpl%s-prod%ct @it @om te mercant dealt, namely, te sla8e-o@ner, te !e%dal lord, and
te state B!or instance, te oriental despotC represent te cons%ming @ealt and l%x%ry @ic te
mercant seeks to trap, as ?dam $mit correctly scented in te passage on !e%dal times D%oted
earlier0 Mercant"s capital, @en it olds a position o! dominance, stands e8ery@ere !or a system
o! robbery,
2
so tat its de8elopment among te trading nations o! old and modern times is al@ays
directly connected @it pl%ndering, piracy, kidnapping sla8es, and colonial conD%est# as in
;artage, )ome, and later among te 4enetians, ,ort%g%ese, 7%tc, etc0
5e de8elopment o! commerce and mercant"s capital gi8es rise e8ery@ere to te tendency
to@ards prod%ction o! excange-8al%es, increases its 8ol%me, m%ltiplies it, makes it
cosmopolitan, and de8elops money into @orld-money0 ;ommerce, tere!ore, as a more or less
dissol8ing in!l%ence e8ery@ere on te prod%cing organisation, @ic it !inds at and and @ose
di!!erent !orms are mainly carried on @it a 8ie@ to %se-8al%e0 5o @at extent it brings abo%t a
dissol%tion o! te old mode o! prod%ction depends on its solidity and internal str%ct%re0 ?nd
@iter tis process o! dissol%tion @ill lead, in oter @ords, @at ne@ mode o! prod%ction @ill
replace te old, does not depend on commerce, b%t on te caracter o! te old mode o! prod%ction
itsel!0 &n te ancient @orld te e!!ect o! commerce and te de8elopment o! mercant"s capital
al@ays res%lted in a sla8e economy# depending on te point o! depart%re, only in te
trans!ormation o! patriarcal sla8e system de8oted to te prod%ction o! immediate means o!
s%bsistence into one de8oted to te prod%ction o! s%rpl%s-8al%e0 6o@e8er, in te modern @orld, it
res%lts in te capitalist mode o! prod%ction0 &t !ollo@s tere!rom tat tese res%lts spring in
temsel8es !rom circ%mstances oter tan te de8elopment o! mercant"s capital0
&t is in te nat%re o! tings tat as soon as to@n ind%stry as s%c separates !rom agric%lt%ral
ind%stry, its prod%cts are !rom te o%tset commodities and t%s reD%ire te mediation o!
commerce !or teir sale0 5e leaning o! commerce to@ards te de8elopment o! to@ns, and, on te
oter and, te dependence o! to@ns %pon commerce, are so !ar nat%ral0 6o@e8er, it depends on
altogeter di!!erent circ%mstances to @at meas%re ind%strial de8elopment @ill go and in and
@it tis de8elopment0 ?ncient )ome, in its later rep%blican days, de8eloped mercant"s capital
to a iger degree tan e8er be!ore in te ancient @orld, @ito%t so@ing any progress in te
de8elopment o! cra!ts, @ile in ;orint and oter :recian to@ns in E%rope and ?sia Minor te
de8elopment o! commerce @as accompanied by igly de8eloped cra!ts0 3n te oter and, D%ite
contrary to te gro@t o! to@ns and attendant conditions, te trading spirit and te de8elopment
o! mercant"s capital occ%r !reD%ently among %nsettled nomadic peoples0
5ere is no do%bt I and it is precisely tis !act @ic as led to @olly erroneo%s conceptions I
tat in te 16t and 1>t cent%ries te great re8ol%tions, @ic took place in commerce @it te
geograpical disco8eries and speeded te de8elopment o! mercant"s capital, constit%te one o! te
principal elements in !%rtering te transition !rom !e%dal to capitalist mode o! prod%ction0 5e
<<< ;apter JJ
s%dden expansion o! te @orld-market, te m%ltiplication o! circ%lating commodities, te
competiti8e Eeal o! te E%ropean nations to possess temsel8es o! te prod%cts o! ?sia and te
treas%res o! ?merica, and te colonial system I all contrib%ted materially to@ard destroying te
!e%dal !etters on prod%ction0 6o@e8er, in its !irst period I te man%!act%ring period I te modern
mode o! prod%ction de8eloped only @ere te conditions !or it ad taken sape @itin te Middle
?ges0 ;ompare, !or instance, 6olland @it ,ort%gal0
+
?nd @en in te 16t, and partially still in
te 1>t, cent%ry te s%dden expansion o! commerce and emergence o! a ne@ @orld-market
o8er@elmingly contrib%ted to te !all o! te old mode o! prod%ction and te rise o! capitalist
prod%ction, tis @as accomplised con8ersely on te basis o! te already existing capitalist mode
o! prod%ction0 5e @orld-market itsel! !orms te basis !or tis mode o! prod%ction0 3n te oter
and, te immanent necessity o! tis mode o! prod%ction to prod%ce on an e8er-enlarged scale
tends to extend te @orld-market contin%ally, so tat it is not commerce in tis case @ic
re8ol%tionises ind%stry, b%t ind%stry @ic constantly re8ol%tionises commerce0 ;ommercial
s%premacy itsel! is no@ linked @it te pre8alence to a greater or lesser degree o! conditions !or a
large ind%stry0 ;ompare, !or instance, England and 6olland0 5e istory o! te decline o! 6olland
as te r%ling trading nation is te istory o! te s%bordination o! mercant"s capital to ind%strial
capital0 5e obstacles presented by te internal solidity and organisation o! pre-capitalistic,
national modes o! prod%ction to te corrosi8e in!l%ence o! commerce are strikingly ill%strated in
te interco%rse o! te Englis @it &ndia and ;ina0 5e broad basis o! te mode o! prod%ction
ere is !ormed by te %nity o! small-scale agric%lt%re and ome ind%stry, to @ic in &ndia @e
so%ld add te !orm o! 8illage comm%nities b%ilt %pon te common o@nersip o! land, @ic,
incidentally, @as te original !orm in ;ina as @ell0 &n &ndia te Englis lost no time in exercising
teir direct political and economic po@er, as r%lers and landlords, to disr%pt tese small economic
comm%nities0
6
Englis commerce exerted a re8ol%tionary in!l%ence on tese comm%nities and
tore tem apart only in so !ar as te lo@ prices o! its goods ser8ed to destroy te spinning and
@ea8ing ind%stries, @ic @ere an ancient integrating element o! tis %nity o! ind%strial and
agric%lt%ral prod%ction0 ?nd e8en so tis @ork o! dissol%tion proceeds 8ery grad%ally0 ?nd still
more slo@ly in ;ina, @ere it is not rein!orced by direct political po@er0 5e s%bstantial
economy and sa8ing in time a!!orded by te association o! agric%lt%re @it man%!act%re p%t %p a
st%bborn resistance to te prod%cts o! te big ind%stries, @ose prices incl%de te fau frais o! te
circ%lation process @ic per8ades tem0 (nlike te Englis, )%ssian commerce, on te oter
and, lea8es te economic gro%nd@ork o! ?siatic prod%ction %nto%ced0
>

5e transition !rom te !e%dal mode o! prod%ction is t@o-!old0 5e prod%cer becomes mercant
and capitalist, in contrast to te nat%ral agric%lt%ral economy and te g%ild-bo%nd andicra!ts o!
te medie8al %rban ind%stries0 5is is te really re8ol%tionising pat0 3r else, te mercant
establises direct s@ay o8er prod%ction0 6o@e8er m%c tis ser8es istorically as a stepping-
stone I @itness te Englis 1>t-cent%ry clotier, @o brings te @ea8ers, independent as tey
are, %nder is control by selling teir @ool to tem and b%ying teir clot I it cannot by itsel!
contrib%te to te o8ertro@ o! te old mode o! prod%ction, b%t tends rater to preser8e and retain
it as its precondition0 5e man%!act%rer in te Frenc silk ind%stry and in te Englis osiery and
lace ind%stries, !or example, @as t%s mostly b%t nominally a man%!act%rer %ntil te middle o! te
1*t cent%ry0 &n point o! !act, e @as merely a mercant, @o let te @ea8ers carry on in teir old
%norganised @ay and exerted only a mercant"s control, !or tat @as !or @om tey really
@orked0
8
5is system presents e8ery@ere an obstacle to te real capitalist mode o! prod%ction
and goes %nder @it its de8elopment0 Wito%t re8ol%tionising te mode o! prod%ction, it only
@orsens te condition o! te direct prod%cers, t%rns tem into mere @age-@orkers and
proletarians %nder conditions @orse tan tose %nder te immediate control o! capital, and
appropriates teir s%rpl%s-labo%r on te basis o! te old mode o! prod%ction0 5e same conditions
exist in some@at modi!ied !orm in part o! te 'ondon andicra!t !%rnit%re ind%stry0 &t is
practised notably in te 5o@er 6amlets on a 8ery large scale0 5e @ole prod%ction is di8ided
<<3 ;apter JJ
into 8ery n%mero%s separate brances o! b%siness independent o! one anoter0 3ne establisment
makes only cairs, anoter only tables, a tird only b%rea%s, etc0 A%t tese establisments
temsel8es are r%n more or less like andicra!ts by a single minor master and a !e@ Ho%rneymen0
-e8erteless, prod%ction is too large to @ork directly !or pri8ate persons0 5e b%yers are te
o@ners o! !%rnit%re stores0 3n $at%rdays te master 8isits tem and sells is prod%ct, te
transaction being closed @it as m%c aggling as in a pa@nsop o8er a loan0 5e masters
depend on tis @eekly sale, i! !or no oter reason tan to be able to b%y ra@ materials !or te
!ollo@ing @eek and to pay o%t @ages0 (nder tese circ%mstances, tey are really only middlemen
bet@een te mercant and teir o@n labo%rers0 5e mercant is te act%al capitalist @o pockets
te lion"s sare o! te s%rpl%s-8al%e0
*
?lmost te same applies in te transition to man%!act%re o!
brances !ormerly carried on as andicra!ts or side lines to r%ral ind%stries0 5e transition to
large-scale ind%stry depends on te tecnical de8elopment o! tese small o@ner-operated
establisments I @ere8er tey employ macinery tat admits o! a andicra!t-like operation0 5e
macine is dri8en by steam, instead o! by and0 5is is o! late te case, !or instance, in te
Englis osiery ind%stry0
5ere is, conseD%ently, a tree-!old transition0 'irst, te mercant becomes directly an ind%strial
capitalist0 5is is tr%e in cra!ts based on trade, especially cra!ts prod%cing l%x%ries and imported
by mercants togeter @it te ra@ materials and labo%rers !rom !oreign lands, as in &taly !rom
;onstantinople in te 1+t cent%ry0 Second, te mercant t%rns te small masters into is
middlemen, or b%ys directly !rom te independent prod%cer, lea8ing im nominally independent
and is mode o! prod%ction %ncanged0 4hird, te ind%strialist becomes mercant and prod%ces
directly !or te @olesale market0
&n te Middle ?ges, te mercant @as merely one @o, as ,oppe rigtly says, Ktrans!erredL te
goods prod%ced by g%ilds or peasants /,oppe,Geschichte der 4echnologie seit der
"iederherstellung der "issenschaften bis an das 0nde des acht#ehnten Jahrhunderts, Aand &,
:dttingen0 18=>, $0 >=0 I 0d01 5e mercant becomes ind%strialist, or rater, makes cra!tsmen,
partic%larly te small r%ral prod%cers, @ork !or im0 ;on8ersely, te prod%cer becomes mercant0
5e master @ea8er, !or instance, b%ys is @ool or yarn imsel! and sells is clot to te
mercant, instead o! recei8ing is @ool !rom te mercant piecemeal and @orking !or im
togeter @it is Ho%rneymen0 5e elements o! prod%ction pass into te prod%ction process as
commodities bo%gt by imsel!0 ?nd instead o! prod%cing !or some indi8id%al mercant, or !or
speci!ied c%stomers, e prod%ces !or te @orld o! trade0 5e prod%cer is imsel! a mercant0
Mercant"s capital does no more tan carry on te process o! circ%lation0 3riginally, commerce
@as te precondition !or te trans!ormation o! te cra!ts, te r%ral domestic ind%stries, and !e%dal
agric%lt%re, into capitalist enterprises0 &t de8elops te prod%ct into a commodity, partly by
creating a market !or it, and partly by introd%cing ne@ commodity eD%i8alents and s%pplying
prod%ction @it ne@ ra@ and a%xiliary materials, tereby opening ne@ brances o! prod%ction
based !rom te !irst %pon commerce, bot as concerns prod%ction !or te ome and @orld-market,
and as concerns conditions o! prod%ction originating in te @orld-market0 ?s soon as
man%!act%re gains s%!!icient strengt, and partic%larly large-scale ind%stry, it creates in its t%rn a
market !or itsel!, by capt%ring it tro%g its commodities0 ?t tis point commerce becomes te
ser8ant o! ind%strial prod%ction, !or @ic contin%ed expansion o! te market becomes a 8ital
necessity0 E8er more extended mass prod%ction !loods te existing market and tereby @orks
contin%ally !or a still greater expansion o! tis market !or breaking o%t o! its limits0 Wat restricts
tis mass prod%ction is not commerce Bin so !ar as it expresses te existing demandC, b%t te
magnit%de o! employed capital and te le8el o! de8elopment o! te prod%cti8ity o! labo%r0 5e
ind%strial capitalist al@ays as te @orld-market be!ore im, compares, and m%st constantly
compare, is o@n cost-prices @it te market-prices at ome, and tro%go%t te @orld0 &n te
earlier period s%c comparison !ell almost entirely to te mercants, and t%s sec%red te
predominance o! mercant"s capital o8er ind%strial capital0
<<2 ;apter JJ
5e !irst teoretical treatment o! te modern mode o! prod%ction I te mercantile system I
proceeded necessarily !rom te s%per!icial penomena o! te circ%lation process as indi8id%alised
in te mo8ements o! mercant"s capital, and tere!ore grasped only te appearance o! matters0
,artly beca%se mercant"s capital is te !irst !ree state o! existence o! capital in general0 ?nd
partly beca%se o! te o8er@elming in!l%ence @ic it exerted d%ring te !irst re8ol%tionising
period o! !e%dal prod%ction I te genesis o! modern prod%ction0 5e real science o! modern
economy only begins @en te teoretical analysis passes !rom te process o! circ%lation to te
process o! prod%ction0 &nterest-bearing capital is, indeed, like@ise a 8ery old !orm o! capital0 A%t
@e sall see later @y mercantilism does not take it as its point o! depart%re, b%t rater carries on
a polemic against it0
Part V. Division of Proft into
Interest and Proft of
Enterprise. Interest-Bearing
Capital
Chapter 21. Interest-Bearing Capital
&n o%r !irst disc%ssion o! te general, or a8erage, rate o! pro!it B,art && o! tis bookC @e did not
a8e tis rate be!ore %s in its complete !orm, te eD%alisation o! pro!it appearing only as
eD%alisation bet@een ind%strial capitals in8ested in di!!erent speres0 5is @as s%pplemented in
te preceding part, @ic dealt @it te participation o! mercant"s capital in tis eD%alisation,
and also commercial pro!it0 5e general rate o! pro!it and te a8erage pro!it no@ appeared in
narro@er limits tan be!ore0 &t so%ld be remembered in te co%rse o! o%r analysis tat in any
!%t%re re!erence to te general rate o! pro!it or to a8erage pro!it @e mean tis latter connotation,
ence only te !inal !orm o! a8erage rate0 ?nd since tis rate is te same !or mercantile, as @ell as
ind%strial, capital, it is no longer necessary, so !ar as tis a8erage pro!it is concerned, to make a
distinction bet@een ind%strial and commercial pro!it0 Weter ind%strially in8ested in te spere
o! prod%ction, or commercially in te spere o! circ%lation, capital yields te same a8erage
ann%al pro!it pro rata to its magnit%de0
Money I ere taken as te independent expression o! a certain amo%nt o! 8al%e existing eiter
act%ally as money or as commodities I may be con8erted into capital on te basis o! capitalist
prod%ction, and may tereby be trans!ormed !rom a gi8en 8al%e to a sel!-expanding, or
increasing, 8al%e0 &t prod%ces pro!it, i.e., it enables te capitalist to extract a certain D%antity o!
%npaid labo%r, s%rpl%s-prod%ct and s%rpl%s-8al%e !rom te labo%rers, and to appropriate it0 &n tis
@ay, aside !rom its %se-8al%e as money, it acD%ires an additional %se-8al%e, namely tat o! ser8ing
as capital0 &ts %se-8al%e ten consists precisely in te pro!it it prod%ces @en con8erted into
capital0 &n tis capacity o! potential capital, as a means o! prod%cing pro!it, it becomes a
commodity, b%t a commoditysui generis0 3r, @at amo%nts to te same, capital as capital
becomes a commodity0
1

$%ppose te ann%al a8erage rate o! pro!it is <=T0 &n tat case a macine 8al%ed at V1==,
employed as capital %nder a8erage conditions and an a8erage amo%nt o! intelligence and
p%rposi8e e!!ort, @o%ld yield a pro!it o! V<=0 ? man in possession o! V1==, tere!ore, possesses
te po@er to make V1<= o%t o! V1==, or to prod%ce a pro!it o! V<=0 6e possesses a potential
capital o! V1==0 &! e gi8es tese V1== to anoter !or one year, so te latter may %se tem as real
capital, e gi8es im te po@er to prod%ce a pro!it o! V<= I a s%rpl%s-8al%e @ic costs tis oter
noting, and !or @ic e pays no eD%i8alent0 &! tis oter so%ld pay, say, V+ at te close o! te
year to te o@ner o! te V1== o%t o! te pro!it prod%ced, e @o%ld tereby pay te %se-8al%e o!
te V1== I te %se-8al%e o! its !%nction as capital, te !%nction o! prod%cing a pro!it o! V<=0 5e
part o! te pro!it paid to te o@ner is called interest, @ic is H%st anoter name, or special term,
<<6 ;apter JJ&
!or a part o! te pro!it gi8en %p by capital in te process o! !%nctioning to te o@ner o! te capital,
instead o! p%tting it into its o@n pocket0
&t is plain tat te possession o! V1== gi8es teir o@ner te po@er to pocket te interest I tat
certain portion o! pro!it prod%ced by means o! is capital0 &! e ad not gi8en te V1== to te
oter person, te latter co%ld not a8e prod%ced any pro!it, and co%ld not at all a8e acted as a
capitalist @it re!erence to tese V1==0
<

5o speak ere o! nat%ral H%stice, as :ilbart does Bsee noteC, is nonsense0 5e H%stice o! te
transactions bet@een agents o! prod%ction rests on te !act tat tese arise as nat%ral
conseD%ences o%t o! te prod%ction relationsips0 5e H%ristic !orms in @ic tese economic
transactions appear as @il!%l acts o! te parties concerned, as expressions o! teir common @ill
and as contracts tat may be en!orced by la@ against some indi8id%al party, cannot, being mere
!orms, determine tis content0 5ey merely express it0 5is content is H%st @ene8er it
corresponds, is appropriate, to te mode o! prod%ction0 &t is %nH%st @ene8er it contradicts tat
mode0 $la8ery on te basis o! capitalist prod%ction is %nH%st# like@ise !ra%d in te D%ality o!
commodities0
5e V1== prod%ce te pro!it o! V<= beca%se tey !%nction as capital, be it ind%strial or mercantile0
A%t te sine 3ua non o! tis !%nction as capital is tat tey are expended as capital, i.e., are
expended in p%rcasing means o! prod%ction Bin te case o! ind%strial capitalC or commodities Bin
te case o! mercant"s capitalC0 A%t to be expended, tey m%st be a8ailable0 &! ?, te o@ner o! te
V1==, @ere eiter to spend tem !or personal cons%mption, or to keep tem as a oard, tey co%ld
not a8e been in8ested as capital by A in is capacity o! !%nctioning capitalist0 A does not expend
is o@n capital, b%t ?"s# o@e8er, e cannot expend ?"s capital @ito%t ?"s consent0 5ere!ore, it
is really ? @o originally expends te V1== as capital, albeit is !%nction as capitalist is limited to
tis o%tlay o! V1== as capital0 &n respect to tese V1==, A acts as capitalist only beca%se ? lends
im te V1==, t%s expending tem as capital0
'et %s !irst consider te sing%lar circ%lation o! interest-bearing capital0 We sall ten secondly
a8e to analyse te pec%liar manner in @ic it is sold as a commodity, namely loaned instead o!
relinD%ised once and !or all0
5e point o! depart%re is te money @ic ? ad8ances to A0 5is may be done @it or @ito%t
sec%rity0 5e !irst-named !orm, o@e8er, is te more ancient, sa8e ad8ances on commodities or
paper, s%c as bills o! excange, sares, etc0 5ese special !orms do not concern %s at tis point0
We are dealing ere @it interest-bearing capital in its %s%al !orm0
&n A"s possession te money is act%ally con8erted into capital, passes tro%g M I ; I M" and
ret%rns to ? as M", as MUcM, @ere cM represents te interest0 For te sake o! simplicity @e
sall not consider ere te case, in @ic capital remains in A"s possession !or a long term and
interest is paid at reg%lar inter8als0
5e mo8ement, tere!ore, is
M I M I ; I M" I M"0
Wat appears d%plicated ere, is 1C te o%tlay o! money as capital, and <C its re!l%x as realised
capital, as M" or MUcM0
&n te mo8ement o! mercant"s capital, M I ; I M", te same commodity canges ands t@ice, or
more tan t@ice, i! mercant sells to mercant0 A%t e8ery s%c cange o! place o! te same
commodity indicates a metamorposis, a p%rcase or sale o! te commodity, no matter o@ o!ten
te process may be repeated, %ntil it enters cons%mption0
3n te oter and, te same money canges ands t@ice in ; I M I ;, b%t tis indicates te
complete metamorposis o! te commodity, @ic is !irst con8erted into money and ten !rom
money back into anoter commodity0
<<> ;apter JJ&
A%t in interest-bearing capital te !irst time M canges ands is by no means a pase eiter o! te
commodity metamorposis, or o! reprod%ction o! capital0 &t !irst becomes one @en it is
expended a second time, in te ands o! te acti8e capitalist @o carries on trade @it it, or
trans!orms it into prod%cti8e capital0 M"s !irst cange o! ands does not express anyting ere,
beyond its trans!er !rom ? to A I a trans!er @ic %s%ally takes place %nder certain legal !orms
and stip%lations0
5is do%ble o%tlay o! money as capital, o! @ic te !irst is merely a trans!er !rom ? to A, is
matced by its do%ble re!l%x0 ?s M", or M U cM, it !lo@s back o%t o! te process to A, te person
acting as capitalist0 5e latter ten trans!ers it back to ?, b%t togeter @it a part o! te pro!it, as
realised capital, as M U cM, in @ic cM is not te entire pro!it, b%t only a portion o! te pro!it I
te interest0 &t !lo@s back to A only as @at e ad expended, as !%nctioning capital, b%t as te
property o! ?0 5o make its re!l%x complete, A m%st conseD%ently ret%rn it to ?0 A%t in addition to
te capital, A m%st also t%rn o8er to ? a portion o! te pro!it, a part @ic goes %nder te name o!
interest, @ic e ad made @it tis capital since ? ad gi8en im te money only as a capital,
i.e., as 8al%e @ic is not only preser8ed in its mo8ement, b%t also creates s%rpl%s-8al%e !or its
o@ner0 &t remains in A"s ands only so long as it is !%nctioning capital0 ?nd @it its re!l%x I on
te stip%lated date I it ceases to !%nction as capital0 Wen no longer acting as capital, o@e8er, it
m%st again be ret%rned to ?, @o ad ne8er ceased being its legal o@ner0
5e !orm o! lending, @ic is pec%liar to tis commodity, to capital as commodity, and @ic
also occ%rs in oter transactions instead o! tat o! sale, !ollo@s !rom te simple de!inition tat
capital obtains ere as a commodity, or tat money as capital becomes a commodity0
? distinction so%ld be made ere0
We a8e seen BAook &&, ;ap0 &C, and recall brie!ly at tis point, tat in te process o! circ%lation
capital ser8es as commodity-capital and money-capital0 A%t in neiter !orm does capital become a
commodity as capital0
?s soon as prod%cti8e capital t%rns into commodity-capital it m%st be placed on te market to be
sold as a commodity0 5ere it acts simply as a commodity0 5e capitalist ten appears only as te
seller o! commodities, H%st as te b%yer is only te b%yer o! commodities0 ?s a commodity te
prod%ct m%st realise its 8al%e, m%st ass%me its transm%ted !orm o! money, in te process o!
circ%lation by its sale0 &t is also D%ite immaterial !or tis reason, @eter tis commodity is
bo%gt by a cons%mer as a necessity o! li!e, or by a capitalist as means o! prod%ction, i.e., as a
component part o! is capital0 &n te act o! circ%lation commodity-capital acts only as a
commodity, not as a capital0 &t is commodity-capital, as distinct !rom an ordinary commodity, 1C
beca%se it is @eigted @it s%rpl%s-8al%e, te realisation o! its 8al%e, tere!ore, being
sim%ltaneo%sly te realisation o! s%rpl%s-8al%e# b%t tis alters noting abo%t its simple existence
as a commodity, as a prod%ct @it a certain price# <C beca%se its !%nction as a commodity is a
pase in its process o! reprod%ction as capital, and tere!ore its mo8ement as a commodity being
only a partial mo8ement o! its process, is sim%ltaneo%sly its mo8ement as capital0 .et it does not
become tat tro%g te sale as s%c, b%t only tro%g te connection o! te sale @it te @ole
mo8ement o! tis speci!ic D%antity o! 8al%e in te capacity o! capital0
&n te same @ay as money-capital it really acts simply as money, i.e., as a means o! b%ying
commodities Bte elements o! prod%ctionC0 5e !act tat tis money is sim%ltaneo%sly money-
capital, a !orm o! capital, does not emerge !rom te act o! b%ying, te act%al !%nction @ic it
ere per!orms as money, b%t !rom te connection o! tis act @it te total mo8ement o! capital,
since tis act, per!ormed by capital as money, initiates te capitalist prod%ction process0
A%t in so !ar as tey act%ally !%nction, i.e., act%ally play a role in te process, commodity-capital
acts ere only as a commodity and money-capital only as money0 ?t no time d%ring te
metamorposis, 8ie@ed by itsel!, does te capitalist sell is commodities as capital to te b%yer,
alto%g to im tey represent capital# nor does e gi8e %p money as capital to te seller0 &n bot
<<8 ;apter JJ&
cases be gi8es %p is commodities simply as commodities, and money simply as money, i.e., as a
means o! p%rcasing commodities0
&t is only in connection @it te entire process, at te moment @ere te point o! depart%re
appears sim%ltaneo%sly as te point o! ret%rn, in M I M" or ; I ;", tat capital in te process o!
circ%lation appears as capital B@ereas in te process o! prod%ction it appears as capital tro%g
te s%bordination o! te labo%rer to te capitalist and te prod%ction o! s%rpl%s 8al%eC0 &n tis
moment o! ret%rn, o@e8er, te connection disappears0 Wat @e a8e ten is M", or M U cM, a
s%m o! money eD%al to te s%m originally ad8anced pl%s an increment I te realised s%rpl%s-
8al%e Bregardless o! @eter te amo%nt o! 8al%e increased by cM exists in te !orm o! money, or
commodities, or elements o! prod%ctionC0 ?nd it is precisely at tis point o! ret%rn @ere capital
exists as realised capital, as an expanded 8al%e, tat it ne8er enters te circ%lation in tis !orm I
in so !ar as tis point is !ixed as a point o! rest, @eter real or imaginary I b%t rater appears to
a8e been @itdra@n !rom circ%lation as a res%lt o! te @ole process0 Wene8er it is again
expended, it is ne8er gi8en %p to anoter as capital, b%t is sold to im as an ordinary commodity,
or gi8en to im as ordinary money in excange !or commodities0 &t ne8er appears as capital in its
process o! circ%lation, only as commodity or money, and at tis point tis is te only !orm o! its
existence !or others0 ;ommodities and money are ere capital not beca%se commodities cange
into money, or money into commodities, not in teir act%al relations to sellers or b%yers, b%t only
in teir ideal relations to te capitalist imsel! Bs%bHecti8ely speakingC, or as pases in te process
o! reprod%ction BobHecti8ely speakingC0 ;apital exists as capital in act%al mo8ement, not in te
process o! circ%lation, b%t only in te process o! prod%ction, in te process by @ic labo%r-
po@er is exploited0
5e matter is di!!erent @it interest-bearing capital, o@e8er, and it is precisely tis di!!erence
@ic lends it its speci!ic caracter0 5e o@ner o! money @o desires to enance is money as
interest-bearing capital, t%rns it o8er to a tird person, tro@s it into circ%lation, t%rns it into a
commodity as capital# not H%st capital !or imsel!, b%t also !or oters0 &t is not capital merely !or
te man @o gi8es it %p, b%t is !rom te 8ery !irst gi8en to te tird person as capital, as a 8al%e
endo@ed @it te %se-8al%e o! creating s%rpl%s-8al%e, o! creating pro!it# a 8al%e @ic preser8es
itsel! in its mo8ement and ret%rns to its original o@ner, in tis case te o@ner o! money, a!ter
per!orming its !%nction0 6ence it lea8es im only !or a speci!ied time, passes b%t temporarily o%t
o! te possession o! its o@ner into te possession o! a !%nctioning capitalist, is tere!ore neiter
gi8en %p in payment nor sold, b%t merely loaned, merely relinD%ised @it te %nderstanding
tat, !irst, it sall ret%rn to its point o! depart%re a!ter a de!inite time inter8al, and, second, tat it
sall ret%rn as realised capital I a capital a8ing realised its %se-8al%e, its po@er o! creating
s%rpl%s-8al%e0
;ommodities loaned o%t as capital are loaned eiter as !ixed or as circ%lating capital, depending
on teir properties0 Money may be loaned o%t in eiter !orm0 &t may be loaned as !ixed capital, !or
instance, i! it is paid back in te !orm o! an ann%ity, @ereby a portion o! te capital !lo@s back
togeter @it te interest0 ;ertain commodities, s%c as o%ses, sips, macines, etc0, can be
loaned o%t only as !ixed capital by te nat%re o! teir %se-8al%es0 .et all loaned capital, @ate8er
its !orm, and no matter o@ te nat%re o! its %se-8al%e may modi!y its ret%rn, is al@ays only a
speci!ic !orm o! money-capital0 Aeca%se @at is loaned o%t is al@ays a de!inite s%m o! money,
and it is tis s%m on @ic interest is calc%lated0 $o%ld @ate8er is loaned o%t be neiter money
nor circ%lating capital, it is also paid back in te @ay !ixed capital ret%rns0 5e lender periodically
recei8es interest and a portion o! te cons%med 8al%e o! te !ixed capital itsel!, tis being an
eD%i8alent !or te periodic @ear and tear0 ?nd at te end o! te stip%lated term te %ncons%med
portion o! te loaned !ixed capital is ret%rned in kind0 &! te loaned capital is circ%lating capital, it
is like@ise ret%rned in te manner pec%liar to circ%lating capital0
5e manner o! re!l%x is, tere!ore, al@ays determined by te act%al circ%it described by capital in
te act o! reprod%ction and by its speci!ic 8arieties0 A%t as !or loaned capital, its re!l%x ass%mes
<<* ;apter JJ&
te form o! ret%rn payments, beca%se its ad8ance, by @ic it is trans!erred, possesses te !orm o!
a loan0
&n tis capter @e treat only o! act%al money-capital, !rom @ic te oter !orms o! loaned
capital are deri8ed0
5e loaned capital !lo@s back in t@o @ays0 &n te process o! reprod%ction it ret%rns to te
!%nctioning capitalist, and ten its ret%rn repeats itsel! once more as trans!er to te lender, te
money-capitalist, as ret%rn payment to te real o@ner, its legal point o! depart%re0
&n te act%al process o! circ%lation, capital appears al@ays as a commodity or as money, and its
mo8ement al@ays is broken %p into a series o! p%rcases and sales0 &n sort, te process o!
circ%lation resol8es itsel! into te metamorposis o! commodities0 &t is di!!erent, @en @e
consider te process o! reprod%ction as a @ole0 &! @e start o%t @it money Band te same is tr%e
i! @e start o%t @it commodities, since @e begin @it teir 8al%e, ence 8ie@ temsub specie as
moneyC, @e sall see tat a certain s%m o! money is expended and ret%rns a!ter a certain period
@it an increment0 5e ad8anced s%m o! money ret%rns togeter @it a s%rpl%s-8al%e0 &t as
remained intact and increased in making a certain cycle0 A%t no@, being loaned o%t as capital,
money is loaned as H%st te s%m o! money @ic preser8es and expands itsel!, @ic ret%rns a!ter
a certain period @it an increment, and is al@ays ready to per!orm te same process o8er again0 &t
is expended neiter as money nor as a commodity, t%s, neiter excanged against a commodity
@en ad8anced in te !orm o! money, nor sold in excange !or money @en ad8anced as a
commodity# rater, it is expended as capital0 5is relation to itsel!, in @ic capital presents itsel!
@en te capitalist prod%ction process is 8ie@ed as a @ole and as a single %nity, and in @ic
capital appears as money tat begets money, is ere imparted to it as its caracter, its designation,
@ito%t any intermediary mo8ement0 ?nd it is relinD%ised @it tis designation @en loaned o%t
as money-capital0
? D%eer conception o! te role o! money-capital is old by ,ro%don BGratuit7 du Cr7dit.
Discussion entre M. '. Gastiat et M. &roudhon, ,aris, 18+=C0 'oaning seems an e8il to ,ro%don
beca%se it is not selling0 'oaning !or an interest is
Kte !ac%lty o! selling te same article o8er and o8er
again, and o! recei8ing its price again and again,
@ito%t once relinD%ising o@nersip o! te obHect
@ic is being soldL Bp0 *C0 /5e cited @ords belong
to ;e8e, one o! te editors o! te ne@spaper ,a Loi
du peuple, and te a%tor o! te K!irst letterL in te
book Gratuit7 du Cr7dit. Discussion entre M. '.
Gastiat et M. &roudhon, ,aris, 18+=0 I 0d1
5e obHect I money, a o%se, etc0 I does not cange o@ners as in selling and b%ying0 A%t
,ro%don does not see tat no eD%i8alent is recei8ed in ret%rn !or money gi8en a@ay in te !orm
o! interest-bearing capital0 5r%e, te obHect is gi8en a@ay in e8ery act o! b%ying and selling, so !ar
as tere are processes o! excange at all0 3@nersip o! te sold article is al@ays relinD%ised0 A%t
its 8al%e is not gi8en %p0 &n a sale te commodity is gi8en a@ay, b%t not its 8al%e, @ic is
ret%rned in te !orm o! money, or in @at is ere H%st anoter !orm o! it I promissory notes, or
titles o! payment0 Wen p%rcasing, te money is gi8en a@ay, b%t not its 8al%e, @ic is replaced
in te !orm o! commodities0 5e ind%strial capitalist retains te same 8al%e in is ands
tro%go%t te process o! reprod%ction Bexcl%ding s%rpl%s-8al%eC, b%t in di!!erent !orms0
&nasm%c as tere is an excange, i.e., an excange o! articles, tere is no cange in te 8al%e0
5e same capitalist al@ays retains te same 8al%e0 A%t so long as s%rpl%s-8al%e is prod%ced by
<3= ;apter JJ&
te capitalist, tere is no excange0 ?s soon as an excange occ%rs, te s%rpl%s-8al%e is already
incorporated in te commodities0 &! @e 8ie@ te entire circ%it made by capital, M I ; I M", rater
tan indi8id%al acts o! excange, @e sall see tat a de!inite amo%nt o! 8al%e is contin%ally
ad8anced, and tat tis same amo%nt pl%s s%rpl%s-8al%e, or pro!it, is @itdra@n !rom circ%lation0
5e act%al acts o! excange do not, at any rate, re8eal o@ tis process is promoted0 ?nd it is
precisely tis process o! M as capital, on @ic te interest o! te money-lending capitalist rests,
and !rom @ic it is deri8ed0
K&n !act,L says ,ro%don, Kte at-maker, @o sells
ats, recei8es teir 8al%e, neiter more nor less0 A%t
te money-lending capitalist 000 does not reco8er H%st
is capital, e reco8ers more tan is capital, more
tan e tro@s into te excange# e recei8es an
interest o8er and abo8e is capitalL Bp0 6*C0
6ere te atter represents te prod%cti8e capitalist as distinct !rom te loan capitalist0 ,ro%don
as ob8io%sly !ailed to grasp te secret o! o@ te prod%cti8e capitalist can sell commodities at
teir 8al%e BeD%alisation tro%g prices o! prod%ction is ere immaterial to is conceptionC and
recei8e a pro!it o8er and abo8e te capital e !lings into excange0 $%ppose te price o!
prod%ction o! 1== ats R V11+, and tat tis price o! prod%ction appens to coincide @it te
8al%e o! te ats, @ic means tat te capital prod%cing te ats is o! te same composition as
te a8erage social capital0 $o%ld te pro!it R 1+T, te atter makes a pro!it o! V1+ by selling is
commodities at teir 8al%e o! V11+0 5ey cost im only V1==0 &! e prod%ced tem @it is o@n
capital, e pockets te entire s%rpl%s o! V1+ b%t i! @it borro@ed capital, e may a8e to gi8e %p
V+ as interest0 5is alters noting in te 8al%e o! te ats, only in te distrib%tion among di!!erent
persons o! te s%rpl%s-8al%e already contained in tis 8al%e0 $ince, tere!ore, te 8al%e o! te ats
is not a!!ected by te payment o! interest, it is nonsense on ,ro%don"s part to say:
K?s in commerce te interest on capital is added to
te @ages o! labo%rers in making %p te price o!
commodities, it is impossible !or te labo%rer to b%y
back te prod%ct o! is o@n labo%r0 Livre en
travaillant is a principle @ic contains a
contradiction %nder te r%le o! interestL Bp0 1=+C0
3

6o@ little ,ro%don %nderstood te nat%re o! capital is so@n in te !ollo@ing statement, in
@ic e describes te mo8ement o! capital in general as a mo8ement pec%liar to interest-bearing
capital:
K$ince money-capital ret%rns to its so%rce !rom
excange tro%g te acc%m%lation o! interest, it
!ollo@s tat rein8estment al@ays made by te same
indi8id%al contin%ally brings pro!it to te same
person,L p0 1+20
Wat is it tat still p%EEles im in te pec%liar mo8ement o! interest-bearing capitalQ 5e
categories: b%ying, price, gi8ing %p articles, and te immediate !orm in @ic s%rpl%s-8al%e
<31 ;apter JJ&
appears ere# in sort, te penomenon tat capital as s%c as become a commodity, tat selling,
conseD%ently, as t%rned into lending and price into a sare o! te pro!it0
5e ret%rn o! capital to its point o! depart%re is generally te caracteristic mo8ement o! capital
in its total circ%it0 5is is by no means a !eat%re o! interest-bearing capital alone0 Wat singles it
o%t is rater te external !orm o! its ret%rn @ito%t te inter8ention o! any circ%it0 5e loaning
capitalist gi8es a@ay is capital, trans!ers it to te ind%strial capitalist, @ito%t recei8ing any
eD%i8alent0 6is trans!er is not an act belonging to te real circ%lation process o! capital at all0 &t
ser8es merely to introd%ce tis circ%it, @ic is e!!ected by te ind%strial capitalist0 5is !irst
cange o! position o! money does not express any act o! te metamorposis I neiter b%ying nor
selling0 3@nersip is not relinD%ised, beca%se tere is no excange and no eD%i8alent is
recei8ed0 5e ret%rn o! te money !rom te ands o! te ind%strial capitalist to tose o! te
loaning capitalist merely s%pplements te !irst act o! gi8ing a@ay te capital0 ?d8anced in te
!orm o! money, te capital again ret%rns to te ind%strial capitalist tro%g te circ%lar process in
te !orm o! money0 A%t since it did not belong to im @en e in8ested it, it cannot belong to im
on its ret%rn0 ,assing tro%g te process o! reprod%ction cannot by any means t%rn te capital
into is property0 6e m%st tere!ore restore it to te lender0 5e !irst expendit%re, @ic trans!ers
te capital !rom te lender to te borro@er, is a legal transaction @ic as noting to do @it te
act%al process o! reprod%ction0 &t is merely a prel%de to tis process0 5e ret%rn payment, @ic
again trans!ers te capital tat as !lo@ed back !rom te borro@er to te lender is anoter legal
transaction, a s%pplement o! te !irst0 3ne introd%ces te act%al process, te oter is an act
s%pplementary to tis process0 ,oint o! depart%re and point o! ret%rn, te gi8ing a@ay and te
reco8ery o! te loaned capital, t%s appear as arbitrary mo8ements promoted by legal
transactions, @ic take place be!ore and a!ter te act%al mo8ement o! capital and a8e noting
to do @it it as s%c0 &t @o%ld a8e been all te same as concerns tis act%al mo8ement i! te
capital ad !rom te !irst belonged to te ind%strial capitalist and ad ret%rned to im, tere!ore,
as is o@n0
&n te !irst introd%ctory act te lender gi8es is capital to te borro@er0 &n te s%pplemental and
closing act te borro@er ret%rns te capital to te lender0 ?s concerns te transaction bet@een
tese t@o I and aside !rom te interest !or te present I as concerns te mo8ement o! te loaned
capital bet@een lender and borro@er, tere!ore, te t@o acts Bseparated by a longer or sorter time
inter8al, d%ring @ic te act%al reprod%ction process o! te capital takes placeC embrace te
entire mo8ement0 ?nd tis mo8ement, disposing on condition o! ret%rning, constit%tes per se te
mo8ement o! lending and borro@ing, tat speci!ic !orm o! conditionally alienating money or
commodities0
5e caracteristic mo8ement o! capital in general, te ret%rn o! te money to te capitalist, i.e.,
te ret%rn o! capital to its point o! depart%re, ass%mes in te case o! interest-bearing capital a
@olly external appearance, separated !rom te act%al mo8ement, o! @ic it is a !orm0 ? gi8es
a@ay is money not as money, b%t as capital0 -o trans!ormation occ%rs in te capital0 &t merely
canges ands0 &ts real trans!ormation into capital does not take place %ntil it is in te ands o! A0
A%t !or ? it becomes capital as soon as e gi8es it to A0 5e act%al re!l%x o! capital !rom te
processes o! prod%ction and circ%lation takes place only !or A0 A%t !or ? te re!l%x ass%mes te
same !orm as te alienation0 5e capital ret%rns !rom A to ?0 :i8ing a@ay, i.e., loaning money !or
a certain time and recei8ing it back @it interest Bs%rpl%s-8al%eC is te complete !orm o! te
mo8ement pec%liar to interest-bearing capital as s%c0 5e act%al mo8ement o! loaned money as
capital is an operation lying o%tside te transactions bet@een lender and borro@er0 &n tese te
intermediate act is obliterated, in8isible, not directly incl%ded0 ? special sort o! commodity,
capital as its o@n pec%liar mode o! alienation0 -eiter does its ret%rn, tere!ore, express itsel! as
te conseD%ence and res%lt, o! some de!inite series o! economic processes, b%t as te e!!ect o! a
speci!ic legal agreement bet@een b%yer and seller0 5e time o! ret%rn depends on te progress o!
te process o! reprod%ction# in te case o! interest-bearing capital, its ret%rn as capital seems to
<3< ;apter JJ&
depend on te mere agreement bet@een lender and borro@er0 $o tat in regard to tis transaction
te ret%rn o! capital no longer appears as a res%lt arising o%t o! te process o! reprod%ction# it
appears as i! te loaned capital ne8er lost te !orm o! money0 5o be s%re, tese transactions are
really determined by te act%al reprod%cti8e ret%rns0 A%t tis is not e8ident in te transaction
itsel!0 -or is it by any means al@ays te case in practice0 &! te act%al ret%rn does not take place
in d%e time, te borro@er m%st look !or oter reso%rces to meet is obligations 8is-O-8is te
lender0 5e bare form o! capital I money expended as a certain s%m, ?, @ic ret%rns as s%m ? U
1Nx ? a!ter a gi8en lapse o! time @ito%t any oter intermediate act sa8e tis lapse o! time I is
only a meaningless !orm o! te act%al mo8ement o! capital0
&n te act%al mo8ement o! capital its ret%rn is a pase in te process o! circ%lation0 5e money is
!irst con8erted into means o! prod%ction# prod%ction trans!orms tem into commodities# tro%g
sale o! te commodities tey are recon8erted into money and ret%rn in tis !orm into te ands o!
te capitalist @o ad originally ad8anced te capital in te !orm o! money0 A%t in te case o!
interest-bearing capital, te ret%rn, like alienation, is te res%lt o! a legal transaction bet@een te
o@ner o! te capital and a second party0 We see only te alienation and te ret%rn payment0
Wate8er passes in te interim is obliterated0
A%t since money ad8anced as capital as te property o! ret%rning to te person @o ad8anced it,
to te one @o expended it as capital, and since M I ; I M" is te immanent !orm o! te
mo8ement o! capital, te o@ner o! te money can, !or tis 8ery reason, loan it o%t as capital, as
someting tat as te property o! ret%rning to its point o! depart%re, o! preser8ing, and
increasing, its 8al%e in te co%rse o! its mo8ement0 6e gi8es it a@ay as capital, beca%se it ret%rns
to its point o! depart%re a!ter a8ing been employed as capital, ence can be restored by te
borro@er a!ter a certain period precisely beca%se it as come back to im0
'oaning money as capital I its alienation on te condition o! it being ret%rned a!ter a certain time-
pres%pposes, tere!ore, tat it @ill be act%ally employed as capital, and tat it act%ally !lo@s back
to its starting-point0 5e real cycle made by money as capital is, tere!ore, te premise !or te
legal transaction by @ic te borro@er m%st ret%rn te money to te lender0 &! te borro@er does
not %se te money as capital, tat is is o@n b%siness0 5e lender loans it as capital, and as s%c it
is s%pposed to per!orm te !%nctions o! capital, @ic incl%de te circ%it o! money-capital %ntil it
ret%rns to its starting-point in te !orm o! money0
5e acts o! circ%lation, M I ; and ; I M", in @ic a certain amo%nt o! 8al%e !%nctions as money
or commodities, are b%t intermediate processes, mere pases o! te total mo8ement0 ?s capital, it
per!orms te entire mo8ement M I M"0 &t is ad8anced as money or a s%m o! 8al%es in one !orm or
anoter, and ret%rns as a s%m o! 8al%es0 5e lender o! money does not expend it in p%rcasing
commodities, or, i! tis s%m o! 8al%es is in commodity-!orm, does not sell it !or money0 6e
ad8ances it as capital, as M I M", as a 8al%e, @ic ret%rns to its point o! depart%re a!ter a certain
term0 6e lends instead o! b%ying or selling0 5is lending, tere!ore, is te appropriate !orm o!
alienating 8al%e as capital, instead o! alienating it as money or commodities0 &t does not !ollo@,
o@e8er, tat lending cannot also take te !orm o! transactions @ic a8e noting to do @it te
capitalist process o! reprod%ction0
We a8e so !ar only considered te mo8ements o! loaned capital bet@een its o@ner and te
ind%strial capitalist0 -o@ @e m%st inD%ire into interest0
5e lender expends is money as capital# te amo%nt o! 8al%e, @ic e relinD%ises to anoter,
is capital, and conseD%ently ret%rns to im0 A%t te mere ret%rn o! it @o%ld not be te re!l%x o! te
loaned s%m o! 8al%e as capital, b%t merely te ret%rn o! a loaned s%m o! 8al%e0 5o ret%rn as
capital, te ad8anced s%m o! 8al%e m%st not only be preser8ed in te mo8ement b%t m%st also
expand, m%st increase in 8al%e, i.e., m%st ret%rn @it a s%rpl%s-8al%e, as M U cM, te latter being
<33 ;apter JJ&
interest or a portion o! te a8erage pro!it, @ic does not remain in te ands o! te operating
capitalist, b%t !alls to te sare o! te money-capitalist0
5e !act tat te latter as relinD%ised it as capital implies tat it m%st be restored to im as M U
cM0 'ater, @e sall also a8e to t%rn o%r attention to te !orm in @ic interest is paid in te
meantime at !ixed inter8als, b%t @ito%t te capital, @ose ret%rn !ollo@s at te end o! a lengty
period0
Wat does te money-capitalist gi8e to te borro@er, te ind%strial capitalistQ Wat does e really
t%rn o8er to imQ &t is only tis act o! anding o8er money @ic canges lending money into
alienation o! money as capital, i.e., alienation o! capital as a commodity0
&t is only by tis act o! alienating tat capital is loaned by te money-lender as a commodity, or
tat te commodity at is disposal is gi8en to anoter as capital0
Wat is alienated in an ordinary saleQ -ot te 8al%e o! te sold commodity, !or tis merely
canges its !orm0 5e 8al%e exists ideally in a commodity as its price be!ore it act%ally passes as
money into te ands o! te seller0 5e same 8al%e and te same amo%nt o! 8al%e merely cange
teir !orm0 &n te one instance tey exist in commodity-!orm, in te oter in te !orm o! money0
Wat is really alienated by te seller, and, tere!ore, passes into te indi8id%al or prod%cti8e
cons%mption o! te b%yer, is te %se-8al%e o! te commodity I te commodity as a %se-8al%e0
Wat, no@, is te %se-8al%e @ic te money-capitalist gi8es %p !or te period o! te loan and
relinD%ises to te prod%cti8e capitalist I te borro@erQ &t is te %se-8al%e @ic te money
acD%ires by being capable o! becoming capital, o! per!orming te !%nctions o! capital, and
creating a de!inite s%rpl%s-8al%e, te a8erage pro!it B@ate8er is abo8e or belo@ it appears ere as
a mere accidentC d%ring its process, besides preser8ing its original magnit%de o! 8al%e0 &n te case
o! te oter commodities te %se-8al%e is %ltimately cons%med0 5eir s%bstance disappears, and
@it it teir 8al%e0 &n contrast, te commodity-capital is pec%liar in tat its 8al%e and %se-8al%e
not only remain intact b%t also increase, tro%g cons%mption o! its %se-8al%e0
&t is tis %se-8al%e o! money as capital I tis !ac%lty o! prod%cing an a8erage pro!it I @ic te
money-capitalist relinD%ises to te ind%strial capitalist !or te period, d%ring @ic e places te
loaned capital at te latter"s disposal0
Money t%s loaned as in tis respect a certain similarity @it labo%r-po@er in its relation to te
ind%strial capitalist0 Wit te di!!erence tat te latter pays !or te 8al%e o! labo%r-po@er, @ereas
e simply pays back te 8al%e o! te loaned capital0 5e %se-8al%e o! labo%r-po@er !or te
ind%strial capitalist is tat labo%r-po@er creates more 8al%e Bpro!itC in its cons%mption tan it
possesses itsel!, and tan it costs0 5is additional 8al%e is %se-8al%e !or te ind%strial capitalist0
?nd in like manner te %se-8al%e o! loaned capital appears as its !ac%lty o! begetting and
increasing 8al%e0
5e money-capitalist, in !act, alienates a %se-8al%e, and t%s @ate8er e gi8es a@ay is gi8en as a
commodity0 &t is to tis extent tat te analogy @it a commodity per se is complete0 &n te !irst
place, it is a 8al%e @ic passes !rom one and to anoter0 &n te case o! an ordinary commodity,
a commodity as s%c, te same 8al%e remains in te ands o! te b%yer and seller, only in
di!!erent !orms# bot a8e te same 8al%e @ic tey ad be!ore te transaction, and @ic tey
ad alienated I te one in te !orm o! a commodity, te oter in te !orm o! money0 5e
di!!erence is tat in a loan te money-capitalist is te only one in te transaction @o gi8es a@ay
8al%e# b%t e preser8es it tro%g te prospecti8e ret%rn0 &n te loan transaction H%st one party
recei8es 8al%e, since only one party relinD%ises 8al%e0 I &n te second place, a real %se-8al%e is
relinD%ised on te one side, and recei8ed and cons%med on te oter0 A%t in contrast to ordinary
commodities tis %se-8al%e is 8al%e in itsel!, namely te excess o8er te original 8al%e realised
tro%g te %se o! money as capital0 5e pro!it is tis %se-8al%e0
5e %se-8al%e o! te loaned money lies in its being able to ser8e as capital and, as s%c, to
prod%ce te a8erage pro!it %nder a8erage conditions0
2

<32 ;apter JJ&
Wat, no@, does te ind%strial capitalist pay, and @at is, tere!ore, te price o! te loaned
capitalQ
K5at @ic men pay as interest !or te %se o! @at
tey borro@L is, according to Massie, Ka part o! te
pro!it it is capable o! prod%cing,L 10 c0, p0 2*0
+

Wat te b%yer o! an ordinary commodity b%ys is its %se-8al%e# @at e pays !or is its 8al%e0
Wat te borro@er o! money b%ys is like@ise its %se-8al%e as capital# b%t @at does e pay !orQ
$%rely not its price, or 8al%e, as in te case o! ordinary commodities0 -o cange o! !orm occ%rs in
te 8al%e passing bet@een borro@er and lender, as occ%rs bet@een b%yer and seller @en it exists
in one instance in te !orm o! money, and in anoter in te !orm o! a commodity0 5e sameness o!
te alienated and ret%rned 8al%e is re8ealed ere in an entirely di!!erent @ay0 5e s%m o! 8al%e,
i.e., te money, is gi8en a@ay @ito%t an eD%i8alent, and is ret%rned a!ter a certain period0 5e
lender al@ays remains te o@ner o! te same 8al%e, e8en a!ter it passes !rom is ands into tose
o! te borro@er0 &n an ordinary excange o! commodities money al@ays comes !rom te b%yer"s
side# b%t in a loan it comes !rom te side o! te seller0 6e is te one @o gi8es a@ay money !or a
certain period, and te b%yer o! capital is te one @o recei8es it as a commodity0 A%t tis is only
possible as long as te money acts as capital and is tere!ore ad8anced0 5e borro@er borro@s
money as capital, as a 8al%e prod%cing more 8al%e0 A%t at te moment @en it is ad8anced it is
still only potential capital, like any oter capital at its starting-point, te moment it is ad8anced0 &t
is only tro%g its employment tat it expands its 8al%e and realises itsel! as capital0 6o@e8er, it
as to be ret%rned by te borro@er as realised capital, ence as 8al%e pl%s s%rpl%s-8al%e BinterestC0
?nd te latter can only be a portion o! te realised pro!it0 3nly a portion, not all o! it0 For te %se-
8al%e o! te loaned capital to te borro@er consists in prod%cing pro!it !or im0 3ter@ise tere
@o%ld not a8e been any alienation o! %se-8al%e on te lender"s part0 3n te oter and, not all
te pro!it can !all to te borro@er"s sare0 3ter@ise e @o%ld pay noting !or te alienated %se-
8al%e, and @o%ld ret%rn te ad8anced money to te lender as ordinary money, not as capital, as
realised capital, !or it is realised capital only as M U cM0
Aot o! tem, lender and borro@er, expend te same s%m o! money as capital0 A%t it is only in te
ands o! te latter tat it ser8es as capital0 5e pro!it is not do%bled by te do%ble existence o! te
same s%m o! money as capital !or t@o persons0 &t can ser8e as capital !or bot o! tem only by
di8iding te pro!it0 5e portion @ic !alls to te lender is called interest0
5e entire transaction, as ass%med, takes place bet@een t@o kinds o! capitalists I te money-
capitalist and te ind%strial or mercant capitalist0
&t m%st al@ays be borne in mind tat ere capital as capital is a commodity, or tat te commodity
ere disc%ssed is capital0 ?ll te relations in e8idence ere @o%ld tere!ore be irrational !rom te
standpoint o! an ordinary commodity, or !rom tat o! capital in so !ar as it acts as a commodity-
capital in te process o! reprod%ction0 'ending and borro@ing, instead o! selling and b%ying, is a
distinction @ic ere springs !rom te speci!ic nat%re o! te commodity-capital0 $imilarly, te
!act tat it is interest, not te price o! te commodity, @ic is paid ere0 &! @e @ant to call
interest te price o! money-capital, ten it is an irrational !orm o! price D%ite at 8ariance @it te
conception o! te price o! commodities0
6
5e price is ere red%ced to its p%rely abstract and
meaningless !orm, signi!ying tat it is a certain s%m o! money paid !or someting ser8ing in one
@ay or anoter as a %se-8al%e# @ereas te conception o! price really signi!ies te 8al%e o! some
%se-8al%e expressed in money0
&nterest, signi!ying te price o! capital, is !rom te o%tset D%ite an irrational expression0 5e
commodity in D%estion as a do%ble 8al%e, !irst a 8al%e, and ten a price di!!erent !rom tis 8al%e,
@ile price represents te expression o! 8al%e in money0 Money-capital is noting b%t a s%m o!
money, or te 8al%e o! a certain D%antity o! commodities !ixed in a s%m o! money0 &! a commodity
<3+ ;apter JJ&
is loaned o%t as capital, it is only a disg%ised !orm o! a s%m o! money0 Aeca%se @at is loaned o%t
as capital is not so and so many po%nds o! cotton, b%t so m%c and so m%c money existing in te
!orm o! cotton as its 8al%e0 5e price o! capital, tere!ore, re!ers to it as to a s%m o! money, e8en
i! not c%rrency, as Mr0 5orrens tinks Bsee Footnote +*C0 6o@, ten, can a s%m o! 8al%e a8e a
price besides its o@n price, besides te price expressed in its o@n money-!ormQ ,rice, a!ter all, is
te 8al%e o! a commodity Btis is also tr%e o! te market-price, @ose di!!erence !rom 8al%e is not
one o! D%ality, b%t only one o! D%antity, re!erring only to te magnit%de o! 8al%eC as distinct !rom
its %se-8al%e0 ? price @ic di!!ers !rom 8al%e in D%ality is an abs%rd contradiction0
>

;apital mani!ests itsel! as capital tro%g sel!-expansion0 5e degree o! its sel!-expansion
expresses te D%antitati8e degree in @ic it realises itsel! as capital0 5e s%rpl%s-8al%e or pro!it
prod%ced by it I its rate or magnit%de I is meas%rable only by comparison @it te 8al%e o! te
ad8anced capital0 5e greater or lesser sel!-expansion o! interest-bearing capital is, tere!ore,
like@ise only meas%rable by comparing te amo%nt o! interest, its sare in te total pro!its, @it
te 8al%e o! te ad8anced capital0 &!, tere!ore, price expresses te 8al%e o! te commodity, ten
interest expresses te sel!-expansion o! money-capital and t%s appears as te price paid !or it to
te lender0 5is so@s o@ abs%rd it is !rom te 8ery !irst to apply ereto te simple relations o!
excange tro%g te medi%m o! money in b%ying and selling, as ,ro%don does0 5e basic
premise is precisely tat money !%nctions as capital and may t%s be trans!erred as s%c, i.e., as
potential capital, to a tird person0
;apital, o@e8er, appears ere as a commodity, inasm%c as it is o!!ered on te market, and te
%se-8al%e o! money is act%ally alienated as capital0 &ts %se-8al%e, o@e8er, lies in prod%cing
pro!it0 5e 8al%e o! money or o! commodities employed as capital does not depend on teir 8al%e
as money or as commodities, b%t on te D%antity o! s%rpl%s-8al%e tey prod%ce !or teir o@ner0
5e prod%ct o! capital is pro!it0 3n te basis o! capitalist prod%ction it is merely a di!!erent %se o!
money I @eter it is expended as money# or ad8anced as capital0 Money, or commodities, are in
temsel8es potentially capital, H%st as labo%r-po@er is potential capital0 Aeca%se, 1C money may
be con8erted into elements o! prod%ction and is, as is, merely an abstract expression o! tem I
teir existence as 8al%e# <C te material elements o! @ealt a8e te property o! potentially
becoming capital, beca%se teir s%pplementary opposite, @ic makes tem into capital, namely
@age-labo%r, is a8ailable on te basis o! capitalist prod%ction0
5e contradictory social !eat%res o! material @ealt I its antagonism to labo%r as @age-labo%r I
are expressed in capitalist property as s%c independently o! te prod%ction process0 5is
partic%lar !act, set apart !rom te process o! capitalist prod%ction itsel!, !rom @ic it constantly
res%lts and as @ose constant res%lt it ser8es as a constant prereD%isite, expresses itsel! in tat
money and commodities alike are latent, potential, capital, so tat tey may be sold as capital,
and in tat tey can in tis !orm command te labo%r o! oters besto@ing a claim to appropriate
te labo%r o! oters, and tere!ore represent sel!-expanding 8al%es0 &t also becomes clearly
apparent tat tis relationsip, and not te labo%r o!!ered as an eD%i8alent on te part o! te
capitalist, s%pplies te title and te means to appropriate te labo%r o! oters0
F%rtermore, capital appears as a commodity, inasm%c as te di8ision o! pro!it into interest and
pro!it proper is reg%lated by s%pply and demand, tat is, by competition, H%st as te market-prices
o! commodities0 A%t te di!!erence ere is H%st as apparent as te analogy0 &! s%pply and demand
coincide, te market-price o! commodities corresponds to teir price o! prod%ction, i.e., teir
price ten appears to be reg%lated by te immanent la@s o! capitalist prod%ction, independently
o! competition, since te !l%ct%ations o! s%pply and demand explain noting b%t de8iations o!
market-prices !rom prices o! prod%ction0 5ese de8iations m%t%ally balance one anoter, so tat
in te co%rse o! certain longer periods te a8erage market-prices eD%al te prices o! prod%ction0
?s soon as s%pply and demand coincide, tese !orces cease to operate, i.e., compensate one
anoter, and te general la@ determining prices ten also comes to apply to indi8id%al cases0 5e
market-price ten corresponds e8en in its immediate !orm, and not only as te a8erage o! market-
<36 ;apter JJ&
price mo8ements, to te price o! prod%ction, @ic is reg%lated by te immanent la@s o! te
mode o! prod%ction itsel!0 5e same applies to @ages0 &! s%pply and demand coincide, tey
ne%tralise eac oter"s e!!ect, and @ages eD%al te 8al%e o! labo%r-po@er0 A%t it is di!!erent @it
te interest on money-capital0 ;ompetition does not, in tis case, determine te de8iations !rom
te r%le0 5ere is rater no la@ o! di8ision except tat en!orced by competition, beca%se, as @e
sall later see, no s%c ting as a Knat%ralL rate o! interest exists0 Ay te nat%ral rate o! interest
people merely mean te rate !ixed by !ree competition0 5ere are no Knat%ralL limits !or te rate
o! interest0 Wene8er competition does not merely determine te de8iations and !l%ct%ations,
@ene8er, tere!ore, te ne%tralisation o! opposing !orces p%ts a stop to any and all
determination, te ting to be determined becomes someting arbitrary and la@less0 More on tis
in te next capter0
&n te case o! interest-bearing capital e8eryting appears s%per!icial: te ad8ance o! capital as
mere trans!er !rom lender to borro@er# te re!l%x o! realised capital as mere trans!er back, as a
ret%rn payment @it interest, by borro@er to lender0 5e same is tr%e o! te !act, immanent in te
capitalist mode o! prod%ction, tat te rate o! pro!it is not only determined by te relation o!
pro!it made in one single t%rno8er to ad8anced capital-8al%e, b%t also by te lengt o! tis period
o! t%rno8er, ence determined as pro!it yielded by ind%strial capital @itin de!inite spans o! time0
&n te case o! interest-bearing capital tis like@ise appears on te s%r!ace to mean tat a de!inite
interest is paid to te lender !or a de!inite time span0
Wit is %s%al insigt into te internal connection o! tings, te romantic ?dam Meller says
B0lemente der Staats-unst, Aerlin, 18=*, 7ritter 5eil, $0 138C#
K&n determining te prices o! tings, time is not
considered# @ile in determining interest, time is te
principal !actor0L
6e does not see o@ te time o! prod%ction and te time o! circ%lation enter into te
determination o! commodity-prices, and o@ tis is H%st @at determines te rate o! pro!it !or a
gi8en period o! t%rno8er o! capital, @ereas interest is determined by precisely tis determination
o! pro!it !or a gi8en period0 6is sagacity ere, as else@ere, consists in obser8ing te clo%ds o!
d%st on te s%r!ace and pres%mpt%o%sly declaring tis d%st to be someting mysterio%s and
important0
Chapter 22. Division of Proft. Rate of Interest.
Natural Rate of Interest.
5e s%bHect o! tis capter, like all te oter penomena o! credit @e sall come across later on,
cannot be analysed ere in detail0 5e competition bet@een lenders and borro@ers and te
res%ltant minor !l%ct%ations o! te money-market !all o%tside te scope o! o%r inD%iry0 5e circ%it
described by te rate o! interest d%ring te ind%strial cycle reD%ires !or its presentation te
analysis o! tis cycle itsel!, b%t tis like@ise cannot be gi8en ere0 5e same applies to te greater
or lesser approximate eD%alisation o! te rate o! interest in te @orld-market0 We are ere
concerned @it te independent !orm o! interest-bearing capital and te indi8id%alisation o!
interest, as distinct !rom pro!it0
$ince interest is merely a part o! pro!it paid, according to o%r earlier ass%mption, by te ind%strial
capitalist to te money-capitalist, te maxim%m limit o! interest is te pro!it itsel!, in @ic case
te portion pocketed by te prod%cti8e capitalist @o%ld R =0 ?side !rom exceptional cases, in
@ic interest migt act%ally be larger tan pro!it, b%t ten co%ld not be paid o%t o! te pro!it, one
migt consider as te maxim%m limit o! interest te total pro!it min%s te portion Bto be
s%bseD%ently analysedC @ic resol8es itsel! into @ages o! s%perintendence0 5e minim%m limit
o! interest is altogeter indeterminable0 &t may !all to any lo@0 .et in tat case tere @ill al@ays
be co%nteracting in!l%ences to raise it again abo8e tis relati8e minim%m0
K5e relation bet@een te s%m paid !or te %se o!
capital and te capital expresses te rate o! interest as
meas%red in money0L K5e rate o! interest depends 1C
on te rate o! pro!it# <C on te proportion in @ic te
entire pro!it is di8ided bet@een te lender and
borro@er0L B0conomist, Pan%ary <<, 18+30C K&! tat
@ic men pay as interest !or te %se o! @at tey
borro@, be a part o! te pro!its it is capable o!
prod%cing, tis interest m%st al@ays be go8erned by
tose pro!its0L BMassie, 10c0, p02*0C
'et %s !irst ass%me tat tere is a !ixed relation bet@een te total pro!it and tat part o! it @ic
as to be paid as interest to te money-capitalist0 &t is ten clear tat te interest @ill rise or !all
@it te total pro!it, and te latter is determined by te general rate o! pro!it and its !l%ct%ations0
For instance, i! te a8erage rate o! pro!it @ere R <=T and te interest R [ o! te pro!it, te rate o!
interest @o%ld R +T# i! te a8erage rate o! pro!it @ere R 16T, te rate o! interest @o%ld R 2T0
Wit te rate o! pro!it at <=T, te rate o! interest migt rise to 8T, and te ind%strial capitalist
@o%ld still make te same pro!it as e @o%ld at a rate o! pro!it R 16T and a rate o! interest R 2T,
namely 1<T0 $o%ld interest rise only to 6T or >T, e @o%ld still keep a larger sare o! te
pro!it0 &! te interest amo%nted to a constant D%ota o! te a8erage pro!it, it @o%ld !ollo@ tat te
iger te general rate o! pro!it, te greater te absol%te di!!erence bet@een te total pro!it and
te interest, and te greater te portion o! te total pro!it pocketed by te prod%cti8e capitalist,
and 8ice 8ersa0 5ake it tat interest R 1N+ o! te a8erage pro!it0 3ne-!i!t o! 1= is <# te di!!erence
<38 ;apter JJ&&
bet@een total pro!it and interest R 80 3ne-!i!t o! <= R 2# di!!erence R <= - 2 R 16# 1N+ o! <+ R +#
di!!erence R <+ - + R <=# 1N+ o! 3= R 6# di!!erence R 3= - 6 R <2# 1N+ o! 3+ R ># di!!erence R 3+ - >
R <80 5e di!!erent rates o! interest o! 2, +, 6, >T @o%ld ere al@ays represent no more tan 1N+,
or <=T o! te total pro!it0 &! te rates o! pro!it are di!!erent, tere!ore, di!!erent rates o! interest
may represent te same aliD%ot parts o! te total pro!it, or te same percentage o! te total pro!it0
Wit s%c constant proportions o! interest, te ind%strial pro!it Bte di!!erence bet@een te total
pro!it and te interestC @o%ld rise proportionately to te general rate o! pro!it, and con8ersely0
?ll oter conditions taken as eD%al, i.e., ass%ming te proportion bet@een interest and total pro!it
to be more or less constant, te !%nctioning capitalist is able and @illing to pay a iger or lo@er
interest directly proportional to te le8el o! te rate o! pro!it0
1

$ince @e a8e seen tat te rate o! pro!it is in8ersely proportional to te de8elopment o! capitalist
prod%ction, it !ollo@s tat te iger or lo@er rate o! interest in a co%ntry is in te same in8erse
proportion to te degree o! ind%strial de8elopment, at least in so !ar as te di!!erence in te rate o!
interest act%ally expresses te di!!erence in te rates o! pro!it0 &t sall later de8elop tat tis need
not al@ays be te case0 &n tis sense it may be said tat interest is reg%lated tro%g pro!it, or,
more precisely, te general rate o! pro!it0 ?nd tis mode o! reg%lating interest applies e8en to its
a8erage0
&n any e8ent te a8erage rate o! pro!it is to be regarded as te %ltimate determinant o! te
maxim%m limit o! interest0
5e !act tat interest is to be related to a8erage pro!it @ill be considered presently at greater
lengt0 Wene8er a speci!ied entity, s%c as pro!it, is to be di8ided bet@een t@o parties, te
matter nat%rally inges abo8e all on te magnit%de o! te entity @ic is to be di8ided, and tis,
te magnit%de o! te pro!it, is determined by its a8erage rate0 $%ppose te general rate o! pro!it,
ence te magnit%de o! pro!it, !or a capital o! gi8en siEe, say, R 1==, is ass%med as gi8en0 5en
te 8ariations o! interest @ill ob8io%sly be in8ersely proportional to tose o! te part o! pro!it
remaining in te ands o! te prod%cing capitalist, @orking @it a borro@ed capital0 ?nd te
circ%mstances determining te amo%nt o! pro!it to be distrib%ted, o! te 8al%e prod%ced by %npaid
labo%r, di!!er @idely !rom tose @ic determine its distrib%tion bet@een tese t@o kinds o!
capitalists, and !reD%ently prod%ce entirely opposite e!!ects0
<

&! @e obser8e te cycles in @ic modern ind%stry mo8es I state o! inacti8ity, mo%nting re8i8al,
prosperity, o8er-prod%ction, crisis, stagnation, state o! inacti8ity, etc0, @ic !all beyond te scope
o! o%r analysis I @e sall !ind tat a lo@ rate o! interest generally corresponds to periods o!
prosperity or extra pro!it, a rise in interest separates prosperity and its re8erse, and a maxim%m o!
interest %p to a point o! extreme %s%ry corresponds to te period o! crisis0
3
5e s%mmer o! 1823
%sered in a period o! remarkable prosperity# te rate o! interest, still 2ZT in te spring o! 182<,
!ell to <T in te spring and s%mmer o! 1823#
2
in $eptember it !ell as lo@ as 1ZT B:ilbart, &, p0
166C# @ere%pon it rose to 8T and iger d%ring te crisis o! 182>0
&t is possible, o@e8er, !or lo@ interest to go along @it stagnation, and !or moderately rising
interest to go along @it re8i8ed acti8ity0
5e rate o! interest reaces its peak d%ring crises, @en money is borro@ed at any cost to meet
payments0 $ince a rise in interest implies a !all in te price o! sec%rities, tis sim%ltaneo%sly
o!!ers a !ine opport%nity to people @it a8ailable money-capital, to acD%ire at ridic%lo%sly lo@
prices s%c interest-bearing sec%rities as m%st, in te co%rse o! tings, at least regain teir a8erage
price as soon as te rate o! interest !alls again0
+

6o@e8er, te rate o! interest also as a tendency to !all D%ite independently o! te !l%ct%ations in
te rate o! pro!it0 ?nd, indeed, d%e to t@o main ca%ses:
&0 KWere @e e8en to s%ppose tat capital @as ne8er
borro@ed @it any 8ie@ b%t to prod%cti8e
<3* ;apter JJ&&
employment, & tink it 8ery possible tat interest
migt 8ary @ito%t any cange in te rate o! gross
pro!its0 For, as a nation ad8ances in te career o!
@ealt, a class o! men springs %p and increases more
and more, @o by te labo%rs o! teir ancestors !ind
temsel8es in te possession o! !%nds s%!!iciently
ample to a!!ord a andsome maintenance !rom te
interest alone0 4ery many also @o d%ring yo%t and
middle age @ere acti8ely engaged in b%siness, retire
in teir latter days" to li8e D%ietly on te interest o! te
s%ms tey a8e temsel8es acc%m%lated0 5is class,
as @ell as te !ormer, as a tendency to increase @it
te increasing rices o! te co%ntry, !or tose @o
begin @it a tolerable stock are likely to make an
independence sooner tan tey @o commence @it
little0 5%s it comes to pass, tat in old and ric
co%ntries, te amo%nt o! national capital belonging to
tose @o are %n@illing to take te tro%ble o!
employing it temsel8es, bears a larger proportion to
te @ole prod%cti8e stock o! te society, tan in
ne@ly settled and poorer districts0 6o@ m%c more
n%mero%s in proportion to te pop%lation is te class
o! rentiers 000 in EnglandS ?s te class o! rentiers
increases, so also does tat o! lenders o! capital, !or
tey are one and te same0L B)amsay, +n 0ssay on the
Distribution of "ealth, pp0 <=1-=<0C
&&0 5e de8elopment o! te credit system and te attendant e8er-gro@ing control o! ind%strialists
and mercants o8er te money sa8ings o! all classes o! society tat is e!!ected tro%g te
bankers, and te progressi8e concentration o! tese sa8ings in amo%nts @ic can ser8e as
money-capital, m%st also depress te rate o! interest0 More abo%t tis later0
Wit re!erence to te determination o! te rate o! interest, )amsay says tat it
Kdepends partly %pon te rate o! gross pro!its, partly
on te proportion in @ic tese are separated into
pro!its o! capital and tose o! enterprise0 5is
proportion again depends %pon te competition
bet@een te lenders o! capital and te borro@ers#
<2= ;apter JJ&&
@ic competition is in!l%enced, to%g by no means
entirely reg%lated, by te rate o! gross pro!it expected
to be realised0
6
?nd te reason @y competition is not
excl%si8ely reg%lated by tis ca%se, is, beca%se on te
one and many borro@ @ito%t any 8ie@ to
prod%cti8e employment# and, on te oter, beca%se
te proportion o! te @ole capital to be lent, 8aries
@it te rices o! te co%ntry independently o! any
cange in gross pro!its0L B)amsay, 10 c0, pp0 <=6-=>0C
5o determine te a8erage rate o! interest @e m%st 1C calc%late te a8erage rate o! interest d%ring
its 8ariations in te maHor ind%strial cycles# and <C !ind te rate o! interest !or in8estments @ic
reD%ire long-term loans o! capital0
5e a8erage rate o! interest pre8ailing in a certain co%ntry I as distinct !rom te contin%ally
!l%ct%ating market rates I cannot be determined by any la@0 &n tis spere tere is no s%c ting
as a nat%ral rate o! interest in te sense in @ic economists speak o! a nat%ral rate o! pro!it and a
nat%ral rate o! @ages0 Massie as rigtly said in tis respect Bp02*C:
K5e only ting @ic any man can be in do%bt abo%t
on tis occasion, is, @at proportion o! tese pro!its
do o! rigt belong to te borro@er, and @at to te
lender# and tis tere is no oter metod o!
determining tan by te opinions o! borro@ers and
lenders in general# !or rigt and @rong, in tis respect,
are only @at common consent makes so0L
ED%ating s%pply and demand I ass%ming te a8erage rate o! pro!it as gi8en I means noting0
Were8er else tis !orm%la is resorted to Band tis is ten practically correctC, it ser8es as a
!orm%la to !ind te !%ndamental r%le Bte reg%lating limits or limiting magnit%desC @ic is
independent o!, and rater determines, competition# notably as a !orm%la !or tose @o are eld
capti8e by te practice o! competition, and by its penomena and te conceptions arising o%t o!
tem, to arri8e at @at is again b%t a s%per!icial idea o! te inner connection o! economic
relations obtaining @itin competition0 &t is a metod to pass !rom te 8ariations tat go @it
competition to te limits o! tese 8ariations0 5is is not te case @it te a8erage rate o! interest0
5ere is no good reason @y a8erage conditions o! competition, te balance bet@een lender and
borro@er, so%ld gi8e te lender an interest rate o! 3, 2, +T, etc0, or else a certain percentage o!
te gross pro!its, say <=T or +=T, on is capital0 Were8er it is competition as s%c @ic
determines anyting, te determination is accidental, p%rely empirical, and only pedantry or
!antasy @o%ld seek to represent tis accident as a necessity0
>
-oting is more am%sing in te
reports o! ,arliament !or 18+> and 18+8 concerning bank legislation and commercial crises tan
to ear o! Kte real rate prod%cedL as te directors o! te Aank o! England, 'ondon bankers,
co%ntry bankers, and pro!essional teorists catter back and !ort, ne8er getting beyond s%c
commonplaces as tat Kte price paid !or te %se o! loanable capital so%ld 8ary @it te s%pply
o! s%c capital,L tat Ka ig rate and a lo@ pro!it cannot permanently exist,L and similar specio%s
platit%des0
8
;%stoms, H%ristic tradition, etc0, a8e as m%c to do @it determining te a8erage rate
o! interest as competition itsel!, in so !ar as it exists not merely as an a8erage, b%t rater as act%al
<21 ;apter JJ&&
magnit%de0 &n many la@ disp%tes, @ere interest as to be calc%lated, an a8erage rate o! interest
as to be ass%med as te legal rate0 &! @e inD%ire !%rter as to @y te limits o! a mean rate o!
interest cannot be ded%ced !rom general la@s, @e !ind te ans@er lies simply in te nat%re o!
interest0 &t is merely a part o! te a8erage pro!it0 5e same capital appears in t@o roles I as
loanable capital in te lender"s ands and as ind%strial, or commercial, capital in te ands o! te
!%nctioning capitalist0 A%t it !%nctions H%st once, and prod%ces pro!it H%st once0 &n te prod%ction
process itsel! te nat%re o! capital as loanable capital plays no role0 6o@ te t@o parties @o a8e
claim to it di8ide te pro!it is in itsel! H%st as p%rely empirical a matter belonging to te realm o!
accident as te distrib%tion o! percentage sares o! a common pro!it in a b%siness partnersip0
5@o entirely di!!erent elements I labo%r-po@er and capital I act as determinants in te di8ision
bet@een s%rpl%s-8al%e and @ages, @ic di8ision essentially determines te rate o! pro!it# tese
are !%nctions o! t@o independent 8ariables, @ic limit one anoter# and it is teir 3ualitative
difference tat is te so%rce o! te3uantitative division o! te prod%ced 8al%e0 We sall see later
tat te same occ%rs in te splitting o! s%rpl%s-8al%e into rent and pro!it0 -oting o! te kind
occ%rs in te case o! interest0 6ere te 3ualitative differentiation as @e sall presently see,
proceeds rater !rom te purely 3uantitative division o! te same s%m o! s%rpl%s-8al%e0
&t !ollo@s !rom te a!oresaid tat tere is no s%c ting as a Knat%ralL rate o! interest0 A%t i!,
%nlike te general rate o! pro!it, tere is on te one and no general la@ to determine te limits o!
te a8erage interest, or a8erage rate o! interest as distinct !rom te contin%ally !l%ct%ating market
rates o! interest, beca%se it is merely a D%estion o! di8iding te gross pro!it bet@een t@o o@ners
o! capital %nder di!!erent title# on te oter and, te rate o! interest I be it te a8erage or te
market rate pre8alent in eac partic%lar case I appears as a %ni!orm, de!inite and tangible
magnit%de in a D%ite di!!erent @ay !rom te general rate o! pro!it0
*

5e rate o! interest is similarly related to te rate o! pro!it as te market-price o! a commodity is
to its 8al%e0 &n so !ar as te rate o! interest is determined by te rate o! pro!it, tis is al@ays te
general rate o! pro!it and not any speci!ic rate o! pro!it pre8ailing in some partic%lar branc o!
ind%stry, and still less any extra pro!it @ic an indi8id%al capitalist may make in a partic%lar
spere o! b%siness0
1=
&t is a !act, tere!ore, tat te general rate o! pro!it appears as an empirical,
gi8en reality in te a8erage rate o! interest, alto%g te latter is not a p%re or reliable expression
o! te !ormer0
&t is indeed tr%e tat te rate o! interest itsel! 8aries in accordance @it te di!!erent classes o!
sec%rities o!!ered by borro@ers, and in accordance @it te lengt o! time !or @ic te money is
borro@ed# b%t it is %ni!orm in eac o! tese classes at a gi8en moment0 5is distinction, ten,
does not militate against a !ixed and %ni!orm appearance o! te rate o! interest0
11

5e a8erage rate o! interest appears in e8ery co%ntry o8er !airly long periods as a constant
magnit%de, beca%se te general rate o! pro!it 8aries only at longer inter8als I in spite o! constant
8ariations in speci!ic rates o! pro!it, in @ic a cange in one spere is o!!set by an opposite
cange in anoter0 ?nd its relati8e constancy is re8ealed precisely in tis more or less constant
nat%re o! te a8erage, or common, rate o! interest0
?s concerns te perpet%ally !l%ct%ating market rate o! interest, o@e8er, it exists at any moment
as a !ixed magnit%de, H%st as te market-price o! commodities, beca%se in te money-market all
loanable capital contin%ally !aces !%nctioning capital as an aggregate mass, so tat te relation
bet@een te s%pply o! loanable capital on one side, and te demand !or it on te oter, decides te
market le8el o! interest at any gi8en time0 5is is all te more so, te more te de8elopment, and
te attendant concentration, o! te credit system gi8es to loanable capital a general social
caracter and tro@s it all at once on te money-market0 3n te oter and, te general rate o!
pro!it is ne8er anyting more tan a tendency, a mo8ement to eD%alise speci!ic rates o! pro!it0 5e
competition bet@een capitalists I @ic is itsel! tis mo8ement to@ard eD%ilibri%m I consists
ere o! teir grad%ally @itdra@ing capital !rom speres in @ic pro!it is !or an appreciable
lengt o! time belo@ a8erage, and grad%ally in8esting capital into speres in @ic pro!it is
<2< ;apter JJ&&
abo8e a8erage0 3r it may also consist in additional capital distrib%ting itsel! grad%ally and in
8arying proportions among tese speres0 &t is contin%al 8ariation in s%pply and @itdra@al o!
capital in regard to tese di!!erent speres, and ne8er a sim%ltaneo%s mass e!!ect, as in te
determination o! te rate o! interest0
We a8e seen tat interest-bearing capital, alto%g a category @ic di!!ers absol%tely !rom a
commodity, becomes a commodity sui generis, so tat interest becomes its price, !ixed at all
times by s%pply and demand like te market-price o! an ordinary commodity0 5e market rate o!
interest, @ile !l%ct%ating contin%ally, appears tere!ore at any gi8en moment H%st as constantly
!ixed and %ni!orm as te market-price o! a commodity pre8ailing in eac indi8id%al case0 Money-
capitalists s%pply tis commodity, and !%nctioning capitalists b%y it, creating te demand !or it0
5is does not occ%r @en eD%alisation creates a general rate o! pro!it0 &! prices o! commodities in
one spere are belo@ or abo8e te price o! prod%ction B@erein @e deliberately lea8e aside te
!l%ct%ations attendant %pon te 8ario%s pases o! te ind%strial cycle in eac and e8ery enterpriseC
te balance is e!!ected tro%g te expansion or c%rtailment o! prod%ction, i.e., te expansion or
c%rtailment o! te masses o! commodities tro@n on te market by ind%strial capitals I ca%sed by
in!lo@ or o%t!lo@ o! capital to and !rom indi8id%al speres o! prod%ction0 &t is by tis eD%alisation
o! te a8erage market-prices o! commodities to prices o! prod%ction tat de8iations o! speci!ic
rates o! pro!it !rom te general, or a8erage, rate o! pro!it are corrected0 &t cannot be tat in tis
process ind%strial or mercantile capitalas such so%ld e8er ass%me te appearance o!
commodities 8is-O-8is te b%yer, as in te case o! interest-bearing capital0 &! perceptible at all, tis
process is so only in te !l%ct%ations and eD%alisations o! market-prices o! commodities to prices
o! prod%ction, not as a direct !ixation o! te a8erage pro!it0 5e general rate o! pro!it is, indeed,
determined 1C by te s%rpl%s-8al%e prod%ced by te total capital, <C by te proportion o! tis
s%rpl%s-8al%e to te 8al%e o! te total capital, and 3C by competition, b%t only in so !ar as tis is a
mo8ement @ereby capitals in8ested in partic%lar prod%ction speres seek to dra@ eD%al
di8idends o%t o! tis s%rpl%s-8al%e in proportion to teir relati8e magnit%des0 5e general rate o!
pro!it, tere!ore, deri8es act%ally !rom ca%ses !ar di!!erent and !ar more complicated tan te
market rate o! interest, @ic is directly and immediately determined by te proportion bet@een
s%pply and demand, and ence is not as tangible and ob8io%s a !act as te rate o! interest0 5e
indi8id%al rates o! pro!it in 8ario%s speres o! prod%ction are temsel8es more or less %ncertain#
b%t in so !ar as tey appear, it is not teir %ni!ormity b%t teir di!!erences @ic are perceptible0
5e general rate o! pro!it, o@e8er, appears only as te lo@est limit o! pro!it, not as an empirical,
directly 8isible !orm o! te act%al rate o! pro!it0
&n empasising tis di!!erence bet@een te rate o! interest and te rate o! pro!it, @e still omit te
!ollo@ing t@o points, @ic !a8o%r consolidation o! te rate o! interest: 1C te istorical pre-
existence o! interest-bearing capital and te existence o! a traditional general rate o! interest# <C
te !ar greater direct in!l%ence exerted by te @orld-market on establising te rate o! interest,
irrespecti8e o! te economic conditions o! a co%ntry, as compared @it its in!l%ence on te rate o!
pro!it0
5e a8erage pro!it does not obtain as a directly establised !act, b%t rater is to be determined as
an end res%lt o! te eD%alisation o! opposite !l%ct%ations0 -ot so @it te rate o! interest0 &t is a
ting !ixed daily in its general, at least local, 8alidity I a ting @ic ser8es ind%strial and
mercantile capitals e8en as a prereD%isite and a !actor in te calc%lation o! teir operation0 &t
becomes te general endo@ment o! e8ery s%m o! money o! V1== to yield V<, 3, 2, +0
Meteorological reports ne8er denote te readings o! te barometer and termometer @it greater
acc%racy tan stock excange reports denote te rate o! interest, not !or one or anoter capital,
b%t !or capital in te money-market, i.e., !or loanable capital generally0
&n te money-market only lenders and borro@ers !ace one anoter0 5e commodity as te same
!orm-money0 ?ll speci!ic !orms o! capital in accordance @it its in8estment in partic%lar speres
o! prod%ction or circ%lation are ere obliterated0 &t exists in te %ndi!!erentiated omogeneo%s
<23 ;apter JJ&&
!orm o! independent 8al%e-money0 5e competition o! indi8id%al speres does not a!!ect it0 5ey
are all tro@n togeter as borro@ers o! money, and capital con!ronts tem all in a !orm, in @ic
it is as yet indi!!erent to te prospecti8e manner o! its in8estment0 &t obtains most empatically in
te s%pply and demand o! capital asessentially the common capital of a class I someting
ind%strial capital does only in te mo8ement and competition o! capital bet@een te 8ario%s
indi8id%al speres0 3n te oter and, money-capital in te money-market act%ally possesses te
!orm, in @ic, indi!!erent to its speci!ic employment, it is di8ided as a common element among
te 8ario%s speres, among te capitalist class, as te reD%irements o! prod%ction in eac
indi8id%al spere may dictate0 Moreo8er, @it te de8elopment o! large-scale ind%stry money-
capital, so !ar as it appears on te market, is not represented by some indi8id%al capitalist, not te
o@ner o! one or anoter !raction o! te capital in te market, b%t ass%mes te nat%re o! a
concentrated, organised mass, @ic, D%ite di!!erent !rom act%al prod%ction, is s%bHect to te
control o! bankers, i.e., te representati8es o! social capital0 $o tat, as concerns te !orm o!
demand, loanable capital is con!ronted by te class as a @ole, @ereas in te pro8ince o! s%pply
it is loanable capital @ic obtains en masse0
5ese are some o! te reasons @y te general rate o! pro!it appears bl%rred and aEy alongside
te de!inite interest rate, @ic may !l%ct%ate in magnit%de, b%t al@ays con!ronts borro@ers as
gi8en and !ixed beca%se it 8aries %ni!ormly !or all o! tem0 P%st as 8ariations in te 8al%e o!
money do not pre8ent it !rom a8ing te same 8al%e 8is-O-8is all commodities0 P%st as te daily
!l%ct%ations in market-prices o! commodities do not pre8ent tem !rom being daily reported in
te papers0 $o te rate o! interest is reg%larly reported as Kte price o! money0L &t is so, beca%se
capital itsel! is being o!!ered ere in te !orm o! money as a commodity0 5e !ixation o! its price
is t%s a !ixation o! its market-price, as @it all oter commodities0 5e rate o! interest, tere!ore,
al@ays appears as te general rate o! interest, as so m%c money !or so m%c money, as a de!inite
D%antity0 5e rate o! pro!it, on te oter and, may 8ary e8en @itin te same spere !or
commodities @it te same price, depending on di!!erent conditions %nder @ic di!!erent
capitals prod%ce te same commodity, beca%se te rate o! pro!it o! an indi8id%al capital is not
determined by te market-price o! a commodity, b%t rater by te di!!erence bet@een market-
price and cost-price0 ?nd tese di!!erent rates o! pro!it can strike a balance I !irst @itin te same
spere and ten bet@een di!!erent speres I only tro%g contin%al !l%ct%ation0
B-ote !or later elaboration0C ? speci!ic !orm o! credit: &t is kno@n tat @en money ser8es as a
means o! payment instead o! a means o! p%rcase, te commodity is alienated, b%t its 8al%e is
realised only later0 &! payment is not made %ntil a!ter te commodity as again been sold, tis sale
does not appear as te res%lt o! te p%rcase# rater it is tro%g tis sale tat te p%rcase is
realised0 &n oter @ords, te sale becomes a means o! p%rcase0 $econdly: titles to debts, bills o!
excange, etc0, become means o! payment !or te creditor0 5irdly: te compensation o! titles to
debts replaces money0
Chapter 23. Interest and Proft of Enterprise
&nterest, as @e a8e seen in te t@o preceding capters, appears originally, is originally, and
remains in !act merely a portion o! te pro!it, i.e., o! te s%rpl%s-8al%e, @ic te !%nctioning
capitalist, ind%strialist or mercant as to pay to te o@ner and lender o! money-capital @ene8er
e %ses loaned capital instead o! is o@n0 &! e employs only is o@n capital, no s%c di8ision o!
pro!it takes place# te latter is ten entirely is0 &ndeed, as long as te o@ners o! te capital
employ it on teir o@n in te reprod%ction process, tey do not compete in determining te rate
o! interest0 5is alone so@s tat te category o! interest I impossible @ito%t determining te
rate o! interest I is alien to te mo8ements o! ind%strial capital as s%c0
K5e rate o! interest may be de!ined to be tat
proportional s%m @ic te lender is content to
recei8e, and te borro@er to pay, ann%ally, or !or any
longer or sorter period, !or te %se o! a certain
amo%nt o! moneyed capital0000 Wen te o@ner o! a
capital employs it acti8ely in reprod%ction, e does
not come %nder te ead o! tose capitalists, te
proportion o! @om, to te n%mber o! borro@ers,
determines te rate o! interest0L# B50 5ooke, (istory
of &rices, 'ondon, 1838, &&, pp0 3++-+60C
&t is indeed only te separation o! capitalists into money-capitalists and ind%strial capitalists tat
trans!orms a portion o! te pro!it into interest, tat generally creates te category o! interest# and
it is only te competition bet@een tese t@o kinds o! capitalists @ic creates te rate o! interest0
?s long as capital !%nctions in te process o! reprod%ction I ass%ming tat it e8en belongs to te
ind%strial capitalist and e as no need o! paying it back to a lender I te capitalist, as a pri8ate
indi8id%al, does not a8e at is disposal tis capital itsel!, b%t only te pro!it, @ic e may
spend as re8en%e0 ?s long as is capital !%nctions as capital, it belongs to te process o!
reprod%ction, is tied %p in it0 6e is, indeed, its o@ner, b%t tis o@nersip does not enable im to
dispose o! it in any oter @ay, so long as e %ses it as capital !or te exploitation o! labo%r0 5e
same is tr%e o! te money-capitalist0 $o long as is capital is loaned o%t and tereby ser8es as
money-capital, it brings im interest, a portion o! te pro!it, b%t e cannot dispose o! te
principal0 5is is e8ident @ene8er e loans o%t is capital !or, say, a year, or more, and recei8es
interest at certain stip%lated times @ito%t te ret%rn o! is principal0 A%t e8en te ret%rn o! te
principal makes no di!!erence ere0 &! e gets it back, e m%st al@ays loan it o%t again, so long as
it is to !%nction !or im as capital I ere as money-capital0 ?s long as e keeps it in is o@n
ands, it does not collect interest and does not act as capital# and as long as it does gater interest
and ser8e as capital, it is o%t o! is ands0 6ence te possibility o! loaning o%t capital !or all time0
5e !ollo@ing remarks by 5ooke directed against AosanD%et are, tere!ore, entirely @rong0 6e
D%otes AosanD%et BMetallic, &aper and Credit Currency, 'ondon, 182<, p0 >3C:
<2+ ;apter JJ&&&
KWere te rate o! interest red%ced as lo@ as 1T,
capital borro@ed @o%ld be placed nearly on a par @it
capital possessed0L#
5o tis 5ooke adds te !ollo@ing marginal note:
K5at a capital borro@ed at tat, or e8en a lo@er rate,
so%ld be considered nearly on a par @it capital
possessed, is a proposition so strange as ardly to
@arrant serio%s notice @ere it not ad8anced by a
@riter so intelligent, and, on some points o! te
s%bHect, so @ell in!ormed0 6as e o8erlooked te
circ%mstance, or does e consider it o! little
conseD%ence, tat tere m%st, by te s%pposition, be a
condition o! repaymentQL# B50 5ooke, +n Dn3uiry
into the Currency &rinciple , <nd ed0, 'ondon, 1822,
p0 8=0C
&! interest @ere R =, te ind%strial capitalist operating on borro@ed capital @o%ld stand on a par
@it a capitalist %sing is o@n capital0 Aot @o%ld pocket te same a8erage pro!it, and capital,
@eter borro@ed or o@ned, ser8es as capital only as long as it prod%ces pro!it0 5e condition o!
ret%rn payment @o%ld alter noting0 5e nearer te rate o! interest approaces Eero, !alling, !or
instance, to 1T, te nearer borro@ed capital is to being on a par @it o@ner"s capital0 $o long as
money-capital is to exist as money-capital, it m%st al@ays be loaned o%t, and indeed at te
pre8ailing rate o! interest, say o! 1T, and al@ays to te same class o! ind%strial and commercial
capitalists0 $o long as tese !%nction as capitalists, te sole di!!erence bet@een te one @orking
@it borro@ed capital and te oter @it is o@n is tat te !ormer m%st pay interest and te
latter m%st not# te one pockets te entire pro!it p, and te oter p - i, te pro!it min%s te interest0
5e nearer interest approaces Eero, te nearer p - i approaces p, and ence te nearer te t@o
capitals are to being on a par0 5e one m%st pay back te capital and borro@ ane@# yet te oter
m%st like@ise ad8ance it again and again to te prod%ction process, so long as is capital is to
!%nction, and cannot dispose o! it !reely, independent o! tis process0 5e sole remaining
di!!erence bet@een te t@o is te ob8io%s di!!erence tat one is te o@ner o! is capital, and te
oter is not0
5e D%estion @ic no@ arises is tis0 6o@ does tis p%rely D%antitati8e di8ision o! pro!it into
net pro!it and interest t%rn into a D%alitati8e oneQ &n oter @ords, o@ is it tat a capitalist @o
employs solely is o@n, not borro@ed capital, classi!ies a portion o! is gross pro!it %nder te
speci!ic category o! interest and as s%c calc%lates it separatelyQ ?nd, !%rtermore, o@ is it tat
all capital, @eter borro@ed or not, is di!!erentiated as interest-bearing capital !rom itsel! as
capital prod%cing a net pro!itQ
&t is %nderstood tat not e8ery accidental D%antitati8e di8ision o! pro!it t%rns in tis manner into a
D%alitati8e one0 For instance, some ind%strial capitalists Hoin ands to operate a b%siness and ten
di8ide te pro!it among temsel8es in accordance @it some legal agreement0 3ters do teir
b%siness, eac on is o@n, @ito%t any partners0 5ese last do not calc%late teir pro!it %nder t@o
eads I one part as indi8id%al pro!it, and te oter as company pro!it !or teir non-existent
partners0 &n tis case te D%antitati8e di8ision tere!ore does not become a D%alitati8e one0 5is
<26 ;apter JJ&&&
occ%rs @ene8er o@nersip appens to be 8ested in se8eral H%ridical persons0 &t does not occ%r
@ene8er tis is not te case0
&n order to ans@er tis D%estion, @e m%st d@ell some@at longer on te act%al point o! depart%re
in te !ormation o! interest# tat is, @e m%st proceed !rom te ass%mption tat te money-
capitalist and ind%strial capitalist really con!ront one anoter not H%st as legally di!!erent persons,
b%t as persons playing entirely di!!erent roles in te reprod%ction process, or as persons in @ose
ands te same capital really per!orms a t@o-!old and @olly di!!erent mo8ement0 5e one
merely loans it, te oter employs it prod%cti8ely0
For te prod%cti8e capitalist @o @orks on borro@ed capital, te gross pro!it !alls into t@o parts I
te interest, @ic e is to pay te lender, and te s%rpl%s o8er and abo8e te interest, @ic
makes %p is o@n sare o! te pro!it0 &! te general rate o! pro!it is gi8en, tis latter portion is
determined by te rate o! interest# and i! te rate o! interest is gi8en, ten by te general rate o!
pro!it0 ?nd !%rtermore: o@e8er te gross pro!it, te act%al 8al%e o! te total pro!it, may di8erge
in eac indi8id%al case !rom te a8erage pro!it, te portion belonging to te !%nctioning capitalist
is determined by te interest, since tis is !ixed by te general rate o! interest Blea8ing aside any
special legal stip%lationsC and ass%med to be gi8en be!oreand, be!ore te process o! prod%ction
begins, ence be!ore its res%lt, te gross pro!it, is acie8ed0 We a8e seen tat te act%al speci!ic
prod%ct o! capital is s%rpl%s-8al%e, or, more precisely, pro!it0 A%t !or te capitalist @orking on
borro@ed capital it is not pro!it, b%t pro!it min%s interest, tat portion o! pro!it @ic remains to
im a!ter paying interest0 5is portion o! te pro!it, tere!ore, necessarily appears to im to be te
prod%ct o! a capital as long as it is operati8e# and tis it is, as !ar as e is concerned, beca%se e
represents capital only as !%nctioning capital0 6e is its personi!ication as long as it !%nctions, and
it !%nctions as long as it is pro!itably in8ested in ind%stry or commerce and s%c operations are
%ndertaken @it it tro%g its employer as are prescribed by te branc o! ind%stry concerned0 ?s
distinct !rom interest, @ic e as to pay to te lender o%t o! te gross pro!it, te portion o!
pro!it @ic !alls to is sare necessarily ass%mes te !orm o! ind%strial or commercial pro!it, or,
to %se a :erman term embracing bot, te !orm o! Nnternehmergewinn Bpro!it o! enterpriseC0 &!
te gross pro!it eD%als te a8erage pro!it, te siEe o! te pro!it o! enterprise is determined
excl%si8ely by te rate o! interest0 &! te gross pro!it de8iates !rom te a8erage pro!it, its
di!!erence !rom te a8erage pro!it Ba!ter interest is ded%cted !rom botC is determined by all te
circ%mstances @ic ca%se a temporary de8iation, be it o! te rate o! pro!it in any partic%lar
spere !rom te general rate o! pro!it, or te pro!it o! some indi8id%al capitalist in a certain spere
!rom te a8erage pro!it o! tis spere0 We a8e seen o@e8er tat te rate o! pro!it @itin te
prod%ction process itsel! does not depend on s%rpl%s-8al%e alone, b%t also on many oter
circ%mstances, s%c as p%rcase prices o! means o! prod%ction, metods more prod%cti8e tan te
a8erage, on sa8ings o! constant capital, etc0 ?nd aside !rom te price o! prod%ction, it depends on
special circ%mstances, and in e8ery single b%siness transaction on te greater or lesser
sre@dness and ind%stry o! te capitalist, @eter, and to @at extent, e b%ys or sells abo8e or
belo@ te price o! prod%ction and t%s appropriates a greater or smaller portion o! te total
s%rpl%s-8al%e in te process o! circ%lation0 &n any case, te D%antitati8e di8ision o! te gross
pro!it t%rns ere into a D%alitati8e one, and all te more so beca%se te D%antitati8e di8ision itsel!
depends on what is to be di8ided, te manner in @ic te acti8e capitalist manages is capital,
and @at gross pro!it it yields to im as a !%nctioning capital, i.e., in conseD%ence o! is !%nctions
as an acti8e capitalist0 5e !%nctioning capitalist is ere ass%med as a non-o@ner o! capital0
3@nersip o! te capital is represented in relation to im by te money-capitalist, te lender0 5e
interest e pays to te latter t%s appears as tat portion o! gross pro!it @ic is d%e to te
o@nersip o! capital as s%c0 ?s distinct !rom tis, tat portion o! pro!it @ic !alls to te acti8e
capitalist appears no@ as pro!it o! enterprise, deri8ing solely !rom te operations, or !%nctions,
@ic e per!orms @it te capital in te process o! reprod%ction, ence partic%larly tose
!%nctions @ic e per!orms as entreprene%r in ind%stry or commerce0 &n relation to im interest
<2> ;apter JJ&&&
appears tere!ore as te mere !r%it o! o@ning capital, o! capital as s%c abstracted !rom te
reprod%ction process o! capital, inasm%c as it does not K@ork,L# does not !%nction# @ile pro!it
o! enterprise appears to im as te excl%si8e !r%it o! te !%nctions @ic e per!orms @it te
capital, as te !r%it o! te mo8ement and per!ormance o! capital, o! a per!ormance @ic appears
to im as is o@n acti8ity, as opposed to te inacti8ity, te non-participation o! te money-
capitalist in te prod%ction process0 5is D%alitati8e distinction bet@een te t@o portions o! gross
pro!it tat interest is te !r%it o! capital as s%c, o! te o@nersip o! capital irrespecti8e o! te
prod%ction process, and tat pro!it o! enterprise is te !r%it o! per!orming capital, o! capital
!%nctioning in te prod%ction process, and ence o! te acti8e role played by te employer o! te
capital in te reprod%ction process I tis D%alitati8e distinction is by no means merely a
s%bHecti8e notion o! te money-capitalist, on te one and, and te ind%strial capitalist, on te
oter0 &t rests %pon an obHecti8e !act, !or interest !lo@s to te money-capitalist, to te lender, @o
is te mere o@ner o! capital, ence represents only o@nersip o! capital be!ore te prod%ction
process and o%tside o! it# @ile te pro!it o! enterprise !lo@s to te !%nctioning capitalist alone,
@o is non-o@ner o! te capital0
5e merely D%antitati8e di8ision o! te gross pro!it bet@een t@o di!!erent persons @o bot a8e
di!!erent legal claims to te same capital, and ence to te pro!it prod%ced by it, t%s t%rns into a
D%alitati8e di8ision !or bot te ind%strial capitalist in so !ar as e is operating on borro@ed
capital, and !or te money-capitalist, in so !ar as e does not imsel! apply is capital0 3ne
portion o! te pro!it appears no@ as !r%it d%e as s%c to capital in one !orm, as interest# te oter
portion appears as a speci!ic !r%it o! capital in an opposite !orm, and t%s as pro!it o! enterprise0
3ne appears excl%si8ely as te !r%it o! operating @it te capital, te !r%it o! per!orming capital,
or o! te !%nctions per!ormed by te acti8e capitalist0 ?nd tis ossi!ication and indi8id%alisation
o! te t@o parts o! te gross pro!it in respect to one anoter, as to%g tey originated !rom t@o
essentially di!!erent so%rces, no@ takes !irm sape !or te entire capitalist class and te total
capital0 ?nd, indeed, regardless o! @eter te capital employed by te acti8e capitalist is
borro@ed or not, and @eter te capital belonging to te money-capitalist is employed by
imsel! or not0 5e pro!it o! e8ery capital, and conseD%ently also te a8erage pro!it establised by
te eD%alisation o! capitals, splits, or is separated, into t@o D%alitati8ely di!!erent, m%t%ally
independent and separately indi8id%alised parts, to @it I interest and pro!it o! enterprise I bot o!
@ic are determined by separate la@s0 5e capitalist operating on is o@n capital, like te one
operating on borro@ed capital, di8ides te gross pro!it into interest d%e to imsel! as o@ner, as is
o@n lender, and into pro!it o! enterprise d%e to im as to an acti8e capitalist per!orming is
!%nction0 ?s concerns tis di8ision, tere!ore, as a D%alitati8e one, it is immaterial @eter te
capitalist really as to sare @it anoter, or not0 5e employer o! capital, e8en @en @orking
@it is o@n capital, splits into t@o personalities I te o@ner o! capital and te employer o!
capital# @it re!erence to te categories o! pro!it @ic it yields, is capital also splits into
capital1property, capital outside te prod%ction process, and yielding interest o! itsel!, and capital
in te prod%ction process @ic yields a pro!it o! enterprise tro%g its !%nction0
&nterest, tere!ore, becomes !irmly establised in a @ay tat it no longer appears as a di8ision o!
gross pro!it o! indi!!erence to prod%ction, @ic occ%rs occasionally @en te ind%strial capitalist
appens to operate @it someone else"s capital0 6is pro!it splits into interest and pro!it o!
enterprise e8en @en e operates on is o@n capital0 ? merely D%antitati8e di8ision t%s t%rns
into a D%alitati8e one0 &t occ%rs regardless o! te !ort%ito%s circ%mstance @eter te ind%strial
capitalist is, or is not, te o@ner o! is capital0 &t is not only a matter o! di!!erent D%otas o! pro!it
assigned to di!!erent persons, b%t t@o di!!erent categories o! pro!it @ic are di!!erently related to
te capital, ence related to di!!erent aspects o! te capital0
-o@ tat tis di8ision o! gross pro!it into interest and pro!it o! enterprise as become a
D%alitati8e one, it is easy to disco8er te reasons @y it acD%ires tis caracter o! a D%alitati8e
di8ision !or te total capital and te entire class o! capitalists0
<28 ;apter JJ&&&
'irstly, tis !ollo@s !rom te simple empirical circ%mstance tat te maHority o! ind%strial
capitalists, e8en i! in di!!erent n%merical proportions, @ork @it teir o@n and @it borro@ed
capital, and tat at di!!erent times te proportion bet@een one"s o@n and borro@ed capital
canges0
Secondly, te trans!ormation o! a portion o! te gross pro!it into te !orm o! interest con8erts its
oter portion into pro!it o! enterprise0 5e latter is, indeed, b%t te opposite !orm ass%med by te
excess o! gross pro!it o8er interest as soon as tis exists as an independent category0 5e entire
analysis o! te problem o@ gross pro!it is di!!erentiated into interest and pro!it o! enterprise,
resol8es itsel! into te inD%iry o! o@ a portion o! te gross pro!it becomes %ni8ersally ossi!ied
and indi8id%alised as interest0 .et istorically interest-bearing capital existed as a completed
traditional !orm, and ence interest as a completed s%b-di8ision o! s%rpl%s-8al%e prod%ced by
capital, long be!ore te capitalist mode o! prod%ction and its attendant conceptions o! capital and
pro!it0 5%s it is tat to te pop%lar mind money-capital, or interest-bearing capital, is still capital
as s%c, as capital par ecellence. 5%s it is, on te oter and, tat %p to te time o! Massie te
notion pre8ailed tat it is money as s%c @ic is paid in interest0 5e !act tat loaned capital
yields interest @eter act%ally employed as capital or not I e8en @en borro@ed only !or
cons%mption I lends strengt to te idea tat tis !orm o! capital exists independently0 5e best
proo! o! te independence @ic interest possessed d%ring te early periods o! te capitalist mode
o! prod%ction in re!erence to pro!it, and @ic interest-bearing capital possessed in re!erence to
ind%strial capital, is tat it @as disco8ered Bby Massie //P0 Massie1 +n 0ssay on the Governing
Causes of the $atural 9ate of Dnterest, 'ondon, 1>+=0 I 0d.1 and a!ter im by 6%me /70 6%me,
K3n &nterest0L &n: KEssays and 5reatises on $e8eral $%bHects,L 4ol0 &, 'ondon, 1>620 I 0d.1 C as
late as te middle o! te 18t cent%ry, tat interest is b%t a portion o! te gross pro!it, and tat
s%c a disco8ery @as at all necessary0
4hirdly, @eter te ind%strial capitalist operates on is o@n or on borro@ed capital does not alter
te !act tat te class o! money-capitalists con!ronts im as a special kind o! capitalists, money-
capital as an independent kind o! capital, and interest as an independent !orm o! s%rpl%s-8al%e
pec%liar to tis speci!ic capital0
Oualitatively speaking, interest is s%rpl%s-8al%e yielded by te mere o@nersip o! capital# it is
yielded by capital as s%c, e8en to%g its o@ner remains o%tside te reprod%ction process0
6ence it is s%rpl%s-8al%e realised by capital o%tside o! its process0
Ouantitatively speaking, tat portion o! pro!it @ic !orms interest does not seem to be related to
ind%strial or commercial capital as s%c, b%t to money-capital, and te rate o! tis portion o!
s%rpl%s-8al%e, te rate o! interest, rein!orces tis relation0 Aeca%se, in te !irst place, te rate o!
interest is independently determined despite its dependence %pon te general rate o! pro!it, and, in
te second place, like te market-price o! commodities, it appears in contrast to te intangible rate
o! pro!it as a !ixed, %ni!orm, tangible and al@ays gi8en relation !or all its 8ariations0 &! all capital
@ere in te ands o! te ind%strial capitalists tere @o%ld be no s%c ting as interest and rate o!
interest0 5e independent !orm ass%med by te D%antitati8e di8ision o! gross pro!it creates te
D%alitati8e one0 &! te ind%strial capitalist @ere to compare imsel! @it te money-capitalist, it
@o%ld be is pro!it o! enterprise alone, te excess o! is gross pro!it o8er te a8erage interest I
te latter appearing to be empirically gi8en by 8irt%e o! te rate o! interest I tat @o%ld
disting%is im !rom te oter person0 &!, on te oter and, e compares imsel! @it te
ind%strial capitalist @orking @it is o@n, instead o! borro@ed, capital, te latter di!!ers !rom im
only as a money-capitalist in pocketing te interest instead o! paying it to someone else0 5e
portion o! gross pro!it disting%ised !rom interest appears to im in eiter case as pro!it o!
enterprise, and interest itsel! as a s%rpl%s-8al%e yielded by capital as s%c, @ic it @o%ld yield
e8en i! not applied prod%cti8ely0
5is is correct in te practical sense !or te indi8id%al capitalist0 6e as te coice o! making %se
o! is capital by lending it o%t as interest-bearing capital, or o! expanding its 8al%e on is o@n by
<2* ;apter JJ&&&
%sing it as prod%cti8e capital, regardless o! @eter it exists as money-capital !rom te 8ery !irst,
or @eter it still as to be con8erted into money-capital0 A%t to apply it to te total capital o!
society, as some 8%lgar economists do, and to go so !ar as to de!ine it as te ca%se o! pro!it, is, o!
co%rse, prepostero%s0 5e idea o! con8erting all te capital into money-capital, @ito%t tere
being people @o b%y and p%t to %se means o! prod%ction, @ic make %p te total capital
o%tside o! a relati8ely small portion o! it existing in money, is, o! co%rse, seer nonsense0 &t @o%ld
be still more abs%rd to pres%me tat capital @o%ld yield interest on te basis o! capitalist
prod%ction @ito%t per!orming any prod%cti8e !%nction, i.e., @ito%t creating s%rpl%s-8al%e, o!
@ic interest is H%st a part# tat te capitalist mode o! prod%ction @o%ld r%n its co%rse @ito%t
capitalist prod%ction0 &! an %nto@ardly large section o! capitalists @ere to con8ert teir capital
into money-capital, te res%lt @o%ld be a !rigt!%l depreciation o! money-capital and a !rigt!%l
!all in te rate o! interest# many @o%ld at once !ace te impossibility o! li8ing on teir interest,
and @o%ld ence be compelled to recon8ert into ind%strial capitalists0 A%t @e repeat tat it is a
!act !or te indi8id%al capitalist0 For tis reason, e8en @en operating @it is o@n capital, e
necessarily considers te part o! is a8erage pro!it @ic eD%als te a8erage interest as !r%it o! is
capital as s%c, set apart !rom te process o! prod%ction# and as distinct !rom tis portion singled
o%t as interest, e considers te s%rpl%s o! te gross pro!it as mere pro!it o! enterprise0
'ourthly, /? blank in te man%script10
We a8e seen, tere!ore, tat te portion o! pro!it @ic te !%nctioning capitalist as to pay to
te o@ner o! borro@ed capital is trans!ormed into an independent !orm !or a portion o! te pro!it,
@ic all capital as s%c, @eter borro@ed or not, yields %nder te name o! interest0 6o@ large
tis portion is depends on te a8erage rate o! interest0 &ts origin is only still re8ealed in te !act
tat te !%nctioning capitalist, @en o@ner o! is capital, does not compete I at least not acti8ely
I in determining te interest rate0 5e p%rely D%antitati8e di8ision o! te pro!it bet@een t@o
persons @o a8e di!!erent legal titles to it as t%rned into a D%alitati8e di8ision, @ic seems to
spring !rom te 8ery nat%re o! capital and pro!it0 Aeca%se, as @e a8e seen, as soon as a portion
o! pro!it %ni8ersally ass%mes te !orm o! interest, te di!!erence bet@een a8erage pro!it and
interest, or te portion o! pro!it o8er and abo8e te interest, ass%mes a !orm opposite to interest I
te !orm o! pro!it o! enterprise0 5ese t@o !orms, interest and pro!it o! enterprise, exist only as
opposites0 6ence, tey are not related to s%rpl%s-8al%e, o! @ic tey are b%t parts placed %nder
di!!erent categories, eads or names, b%t rater to one anoter0 &t is beca%se one portion o! pro!it
t%rns into interest, tat te oter appears as pro!it o! enterprise0
Ay pro!it @e ere al@ays mean a8erage pro!it, since 8ariations do not concern %s in tis analysis,
be tey o! indi8id%al pro!its or o! pro!its in di!!erent speres I ence 8ariations ca%sed by te
competiti8e str%ggle and oter circ%mstances a!!ecting te distrib%tion o! te a8erage pro!it, or
s%rpl%s-8al%e0 5is applies generally to tis entire inD%iry0
&nterest is ten net pro!it, as )amsay calls it, @ic te o@nersip o! capital yields as s%c, eiter
simply to te lender, @o remains o%tside te reprod%ction process, or to te o@ner @o employs
is capital prod%cti8ely0 A%t in te latter"s case, too, capital yields tis net pro!it to im not in is
capacity o! prod%cti8e capitalist, b%t o! money-capitalist, o! lender o! is o@n capital as interest-
bearing capital to imsel! as to a !%nctioning capitalist0 P%st as te con8ersion o! money, and o!
8al%e in general, into capital is te constant res%lt o! capitalist prod%ction, so is its existence as
capital its constant precondition0 Ay its ability to be trans!ormed into means o! prod%ction it
contin%ally commands %npaid labo%r and tereby trans!orms te processes o! prod%ction and
circ%lation o! commodities into te prod%ction o! s%rpl%s-8al%e !or its o@ner0 &nterest is,
tere!ore, te expression o! te !act tat 8al%e in general-materialised labo%r in its general social
!orm-8al%e @ic ass%mes te !orm o! means o! prod%ction in te act%al process o! prod%ction,
con!ronts li8ing labo%r-po@er as an independent po@er, and is a means o! appropriating %npaid
labo%r# and tat it is s%c a po@er beca%se it con!ronts te labo%rer as te property o! anoter0 A%t
on te oter and, tis antitesis to @age-labo%r is obliterated in te !orm o! interest, beca%se
<+= ;apter JJ&&&
interest-bearing capital as s%c as not @age-labo%r, b%t prod%cti8e capital !or its opposite0 5e
lending capitalist as s%c !aces te capitalist per!orming is act%al !%nction in te process o!
reprod%ction, not te @age-@orker, @o, precisely %nder capitalist prod%ction, is expropriated o!
te means o! prod%ction0 &nterest-bearing capital is capital as propertyas distinct !rom capital as a
function. A%t so long as capital does not per!orm its !%nction, it does not exploit labo%rers and
does not come into opposition to labo%r0
3n te oter and, pro!it o! enterprise is not related as an opposite to @age-labo%r, b%t only to
interest0
'irstly, ass%ming te a8erage pro!it to be gi8en, te rate o! te pro!it o! enterprise is not
determined by @ages, b%t by te rate o! interest0 &t is ig or lo@ in in8erse proportion to it
1
Secondly, te !%nctioning capitalist deri8es is claim to pro!its o! enterprise, ence te pro!it o!
enterprise itsel!, not !rom is o@nersip o! capital, b%t !rom te !%nction o! capital, as distinct
!rom te de!inite !orm in @ic it is only inert property0 5is stands o%t as an immediately
apparent contrast @ene8er e operates @it borro@ed capital, and interest and pro!it o!
enterprise tere!ore go to di!!erent persons0 5e pro!it o! enterprise springs !rom te !%nction o!
capital in te reprod%ction process, ence as a res%lt o! te operations, te acts by @ic te
!%nctioning capitalist promotes tis !%nction o! ind%strial and commercial capital0 A%t to
represent !%nctioning capital is not a sinec%re, like representing interest-bearing capital0 3n te
basis o! capitalist prod%ction, te capitalist directs te process o! prod%ction and circ%lation0
Exploiting prod%cti8e labo%r entails exertion, @eter e exploits it imsel! or as it exploited by
someone else on is beal!0 5ere!ore, is pro!it o! enterprise appears to im as distinct !rom
interest, as independent o! te o@nersip o! capital, b%t rater as te res%lt o! is !%nction as a
non-proprietor I a labourer.
6e necessarily concei8es te idea !or tis reason tat is pro!it o! enterprise, !ar !rom being
co%nterposed to @age-labo%r and !ar !rom being te %npaid labo%r o! oters, is itsel! rater a
wage or @ages o! s%perintendence o! labo%r, iger tan a common labo%rer"s, 1C beca%se te
@ork is !ar more complicated, and <C beca%se e pays tem to imsel!0 5e !act tat is !%nction
as a capitalist consists in creating s%rpl%s-8al%e, i.e., %npaid labo%r, and creating it %nder te most
economical conditions, is entirely lost sigt o! in te contrast tat interest !alls to te sare o! te
capitalist e8en @en e does not per!orm te !%nction o! a capitalist and is merely te o@ner o!
capital# and tat, on te oter and, pro!it o! enterprise does !all to te sare o! te !%nctioning
capitalist e8en @en e is not te o@ner o! te capital on @ic e operates0 6e !orgets, d%e to
te antitetical !orm o! te t@o parts into @ic pro!it, ence s%rpl%s-8al%e, is di8ided, tat bot
are merely parts o! te s%rpl%s-8al%e, and tat tis di8ision alters noting in te nat%re, origin,
and @ay o! existence o! s%rpl%s-8al%e0
&n te process o! reprod%ction te !%nctioning capitalist represents capital as te property o!
anoter 8is-O-8is te @age-labo%rers, and te money-capitalist, represented by te !%nctioning
capitalist, takes a and in exploiting labo%r0 5e !act tat te in8esting capitalist can per!orm is
!%nction o! making te labo%rers @ork !or im, or o! employing means o! prod%ction as capital,
only as te personi!ication o! te means o! prod%ction 8is-O-8is te labo%rers, is !orgotten in te
contradiction bet@een te !%nction o! capital in te reprod%ction process and te mere o@nersip
o! capital o%tside o! te reprod%ction process0
&n !act, te !orm o! interest and pro!it o! enterprise ass%med by te t@o parts o! pro!it, i.e., o!
s%rpl%s-8al%e, expresses no relation to labo%r, beca%se tis relation exists only bet@een labo%r
and pro!it, or rater te s%rpl%s-8al%e as a s%m, a @ole, te %nity o! tese t@o parts0 5e
proportion in @ic te pro!it is di8ided, and te di!!erent legal titles by @ic tis di8ision is
sanctioned, are based on te ass%mption tat pro!it is already in existence0 &!, tere!ore, te
capitalist is te o@ner o! te capital on @ic e operates, e pockets te @ole pro!it, or s%rpl%s-
8al%e0 &t is absol%tely immaterial to te labo%rer @eter te capitalist does tis, or @eter e
<+1 ;apter JJ&&&
as to pay a part o! it to a tird person as its legal proprietor0 5e reasons !or di8iding te pro!it
among t@o kinds o! capitalists t%s t%rn imperceptibly into te reasons !or te existence o! te
pro!it, te s%rpl%s-8al%e, tat is to be di8ided, and @ic capital as s%c deri8es !rom te
reprod%ction process regardless o! any s%bseD%ent di8ision0 $ince interest is opposed to pro!it o!
enterprise, and pro!it o! enterprise to interest, and since tey are bot co%nterposed to one
anoter, b%t not to labo%r, it !ollo@s tat pro!it o! enterprise pl%s interest, i.e., pro!it, and !%rter
s%rpl%s-8al%e, are deri8ed I !rom @atQ From te antitetical !orm o! its t@o partsS A%t pro!it is
prod%ced be!ore its di8ision is %ndertaken, and be!ore tere can be any to%gt o! it0
&nterest-bearing capital remains as s%c only so long as te loaned money is act%ally con8erted
into capital and a s%rpl%s is prod%ced @it it, o! @ic interest is a part0 A%t tis does not r%le o%t
tat dra@ing interest, regardless o! te process o! prod%ction, is its organic property0 $o does
labo%r-po@er preser8e its property o! prod%cing 8al%e only so long as it is employed and
materialised in te labo%r-process# yet tis does not arg%e against te !act tat it is potentially, as
a po@er, an acti8ity @ic creates 8al%e, and tat as s%c it does not spring !rom te process o!
prod%ction, b%t rater antecedes it0 &t is bo%gt as s%c a capacity !or creating 8al%e0 3ne migt
also b%y it @ito%t setting it to @ork prod%cti8ely# !or p%rely personal ends, !or instance, !or
personal ser8ices, etc0 5e same applies to capital0 &t is te borro@er"s a!!air @eter e employs
it as capital, ence act%ally sets in motion its inerent property o! prod%cing s%rpl%s-8al%e0 Wat
e pays !or, is in eiter case te potential s%rpl%s-8al%e inerently contained in capital as a
commodity0
'et %s no@ consider pro!it o! enterprise in greater detail0
$ince te speci!ic social attrib%te o! capital %nder capitalist prod%ction I tat o! being property
commanding te labo%r-po@er o! anoter I becomes !ixed, so tat interest appears as a part o!
s%rpl%s-8al%e prod%ced by capital in tis interrelation, te oter part o! s%rpl%s-8al%e I pro!it o!
enterprise I m%st necessarily appear as coming not !rom capital as s%c, b%t !rom te process o!
prod%ction, separated !rom its speci!ic social attrib%te, @ose distinct mode o! existence is
already expressed by te term interest on capital0 A%t te process o! prod%ction, separated !rom
capital, is simply a labo%r-process0 5ere!ore, te ind%strial capitalist, as distinct !rom te o@ner
o! capital, does not appear as operating capital, b%t rater as a !%nctionary irrespecti8e o! capital,
or, as a simple agent o! te labo%r-process in general, as a labo%rer, and indeed as a @age-
labo%rer0
&nterest as s%c expresses precisely te existence o! te conditions o! labo%r as capital, in teir
social antitesis to labo%r, and in teir trans!ormation into personal po@er 8is-O-8is and o8er
labo%r0 &t represents te o@nersip o! capital as a means o! appropriating te prod%cts o! te
labo%r o! oters0 A%t it represents tis caracteristic o! capital as someting @ic belongs to it
o%tside te prod%ction process and by no means is te res%lt o! te speci!ically capitalist attrib%te
o! tis prod%ction process itsel!0 &nterest represents tis caracteristic not as directly co%nterposed
to labo%r, b%t rater as %nrelated to labo%r, and simply as a relationsip o! one capitalist to
anoter0 6ence, as an attrib%te o%tside o! and irrele8ant to te relation o! capital to labo%r0 &n
interest, tere!ore, in tat speci!ic !orm o! pro!it in @ic te antitetical caracter o! capital
ass%mes an independent !orm, tis is done in s%c a @ay tat te antitesis is completely
obliterated and abstracted0 &nterest is a relationsip bet@een t@o capitalists, not bet@een capitalist
and labo%rer0
3n te oter and, tis !orm o! interest lends te oter portion o! pro!it te D%alitati8e !orm o!
pro!it o! enterprise, and !%rter o! @ages o! s%perintendence0 5e speci!ic !%nctions @ic te
capitalist as s%c as to per!orm, and @ic !all to im as distinct !rom and opposed to te
labo%rer, are presented as mere !%nctions o! labo%r0 6e creates s%rpl%s-8al%e not beca%se e
@orks as a capitalist, b%t beca%se e also @orks, regardless o! is capacity o! capitalist0 5is
portion o! s%rpl%s-8al%e is t%s no longer s%rpl%s-8al%e, b%t its opposite, an eD%i8alent !or labo%r
per!ormed0 7%e to te alienated caracter o! capital, its antitesis to labo%r, being relegated to a
<+< ;apter JJ&&&
place o%tside te act%al process o! exploitation, namely to te interest-bearing capital, tis
process o! exploitation itsel! appears as a simple labo%r-process in @ic te !%nctioning
capitalist merely per!orms a di!!erent kind o! labo%r tan te labo%rer0 $o tat te labo%r o!
exploiting and te exploited labo%r bot appear identical as labo%r0 5e labo%r o! exploiting is
H%st as m%c labo%r as exploited labo%r0 5e social !orm o! capital !alls to interest, b%t expressed
in a ne%tral and indi!!erent !orm0 5e economic !%nction o! capital !alls to pro!it o! enterprise, b%t
abstracted !rom te speci!ic capitalist caracter o! tis !%nction0
5e same ting passes tro%g te mind o! te capitalist in tis case as in te case o! te reasons
indicated in ,art && o! tis book !or compensation in te eD%alisation to a8erage pro!it0 5ese
reasons !or compensation @ic enter te distrib%tion o! s%rpl%s-8al%e as determinants are
distorted in a capitalist"s mind to appear as bases o! origin and te Bs%bHecti8eC H%sti!ications o!
pro!it itsel!0
5e conception o! pro!it o! enterprise as te @ages o! s%per8ising labo%r, arising !rom te
antitesis o! pro!it o! enterprise to interest, is !%rter strengtened by te !act tat a portion o!
pro!it may, indeed, be separated, and is separated in reality, as @ages, or rater te re8erse, tat a
portion o! @ages appears %nder capitalist prod%ction as integral part o! pro!it0 5is portion, as
?dam $mit correctly ded%ced, presents itsel! in p%re !orm, independently and @olly separated
!rom pro!it Bas te s%m o! interest and pro!it o! enterpriseC, on te one and, and on te oter,
!rom tat portion o! pro!it @ic remains, a!ter interest is ded%cted, as pro!it o! enterprise in te
salary o! management o! tose brances o! b%siness @ose siEe, etc0, permits o! a s%!!icient
di8ision o! labo%r to H%sti!y a special salary !or a manager0
5e labo%r o! s%per8ision and management is nat%rally reD%ired @ere8er te direct process o!
prod%ction ass%mes te !orm o! a combined social process, and not o! te isolated labo%r o!
independent prod%cers0
<
6o@e8er, it as a do%ble nat%re0
3n te one and, all labo%r in @ic many indi8id%als co-operate necessarily reD%ires a
commanding @ill to co-ordinate and %ni!y te process, and !%nctions @ic apply not to partial
operations b%t to te total acti8ity o! te @orksop, m%c as tat o! an orcestra cond%ctor0 5is
is a prod%cti8e Hob, @ic m%st be per!ormed in e8ery combined mode o! prod%ction0
3n te oter and I D%ite apart !rom any commercial department I tis s%per8ision @ork
necessarily arises in all modes o! prod%ction based on te antitesis bet@een te labo%rer, as te
direct prod%cer, and te o@ner o! te means o! prod%ction0 5e greater tis antagonism, te
greater te role played by s%per8ision0 6ence it reaces its peak in te sla8e system0
3
A%t it is
indispensable also in te capitalist mode o! prod%ction, since te prod%ction process in it is
sim%ltaneo%sly a process by @ic te capitalist cons%mes labo%r-po@er0 P%st as in despotic
states, s%per8ision and all-ro%nd inter!erence by te go8ernment in8ol8es bot te per!ormance o!
common acti8ities arising !rom te nat%re o! all comm%nities, and te speci!ic !%nctions arising
!rom te antitesis bet@een te go8ernment and te mass o! te people0
&n te @orks o! ancient @riters, @o ad te sla8e system be!ore tem, bot sides o! te @ork o!
s%per8ision are as inseparably combined in teory as tey @ere in practice0 'ike@ise in te @orks
o! modern economists, @o regard te capitalist mode o! prod%ction as absol%te0 3n te oter
and, as & sall presently ill%strate @it an example, te apologists o! te modern sla8e system
%tilise te @ork o! s%per8ision D%ite as m%c as a H%sti!ication o! sla8ery, as te oter economists
do to H%sti!y te @age system0
5e villicus in ;ato"s time:
K?t te ead o! te estate @it sla8e economy
Bfamilia rusticaC stands te manager Bvillicus, deri8ed
!rom villaC, @o recei8es and expends, b%ys and sells,
<+3 ;apter JJ&&&
takes instr%ctions !rom te master, in @ose absence
e gi8es orders and metes o%t p%nisment0000 5e
manager nat%rally ad more !reedom o! action tan
te oter sla8es# te Magonian books ad8ise tat e
be permitted to marry, raise cildren, and a8e is
o@n !%nds, and ;ato recommends tat e be married
to te !emale manager# e alone probably ad te
prospect o! @inning is !reedom !rom te master in
te e8ent o! good bea8io%r0 ?s !or te rest, all
!ormed a common o%seold0000 E8ery sla8e,
incl%ding te manager imsel!, @as s%pplied is
necessities at is master"s expense at de!inite inter8als
and !ixed rates, and ad to get along on tem000 5e
D%antity 8aried in accordance @it labo%r, @ic is
@y te manager, !or example, @ose @ork @as
ligter tan te oter sla8es", recei8ed a smaller ration
tan tey0L# BMommsen, 9Kmische Geschichte, <nd
ed0, 18+6, 1, pp0 8=*-1=0C
?ristotle:
K ,
0L BKFor te masterL I te
capitalist I Kpro8es imsel! s%c not by obtaining
sla8esL I o@nersip o! capital @ic gi8es im po@er
to b%y labo%r-po@er I Kb%t in employing sla8esL I
%sing labo%rers, no@adays @age-labo%rers, in te
prod%ction process0C
K
0L BKA%t tere is noting great or s%blime
abo%t tis science0LC
K
0L KA%t @ate8er
te sla8e m%st be able to per!orm, te master m%st be
able to order0LC
K
,
<+2 ;apter JJ&&&
0L BKWene8er te masters
are not compelled to plag%e temsel8es @it
s%per8ision, te manager ass%mes this honour, @ile
te masters attend to a!!airs o! state or st%dy
pilosopy0LC B?ristotle, De republica, Aekker
edition, Aook &, >0C
?ristotle says in H%st so many @ords tat s%premacy in te political and economic !ields imposes
te !%nctions o! go8ernment %pon te r%ling po@ers, and ence tat tey m%st, in te economic
!ield, kno@ te art o! cons%ming labo%r-po@er0 ?nd e adds tat tis s%per8isory @ork is not a
matter o! great moment and tat !or tis reason te master lea8es te Kono%rL o! tis dr%dgery to
an o8erseer as soon as e can a!!ord it0
5e @ork o! management and s%per8ision I so !ar as it is not a special !%nction determined by te
nat%re o! all combined social labo%r, b%t rater by te antitesis bet@een te o@ner o! means o!
prod%ction and te o@ner o! mere labo%r-po@er, regardless o! @eter tis labo%r-po@er is
p%rcased by b%ying te labo%rer imsel!, as it is %nder te sla8e system, or @eter te labo%rer
imsel! sells is labo%r-po@er, so tat te prod%ction process also appears as a process by @ic
capital cons%mes is labo%r I tis !%nction arising o%t o! te ser8it%de o! te direct prod%cers as
all too o!ten been D%oted to H%sti!y tis relationsip0 ?nd exploitation, te appropriation o! te
%npaid labo%r o! oters, as D%ite as o!ten been represented as te re@ard H%stly d%e to te o@ner
o! capital !or is @ork# b%t ne8er better tan by a campion o! sla8ery in te (nited $tates, a
la@yer named 3";onnor, at a meeting eld in -e@ .ork on 7ecember 1*, 18+*, %nder te slogan
o! KP%stice !or te $o%t0L
K-o@, gentlemen,L e said amid t%ndero%s appla%se,
Kto tat condition o! bondage te -egro is assigned by
-at%re000 6e as strengt, and as te po@er to labo%r#
b%t te -at%re @ic created te po@er denied to im
eiter te intellect to go8ern, or @illingness to @ork0L
B?ppla%se0C KAot @ere denied to im0 ?nd tat
-at%re @ic depri8ed im o! te @ill to labo%r, ga8e
im a master to coerce tat @ill, and to make im a
%se!%l000 ser8ant in te clime in @ic e @as capable
o! li8ing %se!%l !or imsel! and !or te master @o
go8erns im000 & maintain tat it is not inH%stice to
lea8e te -egro in te condition in @ic -at%re
placed im, to gi8e im a master to go8ern im 000 nor
is it depri8ing im o! any o! is rigts to compel im
to labo%r in ret%rn, and a!!ord to tat master H%st
compensation !or te labo%r and talent employed in
go8erning im and rendering im %se!%l to imsel!
<++ ;apter JJ&&&
and to te society0L /$ew Eor- Daily
4ribune,-o8ember <=, 18+*, pp0 >-80 I 0d1
-o@, te @age-labo%rer, like te sla8e, m%st a8e a master @o p%ts im to @ork and r%les o8er
im0 ?nd ass%ming te existence o! tis relationsip o! lordsip and ser8it%de, it is D%ite proper
to compel te @age-labo%rer to prod%ce is o@n @ages and also te @ages o! s%per8ision, as
compensation !or te labo%r o! r%ling and s%per8ising im, or
KH%st compensation !or te labo%r and talent employed
in go8erning im and rendering im %se!%l to imsel!
and to te society0L
5e labo%r o! s%per8ision and management, arising as it does o%t o! an antitesis, o%t o! te
s%premacy o! capital o8er labo%r, and being tere!ore common to all modes o! prod%ction based
on class contradictions like te capitalist mode, is directly and inseparably connected, also %nder
te capitalist system, @it prod%cti8e !%nctions @ic all combined social labo%r assigns to
indi8id%als as teir special tasks0 5e @ages o! an epitropos, or r7gisseur, as e @as called in
!e%dal France, are entirely di8orced !rom pro!it and ass%me te !orm o! @ages !or skilled labo%r
@ene8er te b%siness is operated on a s%!!iciently large scale to @arrant paying !or s%c a
manager, alto%g, !or all tat, o%r ind%strial capitalists are !ar !rom Kattending to a!!airs o! state
or st%dying pilosopy0L
&t as already been remarked by Mr0 (re
2
tat it is not te ind%strial capitalists, b%t te ind%strial
managers @o are Kte so%l o! o%r ind%strial system0L Wate8er concerns te commercial part o!
an establisment @e a8e already said all tat is necessary in te preceding part0
5e capitalist mode o! prod%ction as bro%gt matters to a point @ere te @ork o! s%per8ision,
entirely di8orced !rom te o@nersip o! capital, is al@ays readily obtainable0 &t as, tere!ore,
come to be %seless !or te capitalist to per!orm it imsel!0 ?n orcestra cond%ctor need not o@n
te instr%ments o! is orcestra, nor is it @itin te scope o! is d%ties as cond%ctor to a8e
anyting to do @it te K@agesL o! te oter m%sicians0 ;o-operati8e !actories !%rnis proo! tat
te capitalist as become no less red%ndant as a !%nctionary in prod%ction as e imsel!, looking
do@n !rom is ig perc, !inds te big lando@ner red%ndant0 &nasm%c as te capitalist"s @ork
does not originate in te p%rely capitalistic process o! prod%ction, and ence does not cease on its
o@n @en capital ceases# inasm%c as it does not con!ine itsel! solely to te !%nction o!
exploiting te labo%r o! oters# inasm%c as it tere!ore originates !rom te social !orm o! te
labo%r-process, !rom combination and co-operation o! many in p%rs%ance o! a common res%lt, it
is H%st as independent o! capital as tat !orm itsel! as soon as it as b%rst its capitalistic sell0 5o
say tat tis labo%r is necessary as capitalistic labo%r, or as a !%nction o! te capitalist, only means
tat tevulgus is %nable to concei8e te !orms de8eloped in te lap o! capitalist prod%ction,
separate and !ree !rom teir antitetical capitalist caracter0 5e ind%strial capitalist is a @orker,
compared to te money-capitalist, b%t a @orker in te sense o! capitalist, i.e., an exploiter o! te
labo%r o! oters0 5e @age @ic e claims and pockets !or tis labo%r is exactly eD%al to te
appropriated D%antity o! anoter"s labo%r and depends directly %pon te rate o! exploitation o! tis
labo%r, in so !ar as e %ndertakes te e!!ort reD%ired !or exploitation# it does not, o@e8er, depend
on te degree o! exertion tat s%c exploitation demands, and @ic e can si!t to a manager !or
moderate pay0 ?!ter e8ery crisis tere are eno%g ex-man%!act%rers in te Englis !actory districts
@o @ill s%per8ise, !or lo@ @ages, @at @ere !ormerly teir o@n !actories in te capacity o!
managers o! te ne@ o@ners, @o are !reD%ently teir creditors0
+

5e @ages o! management bot !or te commercial and ind%strial manager are completely
isolated !rom te pro!its o! enterprise in te co-operati8e !actories o! labo%rers, as @ell as in
capitalist stock companies0 5e separation o! @ages o! management !rom pro!its o! enterprise,
<+6 ;apter JJ&&&
p%rely accidental at oter times, is ere constant0 &n a co-operati8e !actory te antagonistic nat%re
o! te labo%r o! s%per8ision disappears, beca%se te manager is paid by te labo%rers instead o!
representing capital co%nterposed to tem0 $tock companies in general I de8eloped @it te
credit system I a8e an increasing tendency to separate tis @ork o! management as a !%nction
!rom te o@nersip o! capital, be it sel!-o@ned or borro@ed0 P%st as te de8elopment o! bo%rgeois
society @itnessed a separation o! te !%nctions o! H%dges and administrators !rom land-o@nersip,
@ose attrib%tes tey @ere in !e%dal times0 A%t since, on te one and, te mere o@ner o! capital,
te money-capitalist, as to !ace te !%nctioning capitalist, @ile money-capital itsel! ass%mes a
social caracter @it te ad8ance o! credit, being concentrated in banks and loaned o%t by tem
instead o! its original o@ners, and since, on te oter and, te mere manager @o as no title
@ate8er to te capital, @eter tro%g borro@ing it or oter@ise, per!orms all te real !%nctions
pertaining to te !%nctioning capitalist as s%c, only te !%nctionary remains and te capitalist
disappears as s%per!l%o%s !rom te prod%ction process0
&t is mani!est !rom te p%blic acco%nts o! te co-operati8e !actories in England
6
tat I a!ter
ded%cting te manager"s @ages, @ic !orm a part o! te in8ested 8ariable capital m%c te same
as @ages o! oter labo%rers I te pro!it @as iger tan te a8erage pro!it, alto%g at times tey
paid a m%c iger interest tan did pri8ate man%!act%rers0 5e so%rce o! greater pro!its in all
tese cases @as greater economy in te application o! constant capital0 Wat interests %s in tis,
o@e8er, is te !act tat ere te a8erage pro!it B R interest U pro!it o! enterpriseC presents itsel!
act%ally and palpably as a magnit%de @olly independent o! te @ages o! management0 $ince te
pro!it @as iger ere tan a8erage pro!it, te pro!it o! enterprise @as also iger tan %s%al0
5e same sit%ation is obser8ed in relation to some capitalist stock companies, s%c as Hoint-stock
banks0 5e 'ondon and Westminster Aank paid an ann%al di8idend o! 3=T in 1863, @ile te
(nion Aank o! 'ondon and oters paid 1+T0 ?side !rom te directors" salary te interest paid !or
deposits is ere ded%cted !rom gross pro!it0 5e ig pro!it is to be explained ere by te
moderate proportion o! paid-in capital to deposits0 For instance, in te case o! te 'ondon and
Westminster Aank, in 1863: paid-in capital, V1,===,===# deposits, V12,+2=,<>+0 ?s !or te (nion
Aank o! 'ondon, in 1863: paid-in capital, V6==,===# deposits, V1<,382,1>30
,ro!it o! enterprise and @ages o! s%per8ision, or management, @ere con!%sed originally d%e to
te antagonistic !orm ass%med in respect to interest by te s%rpl%s o! pro!it0 5is @as !%rter
promoted by te apologetic aim o! representing pro!it not as a s%rpl%s-8al%e deri8ed !rom %npaid
labo%r, b%t as te capitalist"s @ages !or @ork per!ormed by im0 5is @as met on te part o!
socialists by a demand to red%ce pro!it act%ally to @at it pretended to be teoretically, namely,
mere @ages o! s%per8ision0 ?nd tis demand @as all te more obnoxio%s to teoretical
embellisment, te more tese @ages o! s%per8ision, like any oter @age, !o%nd teir de!inite
le8el and de!inite market-price, on te one and, @it te de8elopment o! a n%mero%s class o!
ind%strial and commercial managers,
>
and te more tey !ell, on te oter, like all @ages !or
skilled labo%r, @it te general de8elopment @ic red%ces te cost o! prod%ction o! specially
trained labo%r-po@er0
8
Wit te de8elopment o! co-operation on te part o! te labo%rers, and o!
stock enterprises on te part o! te bo%rgeoisie, e8en te last pretext !or te con!%sion o! pro!it o!
enterprise and @ages o! management @as remo8ed, and pro!it appeared also in practice as it
%ndeniably appeared in teory, as mere s%rpl%s-8al%e, a 8al%e !or @ic no eD%i8alent @as paid,
as realised %npaid labo%r0 &t @as ten seen tat te !%nctioning capitalist really exploits labo%r,
and tat te !r%it o! is exploitation, @en @orking @it borro@ed capital, @as di8ided into
interest and pro!it o! enterprise, a s%rpl%s o! pro!it o8er interest0
3n te basis o! capitalist prod%ction a ne@ s@indle de8elops in stock enterprises @it respect to
@ages o! management, in tat boards o! n%mero%s managers or directors are placed abo8e te
act%al director, !or @om s%per8ision and management ser8e only as a pretext to pl%nder te
stockolders and amass @ealt0 4ery c%rio%s details concerning tis are to be !o%nd in 4he City
<+> ;apter JJ&&&
or the &hysiology of ,ondon GusinessP with S-etches on Change, and the Coffee (ouses, 'ondon,
182+0
KWat bankers and mercants gain by te direction o!
eigt or nine di!!erent companies, may be seen !rom
te !ollo@ing ill%stration: 5e pri8ate balance seet o!
Mr0 5imoty ?braam ;%rtis, presented to te ;o%rt
o! Aankr%ptcy @en tat gentleman !ailed, exibited a
sample o! te income netted !rom directorsip 000
bet@een V8== and V*== a year0 Mr0 ;%rtis a8ing
been associated @it te ;o%rts o! te Aank o!
England, and te East &ndia 6o%se, it @as considered
D%ite a pl%m !or a p%blic company to acD%ire is
ser8ices in te boardroomL Bpp0 81, 8<C0
5e rem%neration o! te directors o! s%c companies !or eac @eekly meeting is at least one
g%inea0 5e proceedings o! te ;o%rt o! Aankr%ptcy so@ tat tese @ages o! s%per8ision @ere,
as a r%le, in8ersely proportional to te act%al s%per8ision per!ormed by tese nominal directors0
Chapter 24. Externalization of the Relations of
Capital in the Form of Interest-Bearing
Capital
5e relations o! capital ass%me teir most externalised and most !etis-like !orm in interest-
bearing capital0 We a8e ere M I M", money creating more money, sel!-expanding 8al%e,
@ito%t te process tat e!!ect%ates tese t@o extremes0 &n mercant"s capital, M I ; I M", tere
is at least te general !orm o! te capitalistic mo8ement, alto%g it con!ines itsel! solely to te
spere o! circ%lation, so tat pro!it appears merely as pro!it deri8ed !rom alienation# b%t it is at
least seen to be te prod%ct o! a social relation, not te prod%ct o! a mere thing. 5e !orm o!
mercant"s capital at least presents a process, a %nity o! opposing pases, a mo8ement tat breaks
%p into t@o opposite actions I te p%rcase and te sale o! commodities0 5is is obliterated in M
I M", te !orm o! interest-bearing capital0 For instance, i! V1,=== are loaned o%t by a capitalist at a
rate o! interest o! +T, te 8al%e o! V1,=== as a capital !or one year R ; U ;i", @ere ; is te
capital and i" te rate o! interest0 6ence, +T R +N1== R 1N<=, and 1,=== U 1,=== \ 1N<= R V1,=+=0
5e 8al%e o! V1,=== as capital R V1,=+=, i.e., capital is not a simple magnit%de0 &t is a relationship
o! magnit%des, a relationsip o! te principal s%m as a gi8en 8al%e to itsel! as a sel!-expanding
8al%e, as a principal s%m @ic as prod%ced a s%rpl%s-8al%e0 ?nd capital as s%c, as @e a8e
seen, ass%mes tis !orm o! a directly sel!-expanding 8al%e !or all acti8e capitalists, @eter tey
operate on teir o@n or borro@ed capital0
M I M"0 We a8e ere te original starting-point o! capital, money in te !orm%la M I ; I M"
red%ced to its t@o extremes M I M", in @ic M" R M U M, money creating more money0 &t is
te primary and general !orm%la o! capital red%ced to a meaningless condensation0 &t is ready
capital, a %nity o! te process o! prod%ction and te process o! circ%lation, and ence capital
yielding a de!inite s%rpl%s-8al%e in a partic%lar period o! time0 &n te !orm o! interest-bearing
capital tis appears directly, %nassisted by te processes o! prod%ction and circ%lation0 ;apital
appears as a mysterio%s and sel!-creating so%rce o! interest I te so%rce o! its o@n increase0 5e
thing Bmoney, commodity, 8al%eC is no@ capital e8en as a mere ting, and capital appears as a
mere ting0 5e res%lt o! te entire process o! reprod%ction appears as a property inerent in te
ting itsel!0 &t depends on te o@ner o! te money, i.e., o! te commodity in its contin%ally
excangeable !orm, @eter e @ants to spend it as money or loan it o%t as capital0 &n interest-
bearing capital, tere!ore, tis a%tomatic !etis, sel!-expanding 8al%e, money generating money,
are bro%gt o%t in teir p%re state and in tis !orm it no longer bears te birt-marks o! its origin0
5e social relation is cons%mmated in te relation o! a ting, o! money, to itsel!0 &nstead o! te
act%al trans!ormation o! money into capital, @e see ere only !orm @ito%t content0 ?s in te case
o! labo%r-po@er, te %se-8al%e o! money ere is its capacity o! creating 8al%e I a 8al%e greater
tan it contains0 Money as money is potentially sel!-expanding 8al%e and is loaned o%t as s%c I
@ic is te !orm o! sale !or tis sing%lar commodity0 &t becomes a property o! money to generate
8al%e and yield interest, m%c as it is an attrib%te o! pear-trees to bear pears0 ?nd te money-
lender sells is money as H%st s%c an interest-bearing ting0 A%t tat is not all0 5e act%ally
!%nctioning capital, as @e a8e seen, presents itsel! in s%c a ligt, tat it seems to yield interest
not as a !%nctioning capital, b%t as capital in itsel!, as money-capital0
<+* ;apter JJ&4
5is, too, becomes distorted0 Wile interest is only a portion o! te pro!it, i.e., o! te s%rpl%s-
8al%e, @ic te !%nctioning capitalist sD%eeEes o%t o! te labo%rer, it appears no@, on te
contrary, as to%g interest @ere te typical prod%ct o! capital, te primary matter, and pro!it, in
te sape o! pro!it o! enterprise, @ere a mere accessory and by-prod%ct o! te process o!
reprod%ction0 5%s @e get te !etis !orm o! capital and te conception o! !etis capital0 &n M I
M" @e a8e te meaningless !orm o! capital, te per8ersion and obHecti!ication o! prod%ction
relations in teir igest degree, te interest-bearing !orm, te simple !orm o! capital, in @ic it
antecedes its o@n process o! reprod%ction0 &t is te capacity o! money, or o! a commodity, to
expand its o@n 8al%e independently o! reprod%ction I @ic is a mysti!ication o! capital in its
most !lagrant !orm0
For 8%lgar political economy, @ic seeks to represent capital as an independent so%rce o! 8al%e,
o! 8al%e creation, tis !orm is nat%rally a 8eritable !ind, a !orm in @ic te so%rce o! pro!it is no
longer discernible, and in @ic te res%lt o! te capitalist process o! prod%ction I di8orced !rom
te process I acD%ires an independent existence0
&t is not %ntil capital is money-capital tat it becomes a commodity, @ose capacity !or sel!-
expansion as a de!inite price D%oted e8ery time in e8ery pre8ailing rate o! interest0
?s interest-bearing capital, and partic%larly in its direct !orm o! interest-bearing money-capital
Bte oter !orms o! interest-bearing capital, @ic do not concern %s ere, are deri8ati8es o! tis
!orm and pres%ppose its existenceC, capital ass%mes its p%re !etis !orm, M I M" being te s%bHect,
te saleable ting0'irstly, tro%g its contin%al existence as money, a !orm, in @ic all its
speci!ic attrib%tes are obliterated and its real elements in8isible0 For money is precisely tat !orm
in @ic te distincti8e !eat%res o! commodities as %se-8al%es are obsc%red, and ence also te
distincti8e !eat%res o! te ind%strial capitals @ic consist o! tese commodities and conditions o!
teir prod%ction0 &t is tat !orm, in @ic 8al%e I in tis case capital I exists as an independent
excange-8al%e0 &n te reprod%ction process o! capital, te money-!orm is b%t transient I a mere
point o! transit0 A%t in te money-market capital al@ays exists in tis !orm0 Secondly, te s%rpl%s-
8al%e prod%ced by it, ere again in te !orm o! money, appears as an inerent part o! it0 ?s te
gro@ing process is to trees, so generating money BC appears innate in capital in its !orm o!
money-capital0
&n interest-bearing capital te mo8ement o! capital is contracted0 5e inter8ening process is
omitted0 &n tis @ay, a capital R 1,=== is !ixed as a ting, @ic in itsel! R 1,2==, and @ic is
trans!ormed a!ter a certain period into 1,1== H%st as @ine stored in a cellar impro8es its %se-8al%e
a!ter a certain period0 ;apital is no@ a ting, b%t as a ting it is capital0 Money is no@ pregnant0
/:oete, 'aust, ,art &, $cene +0 I 0d1 ?s soon as it is loaned o%t, or in8ested in te reprod%ction
process Binasm%c as it yields interest to te !%nctioning capitalist as its o@ner, separate !rom
pro!it o! enterpriseC, interest on it gro@s, no matter @eter it is a@ake or asleep, is at ome or
abroad, by day or by nigt0 5%s interest-bearing money-capital Band all capital is money-capital
in terms o! its 8al%e, or is considered as te expression o! money-capitalC !%l!ils te most !er8ent
@is o! te oarder0
&t is tis ingro@n existence o! interest in money-capital as in a ting Btis is o@ te prod%ction o!
s%rpl%s-8al%e tro%g capital appears ereC, @ic occ%pies '%ter"s attention so toro%gly in
is nai8e onsla%gt against %s%ry0 ?!ter demonstrating tat interest may be demanded i! te
!ail%re to repay a loan on a de!inite date to a lender @o imsel! reD%ired it to make some
payment, ca%sed a loss to im, or res%lted in is missing an opport%nity to make a pro!it on a
bargain, !or instance, in b%ying a garden, '%ter contin%es:
K-o@ tat & a8e loaned yo% tem B1== g%ldenC, yo%
ca%se me a do%ble loss d%e to my not being able to
pay on te one and nor b%y on te oter, so tat &
<6= ;apter JJ&4
a8e to lose on bot sides, and tis is called duple
interesse, damni emergentis et lucri cessantis.... 3n
earing tat Pon s%stained losses on is loan o! 1==
g%lden and demands H%st damages, tey r%s in and
carge do%ble on e8ery 1== g%lden, s%c do%ble
reimb%rsement, namely, !or te loss d%e to non-
payment and to inability to make a pro!it on a bargain,
H%st as to%g tese 1== g%lden had the double loss
grown on to them, so tat @ene8er tey a8e 1==
g%lden, tey loan tem o%t and carge !or t@o losses,
@ic tey a8e not at all s%stained000 5ere!ore yo%
are a %s%rer, @o takes damages o%t o! is neigbo%r"s
money !or an imaginary loss tat yo% did not s%stain
at all, and @ic yo% can neiter pro8e nor calc%late0
5is sort o! loss is called by te H%rists non verum,
sed phantasticum interesse0 &t is a loss @ic eac
conH%res %p !or imsel!000 &t @ill not do to say,
tere!ore, tat tere co%ld a8e been losses beca%se &
co%ld not a8e been able to pay or b%y0 Else it @o%ld
mean e contingente necessarium, @ic is making
someting o%t o! a ting tat is not, and a ting tat is
%ncertain into a ting tat is absol%tely s%re0 Wo%ld
not s%c %s%ry de8o%r te @orld in a !e@ yearsQ 000 &!
an %nappy accident be!alls im against is @ill, and
e m%st reco8er !rom it, e may demand damages !or
it, b%t it is di!!erent in trade and H%st te re8erse0
5ere tey sceme to pro!it at te expense o! teir
needy neigbo%rs, o@ to amass @ealt and get ric,
to be laEy and idle and li8e in l%x%ry on te labo%r o!
oters, @ito%t any care, danger, and loss0 5o sit by
te sto8e and let my 1== g%lden gater @ealt !or me
in te co%ntry and yet keep tem in my pocket,
beca%se tey are only loaned, @ito%t any danger or
risk# my !riend, @o @o%ld not like tatQL BMartin
'%ter, +n die &farherrn wider den "ucher #u
predigen, etc., Wittenberg, 1+2=0C
<61 ;apter JJ&4
5e conception o! capital as a sel!-reprod%cing and sel!-expanding 8al%e, lasting and gro@ing
eternally by 8irt%e o! its innate properties I ence by 8irt%e o! te idden D%ality o! scolasticists
I as led to te !ab%lo%s !ancies o! 7r0 ,rice, @ic o%tdo by !ar te !antasies o! te alcemists#
!ancies, in @ic ,itt belie8ed in all earnest, and @ic e %sed as pillars o! is !inancial
administration in is la@s concerning te sinking !%nd0
KMoney bearing compo%nd interest increases at !irst
slo@ly0 A%t, te rate o! increase being contin%ally
accelerated, it becomes in some time so rapid, as to
mock all te po@ers o! te imagination0 3ne penny,
p%t o%t at o%r $a8io%r"s birt to + per cent compo%nd
interest, @o%ld, be!ore tis time, a8e increased to a
greater s%m, tan @o%ld be contained in a %ndred
and !i!ty millions o! earts, all solid gold0 A%t i! p%t
o%t to simple interest, it @o%ld, in te same time, a8e
amo%nted to no more tan se8en sillings and !o%r
pence al!-penny0 3%r go8ernment as iterto
cosen to impro8e money in te last, rater tan te
!irst o! tese @ays0L
i

6is !ancy !lies still iger in is :bservations on 9eversionary &ayments, etc., 'ondon, 1>><0
5ere @e read:
K? silling p%t o%t to 6T compo%nd interest at o%r
$a8io%r"s birtL Bpres%mably in te 5emple o!
Per%salemC K@o%ld 000 a8e increased to a greater s%m
tan te @ole solar system co%ld old, s%pposing it a
spere eD%al in diameter to te diameter o! $at%rn"s
orbit0L K? state need ne8er tere!ore be %nder any
di!!ic%lties# !or @it te smallest sa8ings it may in as
little time as its interest can reD%ire pay o!! te largest
debtsL Bpp0 J&&&, J&4C0
Wat a pretty teoretical introd%ction to te national debt o! EnglandS
,rice @as simply daEEled by te gargant%an dimensions obtained in a geometrical progression0
$ince e took no note o! te conditions o! reprod%ction and labo%r, and regarded capital as a sel!-
reg%lating a%tomaton, as a mere n%mber tat increases itsel! H%st as Malt%s /+n 0ssay on the
&rinciple of &opulation, 'ondon, 1>*8, pp0 <+-<60 I 0d1 did @it respect to pop%lation in is
geometrical progression, e @as str%ck by te to%gt tat e ad !o%nd te la@ o! its gro@t in
te !orm%la s R cB1 U iCn, in @ic s R te s%m o! capital U compo%nd interest, c R ad8anced
capital, i R rate o! interest Bexpressed in aliD%ot parts o! 1==C and n stands !or te n%mber o! years
in @ic tis process takes place0
,itt takes 7r0 ,rice"s mysti!ication D%ite serio%sly0 &n 1>86 te 6o%se o! ;ommons ad resol8ed
to raise V1 million !or te p%blic @eal0 ?ccording to ,rice, in @om ,itt belie8ed, tere @as, o!
<6< ;apter JJ&4
co%rse, no better @ay tan to tax te people, so as to Kacc%m%lateL tis s%m a!ter raising it, and
t%s to spirit a@ay te national debt tro%g te mystery o! compo%nd interest0 5e abo8e
resol%tion o! te 6o%se o! ;ommons @as soon !ollo@ed %p by ,itt @it a la@ @ic ordered te
acc%m%lation o! V<+=,===,
K%ntil, @it te expired ann%ities, te !%nd so%ld
a8e gro@n to V2,===,=== ann%ally0L B?ct <6, :eorge
&&&, ;ap0 3l0C /K?n ?ct !or 8esting certain s%ms in
;ommissioners, at te End o! e8ery M%arter o! a .ear,
to be by tem applied to te )ed%ction o! te -ational
7ebtL B?nno <6 :eorgii &&&, )egis, cap0 31C0 I 0d01
&n is speec o! 1>*<, in @ic ,itt proposed tat te amo%nt de8oted to te sinking !%nd be
increased, e mentioned macines, credit, etc0, among te ca%ses o! England"s commercial
s%premacy, b%t as
Kte most @ide-spread and end%ring ca%se, tat o!
acc%m%lation0 5is principle, e said, @as completely
de8eloped in te @ork o! $mit, tat geni%s 000 and
tis acc%m%lation, e contin%ed, @as accomplised by
laying aside at least a portion o! te ann%al pro!it !or
te p%rpose o! increasing te principal, @ic @as to
be employed in te same manner te !ollo@ing year,
and @ic t%s yielded a contin%al pro!it0L
Wit 7r0 ,rice"s aid ,itt t%s con8erts $mit"s teory o! acc%m%lation into enricment o! a nation
by means o! acc%m%lating debts, and t%s arri8es at te pleasant progression o! an in!inity o!
loans I loans to pay loans0
&t ad already been noted by Posia ;ild, te !ater o! modern banking, tat V1== at 1=T @o%ld
prod%ce in >= years by compo%nd interest V1=<,2==0 B4rait7 sur le commerce, etc., par P0 ;ild,
trad%it, etc0, ?msterdam et Aerlin, 1>+2, p0 11+0 Written in 166*0C
6o@ to%gtlessly 7r0 ,rice"s conception is applied by modern economists, is so@n in te
!ollo@ing passage !rom te 0conomist:
K;apital, @it compo%nd interest on e8ery portion o!
capital sa8ed, is so all-engrossing tat all te @ealt
in te @orld !rom @ic income is deri8ed, as long
ago become te interest o! capital000 ?ll rent is no@
te payment o! interest on capital pre8io%sly in8ested
in te land0L B0conomist, P%ly 2*, 18+10C
&n its capacity o! interest-bearing capital, capital claims te o@nersip o! all @ealt @ic can
e8er be prod%ced, and e8eryting it as recei8ed so !ar is b%t an instalment !or its all-engrossing
appetite0 Ay its innate la@s, all s%rpl%s-labo%r @ic te %man race can e8er per!orm belongs to
it0 Moloc0
&n concl%sion, te !ollo@ing odge-podge by te romantic Meller:
<63 ;apter JJ&4
K7r0 ,rice"s immense increase o! compo%nd interest,
or o! te sel!-accelerating !orces o! man, pres%pposes
an %ndi8ided, or %ninterr%pted, %ni!orm application
!or se8eral cent%ries, i! tey are to prod%ce s%c
enormo%s e!!ects0 ?s soon as capital is di8ided, c%t %p
into se8eral independently gro@ing soots, te total
process o! acc%m%lating !orces begins ane@0 -at%re
as distrib%ted o8er a span o! abo%t <= to <+ years te
progression o! energy @ic !alls on an a8erage to te
sare o! e8ery labo%rer BSC0 ?!ter te lapse o! tis time
te labo%rer lea8es is career and m%st trans!er te
capital acc%m%lated by te compo%nd interest o!
labo%r to a ne@ labo%rer, mostly distrib%ting it among
se8eral labo%rers or cildren0 5ese m%st !irst learn to
acti8ate and apply teir sare o! capital, be!ore tey
can dra@ any act%al compo%nd interest on it0
F%rtermore, an enormo%s D%antity o! capital gained
by ci8il society e8en in te most restless comm%nities,
is grad%ally acc%m%lated o8er many years and not
employed !or any immediate expansion o! labo%r0
&nstead, as soon as an appreciable s%m is gatered
togeter, it is trans!erred to anoter indi8id%al, a
labo%rer, bank or state, %nder te ead o! a loan0 ?nd
te recei8er ten sets te capital into act%al motion
and dra@s compo%nd interest on it, so tat e can
easily pledge to pay simple interest to te lender0
Finally, te la@ o! cons%mption, greed, and @aste
opposes tose %ge progressions, in @ic man"s
po@ers and teir prod%cts @o%ld m%ltiply i! te la@
o! prod%ction, or tri!t, @ere alone e!!ecti8e0L B?0
Meller, 0lemente der Staats-unst, &&&, pp0 12>-2*0C
&t is impossible to concoct a more air-raising abs%rdity in so !e@ lines0 'ea8ing aside te droll
con!%sion o! labo%rer and capitalist, 8al%e o! labo%r-po@er and interest on capital, etc0, te
carging o! compo%nd interest is s%pposed to be explained by te !act tat capital is loaned o%t to
bring in compo%nd interest0 5e metod employed by o%r Meller is toro%gly caracteristic o!
te romanticism in all @alks o! li!e0 &t is made %p o! c%rrent preH%dices, skimmed !rom te most
<62 ;apter JJ&4
s%per!icial semblance o! tings0 5is incorrect and trite content so%ld ten be KexaltedL and
rendered s%blime tro%g a mysti!ying mode o! expression0
5e process o! acc%m%lation o! capital may be concei8ed as an acc%m%lation o! compo%nd
interest in te sense tat te portion o! pro!it Bs%rpl%s-8al%eC @ic is recon8erted into capital,
i.e., ser8es to absorb more s%rpl%s-labo%r, may be called interest0 A%t:
1C ?side !rom all incidental inter!erence, a large part o! a8ailable capital is constantly more or
less depreciated in te co%rse o! te reprod%ction process, beca%se te 8al%e o! commodities is
not determined by te labo%r-time originally expended in teir prod%ction, b%t by te labo%r-time
expended in teir reprod%ction, and tis decreases contin%ally o@ing to te de8elopment o! te
social prod%cti8ity o! labo%r0 3n a iger le8el o! social prod%cti8ity, all a8ailable capital
appears, !or tis reason, to be te res%lt o! a relati8ely sort period o! reprod%ction, instead o! a
long process o! acc%m%lation o! capital0
ii

<C ?s demonstrated in ,art &&& o! tis book, te rate o! pro!it decreases in proportion to te
mo%nting acc%m%lation o! capital and te correspondingly increasing prod%cti8ity o! social
labo%r, @ic is expressed precisely in te relati8e and progressi8e decrease o! te 8ariable as
compared to te constant portion o! capital0 5o prod%ce te same rate o! pro!it a!ter te constant
capital set in motion by one labo%rer increases ten-!old, te s%rpl%s labo%r-time @o%ld a8e to
increase ten-!old, and soon te total labo%r-time, and !inally te entire <2 o%rs o! a day, @o%ld
not s%!!ice, e8en i! @olly appropriated by capital0 5e idea tat te rate o! pro!it does not srink
is, o@e8er, te basis o! ,rice"s progression and in general te basis o! Kall-engrossing capital
@it compo%nd interest0L
iii

5e identity o! s%rpl%s-8al%e and s%rpl%s-labo%r imposes a D%alitati8e limit %pon te
acc%m%lation o! capital0 5is consists o! te total wor-ing1day, and te pre8ailing de8elopment o!
te prod%cti8e !orces and o! te pop%lation, @ic limits te n%mber o! sim%ltaneo%sly
exploitable @orking-days0 A%t i! one concei8es o! s%rpl%s-8al%e in te meaningless !orm o!
interest, te limit is merely D%antitati8e and de!ies all !antasy0
-o@, te concept o! capital as a !etis reaces its eigt in interest-bearing capital, being a
conception @ic attrib%tes to te acc%m%lated prod%ct o! labo%r, and at tat in te !ixed !orm o!
money, te inerent secret po@er, as an a%tomaton, o! creating s%rpl%s-8al%e in geometrical
progression, so tat te acc%m%lated prod%ct o! labo%r, as te 0conomist tinks, as long
disco%nted all te @ealt o! te @orld !or all time as belonging to it and rigt!%lly coming to it0
5e prod%ct o! past labo%r, te past labo%r itsel!, is ere pregnant in itsel! @it a portion o!
present or !%t%re li8ing s%rpl%s-labo%r0 We kno@, o@e8er, tat in reality te preser8ation, and to
tat extent also te reprod%ction o! te 8al%e o! prod%cts o! past labo%r is only te res%lt o! teir
contact @it li8ing labo%r# and secondly, tat te domination o! te prod%cts o! past labo%r o8er
li8ing s%rpl%s-labo%r lasts only as long as te relations o! capital, @ic rest on tose partic%lar
social relations in @ic past labo%r independently and o8er@elmingly dominates o8er li8ing
labo%r0
Chapter 25. Credit and Fictitious Capital
?n exa%sti8e analysis o! te credit system and o! te instr%ments @ic it creates !or its o@n %se
Bcredit-money, etc0C lies beyond o%r plan0 We merely @is to d@ell ere %pon a !e@ partic%lar
points, @ic are reD%ired to caracterise te capitalist mode o! prod%ction in general0 We sall
deal only @it commercial and bank credit0 5e connection bet@een te de8elopment o! tis !orm
o! credit and tat o! p%blic credit @ill not be considered ere0
& a8e so@n earlier BA%c &, Kap0 &&&, 3, b /Englis edition: ;0 &&&, 3, b0 I 0d01C o@ te !%nction
o! money as a means o! payment, and tere@it a relation o! creditor and debtor bet@een te
prod%cer and trader o! commodities, de8elop !rom te simple circ%lation o! commodities0 Wit
te de8elopment o! commerce and o! te capitalist mode o! prod%ction, @ic prod%ces solely
@it an eye to circ%lation, tis nat%ral basis o! te credit system is extended, generalised, and
@orked o%t0 Money ser8es ere, by and large, merely as a means o! payment, i.e., commodities
are not sold !or money, b%t !or a @ritten promise to pay !or tem at a certain date0 For bre8ity"s
sake, @e may p%t all tese promissory notes %nder te general ead o! bills o! excange0 $%c
bills o! excange, in teir t%rn, circ%late as means o! payment %ntil te day on @ic tey !all
d%e# and tey !orm te act%al commercial money0 &nasm%c as tey %ltimately ne%tralise one
anoter tro%g te balancing o! claims and debts, tey act absol%tely as money, alto%g tere is
no e8ent%al trans!ormation into act%al money0 P%st as tese m%t%al ad8ances o! prod%cers and
mercants make %p te real !o%ndation o! credit, so does te instr%ment o! teir circ%lation, te
bill o! excange, !orm te basis o! credit-money proper, o! bank-notes, etc0 5ese do not rest
%pon te circ%lation o! money, be it metallic or go8ernment-iss%ed paper money, b%t rater %pon
te circ%lation o! bills o! excange0

W0 'eatam Bbanker o! .orksireC @rites in is ,etters on the Currency, <nd ed0, 'ondon, 182=:
K& !ind, ten, te amo%nt !or te @ole o! te year o!
183* 000 to be V+<8,2*3,82<L Be ass%med tat te
!oreign bills o! excange made %p abo%t one-!i!t o!
te totalC Kand te amo%nt o! bills o%t at one time in
te abo8e year, to be V13<,1<3,26=L Bp0 +6C0 5e bills
o! excange make %p Kone component part greater in
amo%nt tan all te rest p%t togeterL Bp0 3C0 K5is
enormo%s s%perstr%ct%re o! bills o! excange rests BSC
%pon te base !ormed by te amo%nt o! bank-notes
and gold, and @en, by e8ents, tis base becomes too
m%c narro@ed, its solidity and 8ery existence is
endangeredL Bp0 8C0 K&! & estimate te @ole c%rrencyL
Be means o! te bank-notesC
Kand te amo%nt o! te liabilities o! te Aank and
co%ntry bankers, payable on demand, & !ind a s%m o!
<66 ;apter JJ4
1+3 million, @ic, by la@, can be con8erted into
gold 000 and te amo%nt o! gold to meet tis demandL
only 12 million Bp011C0 K5e bills o! excange are
not 000 placed %nder any control, except by pre8enting
te ab%ndance o! money, excessi8e and lo@ rates o!
interest or disco%nt, @ic create a part o! tem, and
enco%rage teir great and dangero%s expansion0 &t is
impossible to decide @at part arises o%t o! real bonQ
fide transactions, s%c as act%al bargain and sale, or
@at part is !ictitio%s and mere accommodation paper,
tat is, @ere one bill o! excange is dra@n to take %p
anoter r%nning, in order to raise a !ictitio%s capital,
by creating so m%c c%rrency0 &n times o! ab%ndance
and ceap money tis & kno@ reaces an enormo%s
amo%ntL
Bpp0 23-22C0 P0W0 AosanD%et, Metallic, &aper and Credit Currency, 'ondon, 182<:
K?n a8erage amo%nt o! payments to te extent o!
%p@ards o! V3,===,=== is settled tro%g te ;learing
6o%se
B@ere te 'ondon bankers excange d%e bills and !iled ceD%esC
e8ery day o! b%siness in te year, and te daily
amo%nt o! money reD%ired !or te p%rpose is little
more tan V<==,===L Bp0 86C0
B&n 188*, te total t%rno8er o! te ;learing 6o%se amo%nted to V>,6180>+ million, @ic, in
ro%gly 3== b%siness days, a8erages V<+Z million daily0 I'. 0.1
KAills o! excange act %ndo%btedly as c%rrency,
independent o! money, inasm%c as tey trans!er
property !rom and to and by endorsementL Bp0 *<C0
K&t may be ass%med tat %pon an a8erage tere are
t@o endorsements %pon e8ery bill in circ%lation,
and 000 eac bill per!orms t@o payments be!ore it
becomes d%e0 (pon tis ass%mption it @o%ld appear,
tat by endorsement alone property canged ands,
by means o! bills o! excange, to te 8al%e o! t@ice
!i8e %ndred and t@enty-eigt million, or
V1,=+6,===,===, being at te rate o! more tan
<6> ;apter JJ4
V3,===,=== per day, in te co%rse o! te year 183*0
We may sa!ely tere!ore concl%de, tat deposits and
bills o! excange togeter, per!orm te !%nctions o!
money, by trans!erring property !rom and and to
and @ito%t te aid o! money, to an extent daily o!
not less tan V18,===,===L Bp0 *3C0
5ooke says te !ollo@ing abo%t credit in general:
K;redit, in its most simple expression, is te
con!idence @ic, @ell, or ill-!o%nded, leads a person
to entr%st anoter @it a certain amo%nt o! capital, in
money, or in goods comp%ted at a 8al%e in money
agreed %pon, and in eac case payable at te
expiration o! a !ixed term0 &n te case @ere te
capital is lent in money, tat is, @eter in bank-
notes, or in a cas credit, or in an order %pon a
correspondent, an addition !or te %se o! te capital o!
so m%c %pon e8ery V1== is made to te amo%nt to be
repaid0 &n te case o! goods te 8al%e o! @ic is
agreed in terms o! money, constit%ting a sale, te s%m
stip%lated to be repaid incl%des a consideration !or te
%se o! te capital and !or te risk, till te expiration o!
te period !ixed !or payment0 Written obligations o!
payment at !ixed dates mostly accompany tese
credits, and te obligations or promissory notes a!ter
date being trans!erable, !orm te means by @ic te
lenders, i! tey a8e occasion !or te %se o! teir
capital, in te sape @eter o! money or goods,
be!ore te expiration o! te term o! te bills tey old,
are mostly enabled to borro@ or to b%y on lo@er
terms, by a8ing teir o@n credit strengtened by te
names on te bills in addition to teir o@n0L )Dn3uiry
into the Currency &rinciple, p0 8>0C
;0 ;oD%elin, 7% ;rFdit et des AanD%es dans '"&nd%strie, )e8%e des 7e%x Mondes, 182<, 5ome
31:
K&n e8ery co%ntry te maHority o! credit transactions
takes place @itin te circle o! ind%strial relations000
<68 ;apter JJ4
5e prod%cer o! te ra@ material ad8ances it to te
processing man%!act%rer, and recei8es !rom te latter
a promise to pay on a certain day0 5e man%!act%rer,
a8ing completed is sare o! te @ork, in is t%rn
ad8ances is prod%ct on similar terms to anoter
man%!act%rer, @o as to process it !%rter, and in tis
@ay credit stretces on and on, !rom one to te oter,
rigt %p to te cons%mer0 5e @olesale dealer gi8es
te retailer commodities on credit, @ile recei8ing
credit !rom a man%!act%rer or commission agent0 ?ll
borro@ @it one and and lend @it te oter,
sometimes money, b%t more !reD%ently prod%cts0 &n
tis manner an incessant excange o! ad8ances, @ic
combine and intersect in all directions, takes place in
ind%strial relations0 5e de8elopment o! credit
consists precisely in tis m%ltiplication and gro@t o!
m%t%al ad8ances, and terein is te real seat o! its
po@er0L
5e oter side o! te credit system is connected @it te de8elopment o! money-dealing, @ic,
o! co%rse, keeps step %nder capitalist prod%ction @it te de8elopment o! dealing in commodity0
We a8e seen in te preceding part B;ap0 J&JC o@ te care o! te reser8e !%nds o!
b%sinessmen, te tecnical operations o! recei8ing and disb%rsing money, o! international
payments, and t%s o! te b%llion trade, are concentrated in te ands o! te money-dealers0 5e
oter side o! te credit system I te management o! interest-bearing capital, or money-capital,
de8elops alongside tis money-dealing as a special !%nction o! te money-dealers0 Aorro@ing and
lending money becomes teir partic%lar b%siness0 5ey act as middlemen bet@een te act%al
lender and te borro@er o! money-capital0 :enerally speaking, tis aspect o! te banking b%siness
consists o! concentrating large amo%nts o! te loanable money-capital in te bankers" ands, so
tat, in place o! te indi8id%al money-lender, te bankers con!ront te ind%strial capitalists and
commercial capitalists as representati8es o! all moneylenders0 5ey become te general managers
o! money-capital0 3n te oter and by borro@ing !or te entire @orld o! commerce, tey
concentrate all te borro@ers 8is-O-8is all te lenders0 ? bank represents a centralisation o!
money-capital, o! te lenders, on te one and, and on te oter a centralisation o! te borro@ers0
&ts pro!it is generally made by borro@ing at a lo@er rate o! interest tan it recei8es in loaning0
5e loanable capital @ic te banks a8e at teir disposal streams to tem in 8ario%s @ays0 &n
te !irst place, being te casiers o! te ind%strial capitalists, all te money-capital @ic e8ery
prod%cer and mercant m%st a8e as a reser8e !%nd, or recei8es in payment, is concentrated in
teir ands0 5ese !%nds are t%s con8erted into loanable money-capital0 &n tis @ay, te reser8e
!%nd o! te commercial @orld, beca%se it is concentrated in a common treas%ry, is red%ced to its
necessary minim%m, and a portion o! te money-capital @ic @o%ld oter@ise a8e to lie
sl%mbering as a reser8e !%nd, is loaned o%t and ser8es as interest-bearing capital0 &n te second
place, te loanable capital o! te banks is !ormed by te deposits o! money-capitalists @o entr%st
tem @it te b%siness o! loaning tem o%t0 F%rtermore, @it te de8elopment o! te banking
<6* ;apter JJ4
system, and partic%larly as soon as banks came to pay interest on deposits, money sa8ings and te
temporarily idle money o! all classes @ere deposited @it tem0 $mall amo%nts, eac in itsel!
incapable o! acting in te capacity o! money-capital, merge togeter into large masses and t%s
!orm a money po@er0 5is aggregation o! small amo%nts m%st be disting%ised as a speci!ic
!%nction o! te banking system !rom its go-bet@een acti8ities bet@een te money-capitalists
proper and te borro@ers0 &n te !inal analysis, te re8en%es, @ic are %s%ally b%t grad%ally
cons%med, are also deposited @it te banks0
5e loan is made B@e re!er ere strictly to commercial creditC by disco%nting bills o! excange I
by con8erting bills o! excange into money be!ore tey come d%e I and by ad8ances o! 8ario%s
kinds: direct ad8ances on personal credit, loans against sec%rities, s%c as interest-bearing paper,
go8ernment paper, stocks o! all sorts, and, notably, o8erdra!ts against bills o! lading, dock
@arrants, and oter certi!ied titles o! o@nersip o! commodities and o8erdra@ing deposits, etc0
5e credit gi8en by a banker may ass%me 8ario%s !orms, s%c as bills o! excange on oter
banks, ceD%es on tem, credit acco%nts o! te same kind, and !inally, i! te bank is entitled to
iss%e notes I bank-notes o! te bank itsel!0 ? bank-note is noting b%t a dra!t %pon a banker,
payable at any time to te bearer, and gi8en by te banker in place o! pri8ate dra!ts0 5is last !orm
o! credit appears partic%larly important and striking to te layman, !irst, beca%se tis !orm o!
credit-money breaks o%t o! te con!ines o! mere commercial circ%lation into general circ%lation,
and ser8es tere as money# and beca%se in most co%ntries te principal banks iss%ing notes, being
a pec%liar mixt%re o! national and pri8ate banks, act%ally a8e te national credit to back tem,
and teir notes are more or less legal tender# beca%se it is apparent ere tat te banker deals in
credit itsel!, a bank-note being merely a circ%lating token o! credit0 A%t te banker also as to do
@it credit in all its oter !orms, e8en @en e ad8ances te cas money deposited @it im0 &n
!act, a bank-note simply represents te coin o! @olesale trade, and it is al@ays te deposit @ic
carries te most @eigt @it banks0 5e best proo! o! tis is !%rnised by te $cottis banks0
$pecial credit instit%tions, like special !orms o! banks, need no !%rter consideration !or o%r
p%rpose0
K5e b%siness o! bankers 000 may be di8ided into t@o
brances000 3ne branc o! te banker"s b%siness is to
collect capital !rom tose @o a8e not immediate
employment !or it, and to distrib%te or trans!er it to
tose @o a8e0 5e oter branc is to recei8e
deposits o! te incomes o! teir c%stomers, and to pay
o%t te amo%nt, as it is @anted !or expendit%re by te
latter in te obHects o! teir cons%mption000 5e !ormer
being a circ%lation o! capital, te latter o! c%rrency000 K
I K3ne relates to te concentration o! capital on te
one and and te distrib%tion o! it on te oter, te
oter is employed in administering te circ%lation !or
local p%rposes o! te district0L 5ooke, Dn3uiry into the
Currency &rinciple, pp0 36, 3>0
We sall re8ert to tis passage later, in ;apter JJ4&&&0
<>= ;apter JJ4
)eports o! ;ommittees, 4ol0 4&&&0 ;ommercial 7istress, 4ol0 11, ,art &, 182>-28, Min%tes o!
E8idence0 BF%rter D%oted as ;ommercial 7istress, 182>-280C &n te !orties, @en disco%nting
bills o! excange in 'ondon, <1-day dra!ts o! one bank on anoter @ere o!ten accepted in lie% o!
banknotes0 B5estimony o! P0 ,ease, co%ntry banker, -os0 2638 and 262+0C ?ccording to te same
report, bankers @ere in te abit o! gi8ing s%c bills o! excange reg%larly in payment to teir
c%stomers @ene8er money @as tigt0 &! te recei8er @anted bank-notes, e ad to redisco%nt tis
bill0 For te banks tis amo%nted to a pri8ilege o! coining money0 Messrs0 Pones, 'loyd and ;o0
made payments in tis @ay K!rom time immemorial,L as soon as money @as scarce and te rate o!
interest rose abo8e +T0 5e c%stomer @as glad to get s%c banker"s bills beca%se bills !rom Pones,
'oyd and ;o0 @ere easier disco%nted tan is o@n# besides, tey o!ten passed tro%g t@enty to
tirty ands0 BDbid., -os0 *=1 to *=2, *=+, **<0C
?ll tese !orms ser8e to make te payments claim trans!erable0
K5ere is scarcely any sape into @ic credit can be
cast, in @ic it @ill not at times be called to per!orm
te !%nctions o! money# and @eter tat sape be a
bank-note, or a bill o! excange, or a banker"s ceD%e,
te process is in e8ery essential partic%lar te same,
and te res%lt is te same0L F%llarton, :n the
9egulation of Currencies, <nd ed0, 'ondon, 182+, p0
380 I KAank-notes are te small cange o! creditL Bp0
+1C0
5e !ollo@ing !rom P0 W0 :ilbart"s 4he (istory and &rinciple of Gan-ing, 'ondon, 1832:
K5e trading capital o! a bank may be di8ided into
t@o parts: te in8ested capital, and te borro@ed
banking capitalL Bp0 11>C0 K5ere are tree @ays o!
raising a banking or borro@ed capital0 First, by
recei8ing# secondly, by te iss%ing o! notes# tirdly,
by te dra@ing o! bills0 &! a person @ill lend me V1==
!or noting, and & lend tat V1== to anoter person at
!o%r per cent interest, ten, in te co%rse o! a year, &
sall gain V2 by te transaction0 ?gain, i! a person
@ill take my "promise to pay"K BK& promise to payL is
te %s%al !orm%la !or Englis bank-notesC Kand bring
it back to me at te end o! te year, and pay me !o%r
per cent !or it, H%st te same as to%g & ad lent im
1== so8ereigns, ten & sall gain V2 by tat
transaction# and again, i! a person in a co%ntry to@n
brings me V1== on condition tat, t@enty-one days
a!ter@ards, & sall pay te same amo%nt to a person in
<>1 ;apter JJ4
'ondon, ten @ate8er interest & can make o! te
money d%ring te t@enty-one days, @ill be my pro!it0
5is is a !air representation o! te operations o!
banking, and o! te @ay in @ic a banking capital is
created by means o! deposits, notes, and billsL Bp0
11>C0 K5e pro!its o! a banker are generally in
proportion to te amo%nt o! is banking or borro@ed
capital000 5o ascertain te real pro!it o! a bank, te
interest %pon te in8ested capital so%ld be ded%cted
!rom te gross pro!it, and @at remains is te banking
pro!itL Bp0 118C0 /4he advances of ban-ers to their
customers are made with other people5s money/ Bp0
126C0 K,recisely tose bankers @o do not iss%e notes,
create a banking capital by te disco%nting o! bills0
5ey render teir disco%nts s%bser8ient to te increase
o! teir deposits0 5e 'ondon bankers @ill not
disco%nt except !or tose o%ses @o a8e deposit
acco%nts @it temL Bp0 11*C0 K? party @o as ad
bills disco%nted, and as paid interest on te @ole
amo%nt, m%st lea8e some portion o! tat amo%nt in
te ands o! te banker @ito%t interest0 Ay tis
means te banker obtains more tan te c%rrent rate o!
interest on te money act%ally ad8anced, and raises a
banking capital to te amo%nt o! te balance le!t in is
andsL Bpp0 11*- <=C0
Economising on reser8e !%nds, deposits, ceD%es:
KAanks o! deposit ser8e to economise te %se o! te
circ%lating medi%m0 5is is done %pon te principle o!
trans!er o! titles0000 5%s it is tat banks o! deposit 000
are enabled to settle a large amo%nt o! transactions
@it a small amo%nt o! money0 5e money t%s
liberated, is employed by te banker in making
ad8ances, by disco%nt or oter@ise, to is c%stomers0
6ence te principle o! trans!er gi8es additional
e!!iciency to te deposit system000L Bp0 1<3C0 K&t
<>< ;apter JJ4
matters not @eter te t@o parties, @o a8e
dealings @it eac oter, keep teir acco%nts @it te
same banker or @it di!!erent bankers# !or, as te
bankers excange teir ceD%es @it eac oter at te
clearing o%se0000 5e deposit system migt t%s, by
means o! trans!ers, be carried to s%c an extent as
@olly to s%persede te %se o! a metallic c%rrency0
Were e8ery man to keep a deposit acco%nt at a bank,
and make all is payments by ceD%es, money migt
be s%perseded, and ceD%es become te sole
circ%lating medi%m0 &n tis case, o@e8er, it m%st be
s%pposed tat te banker as te money in is ands,
or te ceD%es @o%ld a8e no 8al%eL Bp0 1<2C0
;entralisation o! local transactions in te ands o! te banks is e!!ected 1C tro%g branc banks0
;o%ntry banks a8e branc establisments in te smaller to@ns o! teir district, and 'ondon
banks in di!!erent districts o! te city0 <C 5ro%g agencies0
KEac co%ntry banker employs a 'ondon agent to pay is notes or bills 000 and to recei8e s%ms
tat may be lodged by parties residing in 'ondon !or te %se o! parties residing in te co%ntryL
Bp01<>C0 KEac banker accepts te notes o! oters, b%t does not reiss%e tem0 &n all larger cities
tey come togeter once or t@ice a @eek and excange teir notes0 5e balance is paid by a dra!t
on 'ondonL Bp0132C0 K&t is te obHect o! banking to gi8e !acilities to trade, and @ate8er gi8es
!acilities to trade gi8es !acilities to spec%lation0 5rade and spec%lation are in some cases so nearly
allied, tat it is impossible to say at @at precise point trade ends and spec%lation begins0000
Were8er tere are banks, capital is more readily obtained, and at a ceaper rate0 5e ceapness
o! capital gi8es !acilities to spec%lation, H%st in te same @ay as te ceapness o! bee! and o! beer
gi8es !acilities to gl%ttony and dr%nkennessL Bpp0 13>, 238C0 K?s banks o! circ%lation al@ays iss%e
teir o@n notes, it @o%ld seem tat teir disco%nting b%siness @as carried on excl%si8ely @it
tis last description o! capital, b%t it is not so0 &t is 8ery possible !or a banker to iss%e is o@n
notes !or all te bills e disco%nts, and yet nine-tents o! te bills in is possession sall represent
real capital0 For, alto%g in te !irst instance, te banker"s notes are gi8en !or te bill, yet tese
notes may not stay in circ%lation %ntil te bill becomes d%e I te bill may a8e tree monts to
r%n, te notes may ret%rn in tree daysL Bp0 1><C0 K5e o8erdra@ing o! a cas credit acco%nt is a
reg%lar matter o! b%siness# it is, in !act, te p%rpose !or @ic te cas credit as been granted0000
;as credits are granted not only %pon personal sec%rity, b%t also %pon te sec%rity o! te ,%blic
F%ndsL Bpp0 1>2, 1>+C0 K;apital ad8anced, by @ay o! loan, on te sec%rities o! mercandise,
@o%ld prod%ce te same e!!ects as i! ad8anced in te disco%nting o! bills0 &! a party borro@s 12==
on te sec%rity o! is mercandise, it is te same as to%g e ad sold is mercandise !or a
81== bill, and got it disco%nted @it te banker0 Ay obtaining tis ad8ance e is enabled to old
o8er tis mercandise !or a better market, and a8oids a sacri!ice @ic, oter@ise, be migt be
ind%ced to make, in order to raise te money !or %rgent p%rposesL Bpp0 18=-81C0
5e ;%rrency 5eory )e8ie@ed, etc0, pp0 6<-63:
K&t is %nD%estionably tr%e tat te V1,=== @ic yo%
deposit at ? today may be reiss%ed tomorro@, and
<>3 ;apter JJ4
!orm a deposit at A0 5e day a!ter tat, reiss%ed !rom
A, it may !orm a deposit at ; 000 and so on to
in!init%de# and tat te same V1,=== in money may
t%s, by a s%ccession o! trans!ers, m%ltiply itsel! into a
s%m o! deposits absol%tely inde!inite0 &t is possible,
tere!ore, tat nine1tenths of all the deposits in the
Nnited Hingdom may have no eistence beyond their
record in the boo-s of the ban-ers @o are
respecti8ely acco%ntable !or tem 000 5%s in $cotland,
!or instance, c%rrency Bmostly paper money at tatC
as ne8er exceeded 13 million, te deposits in te
banks are estimated at V<> million0000 (nless a r%n on
te banks be made, te same V1,=== @o%ld, i! sent
back %pon its tra8els, cancel @it te same !acility a
s%m eD%ally inde!inite0 ?s te same V1,=== @it
@ic yo% cancel yo%r debt to a tradesman today, may
cancel is debt to te mercant tomorro@, te
mercant"s debt to te bank te day !ollo@ing, and so
on @ito%t end# so te same V1,=== may pass !rom
and to and, and bank to bank, and cancel any
concei8able s%m o! deposits0L
/We a8e seen tat :ilbart kne@ e8en in 1832 tat
K@ate8er gi8es !acilities to trade gi8es !acilities to
spec%lation0 5rade and spec%lation are in some cases
so nearly allied, tat it is impossible to say at @at
precise point trade ends and spec%lation begins0L
5e easier it is to obtain ad8ances on %nsold commodities, te more s%c ad8ances are taken, and
te greater te temptation to man%!act%re commodities, or d%mp already man%!act%red
commodities in distant markets, H%st to obtain ad8ances o! money on tem0 5o @at extent te
entire b%siness @orld o! a co%ntry may be seiEed by s%c s@indling, and @at it !inally comes to,
is amply ill%strated by te istory o! Englis b%siness d%ring 182+-2>0 &t so@s %s @at credit can
accomplis0 Ae!ore passing on to te !ollo@ing examples, a !e@ preliminary remarks0
?t te close o! 182< te press%re @ic Englis ind%stry s%!!ered almost %ninterr%ptedly since
183>, began to li!t0 7%ring te !ollo@ing t@o years !oreign demand !or Englis man%!act%red
goods increased still more# 182+ and 1826 marked a period o! greatest prosperity0 &n 1823 te
3pi%m War ad opened ;ina to Englis commerce0 5e ne@ market ga8e a ne@ impet%s to te
!%rter expansion o! an expanding ind%stry, partic%larly te cotton ind%stry0 K6o@ can @e e8er
prod%ce too m%cQ We a8e to clote 3== million people,L a Mancester man%!act%rer said to
tis @riter at te time0 A%t all te ne@ly erected !actory b%ildings, steam-engines, and spinning
<>2 ;apter JJ4
and @ea8ing macines did not s%!!ice to absorb te s%rpl%s-8al%e po%ring in !rom 'ancasire0
Wit te same Eeal as @as so@n in expanding prod%ction, people engaged in b%ilding rail@ays0
5e tirst !or spec%lation o! man%!act%rers and mercants at !irst !o%nd grati!ication in tis !ield,
and as early as in te s%mmer o! 18220 $tock @as !%lly %nder@ritten, i.e., so !ar as tere @as
money to co8er te initial payments0 ?s !or te rest, time @o%ld so@S A%t @en !%rter
payments @ere d%e I M%estion 1=+*, ;0 70 1828N+>, indicates tat te capital in8ested in rail@ays
in 1826-2> amo%nted to V>+ million I reco%rse ad to be taken to credit, and in most cases te
basic enterprises o! te !irm ad also to bleed0
?nd in most cases tese basic enterprises @ere already o8er-b%rdened0 5e enticingly ig pro!its
ad led to !ar more extensi8e operations tan H%sti!ied by te a8ailable liD%id reso%rces0 .et tere
@as credit-easy to obtain and ceap0 5e bank disco%nt rate stood lo@: 1` to <`T in 1822, less
tan 3T %ntil 3ctober 182+, rising to +T !or a @ile BFebr%ary 1826C, ten dropping again to 3[
T in 7ecember 18260 5e Aank o! England ad an %neard-o! s%pply o! gold in its 8a%lts0 ?ll
inland D%otations @ere iger tan e8er be!ore0 Wy ten allo@ tis splendid opport%nity to
escapeQ Wy not go in !or all one @as @ortQ Wy not send all one co%ld man%!act%re to !oreign
markets @ic pined !or Englis goodsQ ?nd @y so%ld not te man%!act%rer imsel! pocket te
do%ble gain arising !rom selling yarn and !abrics in te Far East, and te ret%rn cargo in EnglandQ
5%s arose te system o! mass consignments to &ndia and ;ina against ad8ance payments, and
tis soon de8eloped into a system o! consignments p%rely !or te sake o! getting ad8ances, as
described in greater detail in te !ollo@ing notes, @ic led ine8itably to o8er-!looding te
markets and a cras0
5e cras @as precipitated by te crop !ail%re o! 18260 England, and partic%larly &reland, reD%ired
enormo%s imports o! !oodst%!!s, notably corn and potatoes0 A%t te co%ntries @ic s%pplied
tem co%ld be paid @it te prod%cts o! Englis ind%stry only to a 8ery limited extent0 ,recio%s
metals ad to be gi8en o%t0 :old @ort at least nine million @as sent abroad0 3! tis amo%nt no
less tan se8en and a al! million came !rom te treas%ry o! te Aank o! England, @ose !reedom
o! action on te money-market @as tereby considerably impaired0 3ter banks, @ose reser8es
@ere deposited @it te Aank o! England and @ere practically identical @it tose o! tat Aank,
@ere t%s also compelled to c%rtail accommodation o! money0 5e rapid and easy !lo@ o!
payments @as obstr%cted, !irst ere and tere, ten generally0 5e banking disco%nt rate, still 3 to
3ZT in Pan%ary 182>, rose to >T in ?pril, @en te !irst panic broke o%t0 5e sit%ation eased
some@at in te s%mmer B6ZT, 6TC, b%t @en te ne@ crop !ailed as @ell panic broke o%t a!res
and e8en more 8iolently0 5e o!!icial minim%m bank disco%nt rose in 3ctober to > and in
-o8ember to 1=T# i.e., te o8er@elming mass o! bills o! excange @as disco%ntable only at
o%trageo%s rates o! interest, or no longer disco%ntable at all0 5e general cessation o! payments
ca%sed te !ail%re o! se8eral leading and 8ery many medi%m-siEed and small !irms0 5e Aank
itsel! @as in danger d%e to te limitations imposed by te art!%l Aank ?ct o! 28220 5e
go8ernment yielded to te general clamo%r and s%spended te Aank ?ct on 3ctober <+, tereby
eliminating te abs%rd legal !etters imposed on te Aank0 -o@ it co%ld tro@ its s%pply o! bank-
notes into circ%lation @ito%t indrance0 5e credit o! tese bank-notes being in practice
g%aranteed by te credit o! te nation, and t%s %nimpaired, te money stringency @as t%s
instantly and decisi8ely relie8ed0 -at%rally, D%ite a n%mber o! opelessly enmesed large and
small !irms !ailed ne8erteless, b%t te peak o! te crisis @as o8ercome, te banking disco%nt
dropped to +T in 7ecember, and in te co%rse o! 1828 a ne@ @a8e o! b%siness acti8ity began
@ic took te edge o!! te re8ol%tionary mo8ements on te continent in 182*, and @ic
ina%g%rated in te !i!ties an %nprecedented ind%strial prosperity, b%t ten ended again I in te
cras o! 18+>0 I '. 0.1
&0 ? doc%ment iss%ed by te 6o%se o! 'ords in 1828 deals @it te colossal depreciation o!
go8ernment paper and bonds d%ring te 182> crisis0 ?ccording to it te depreciation o! 3ctober
<3, 182>, compared @it te le8el in Febr%ary o! te same year, amo%nted to:
<>+ ;apter JJ4
3n Englis go8ernment bonds V*3,8<2,<1>
3n dock and canal stock V1,3+8,<88
3n rail@ay stock V1*,+>*,8<=
Total ;114,361,/15
&&0 Wit re!erence to te s@indle in East &ndian trade, in @ic dra!ts @ere no longer dra@n
beca%se commodities @ere being bo%gt, b%t rater commodities @ere bo%gt to be able to make
o%t disco%ntable dra!ts con8ertible into money, te Manchester Guardian o! -o8ember <2, 182>,
remarks:
Mr0 ? in 'ondon instr%cts a Mr0 A to b%y !rom te man%!act%rer ; in Mancester commodities
!or sipment to a Mr0 7 in East &ndia0 A pays ; in six monts" dra!ts to be made o%t by ; on A0 A
sec%res imsel! by six monts" dra!ts on ?0 ?s soon as te goods are sipped ? makes o%t six
monts" dra!ts on 7 against te mailed bill o! lading0
K5e sipper and te co-signee @ere t%s bot p%t in
possession o! !%nds I monts be!ore tey act%ally
paid !or te goods# and, 8ery commonly, tese bills
@ere rene@ed at mat%rity, on pretence o! a!!ording
time !or te ret%rns in a "long trade"0 (n!ort%nately,
losses by s%c a trade, instead o! leading to its
contraction, led directly to its increase0 5e poorer
men became, te greater need tey ad to p%rcase, in
order to make %p, by ne@ ad8ances, te capital tey
ad lost on te past ad8ent%res0 ,%rcases t%s
became, not a D%estion o! s%pply and demand, b%t te
most important part o! te !inance operations o! a !irm
labo%ring %nder di!!ic%lties0 A%t tis is only one side
o! te pict%re0 Wat took place in re!erence to te
export o! goods at ome, @as taking place in te
p%rcase and sipment o! prod%ce abroad0 6o%ses in
&ndia, @o ad credit to pass teir bills, @ere
p%rcasers o! s%gar, indigo, silk, or cotton I not
beca%se te prices ad8ised !rom 'ondon by te last
o8erland mail promised a pro!it on te prices c%rrent
in &ndia, b%t beca%se !ormer dra!ts %pon te 'ondon
o%se @o%ld soon !all d%e, and m%st be pro8ided !or0
Wat @as so simple as to p%rcase a cargo o! s%gar,
pay !or it in bills %pon te 'ondon o%se at ten
monts" date, transmit te sipping doc%ments by te
<>6 ;apter JJ4
o8erland mail# and, in less tan t@o monts, te goods
on te ig seas, or peraps not yet passed te mo%t
o! te 6oogly, @ere pa@ned in 'ombard $treet I
p%tting te 'ondon o%se in !%nds eigt monts
be!ore te dra!ts against tose goods !ell d%e0 ?nd all
tis @ent on @ito%t interr%ption or di!!ic%lty, as long
as bill-brokers ad ab%ndance o! money "at call,"# to
ad8ance on bills o! lading and dock @arrants, and to
disco%nt, @ito%t limit, te bills o! &ndia o%ses
dra@n %pon te eminent !irms in Mincing 'ane0L
/5is !ra%d%lent proced%re remained in 8og%e so long as goods to and !rom &ndia ad to ro%nd
te ;ape in sailing 8essels0 A%t e8er since tey are being sipped in steamboats 8ia te $%eE
;anal tis metod o! !abricating !ictitio%s capital as been depri8ed o! its basis I te long !reigt
8oyage0 ?nd e8er since te telegrap in!orms te Englis b%sinessman abo%t te &ndian market
and te &ndian mercant abo%t te Englis market, on te same day tis metod as become
totally impracticable0 I '.001
&&&0 5e !ollo@ing is taken !rom te D%oted )eport on ;ommercial 7istress, 182>-28:
K&n te last @eek o! ?pril 182>, te Aank o! England
ad8ised te )oyal Aank o! 'i8erpool tat it @o%ld
terea!ter red%ce its disco%nt b%siness @it te latter
bank by one-al!0 5e anno%ncement operated @it
pec%liar ardsip on tis acco%nt, tat te payments
into 'i8erpool ad latterly been m%c more in bills
tan in cas# and te mercants @o generally
bro%gt to te Aank a large proportion o! cas @it
@ic to pay teir acceptances, ad latterly been able
to bring only bills @ic tey ad recei8ed !or teir
cotton and oter prod%ce, and tat increased 8ery
rapidly as te di!!ic%lties increased0000 5e acceptances
000 @ic te Aank ad to pay !or te mercants, @ere
acceptances dra@n cie!ly %pon tem !rom abroad,
and tey a8e been acc%stomed to meet tose
acceptances by @ate8er payment tey recei8ed !or
teir prod%ce0000 5e bills tat te mercants bro%gt000
in lie% o! cas, @ic tey %s%ally bro%gt 000 @ere o!
8ario%s dates, and o! 8ario%s descriptions# a
considerable n%mber o! tem @ere bankers" bills, o!
<>> ;apter JJ4
tree monts" date, te large b%lk being cotton bills0
5ese bills o! excange, @en bankers" bills, @ere
accepted by 'ondon bankers, and by mercants in
e8ery trade tat @e co%ld mention I te AraEilian, te
?merican, te ;anadian, te West &ndian0000 5e
mercants did not dra@ %pon eac oter# b%t te
parties in te interior, @o ad p%rcased prod%ce
!rom te mercants, remitted to te mercants bills on
'ondon bankers, or bills on 8ario%s parties in 'ondon,
or bills %pon anybody0 5e anno%ncement o! te Aank
o! England ca%sed a red%ction o! te mat%rity terms
o! bills dra@n against sales o! !oreign prod%cts,
!reD%ently extending to o8er tree montsL Bpp0 <6,
<>C0
5e period o! prosperity in England !rom 1822 to 182>, @as, as described abo8e, connected @it
te !irst great rail@ay s@indle0 5e abo8e-named report makes te !ollo@ing re!erence to te
e!!ect o! tis s@indle on b%siness in general:
&n ?pril 182> Kalmost all mercantile o%ses ad
beg%n to star8e teir b%siness more or less 000 by
taking part o! teir commercial capital !or rail@aysL
Bp02<C0 K'oans @ere made on rail@ay sares at a ig
rate o! interest, say, 8T, by pri8ate indi8id%als, by
bankers and by !ire-o!!icesL Bp0 66C0 K'oans to so
great an extent by commercial o%ses to rail@ays
ind%ced tem to lean too m%c %pon banks by te
disco%nt o! paper, @ereby to carry on teir
commercial operationsL Bp0 6>C0 BM%estion:C K$o%ld
yo% say tat te rail@ay calls ad ad a great e!!ect in
prod%cing te press%re @ic tere @asL Bon te
money-marketC Kin ?pril and 3ctoberL B182>CQ I
B?ns@er:C K& so%ld say tat tey ad ad ardly any
e!!ect at all in prod%cing te press%re in ?pril# &
so%ld imagine tat %p to ?pril, and %p, peraps, to
te s%mmer, tey ad increased te po@er o! bankers
in some respects rater tan diminised it# !or te
expendit%re ad not been nearly so rapid as te calls#
<>8 ;apter JJ4
te conseD%ence @as, tat most o! te banks ad
rater a large amo%nt o! rail@ay money in teir ands
in te beginning o! te year0L
B5is is corroborated in n%mero%s statements made by bankers in ;0 70 1828-+>0C
K&n te s%mmer tat melted grad%ally a@ay, and on
te 31st o! 7ecember it @as materially less0 3ne
ca%se 000 o! te press%re in 3ctober @as te grad%al
dimin%tion o! te rail@ay money in te bankers"
ands# bet@een te <<nd o! ?pril and te 31st o!
7ecember te rail@ay balances in o%r ands @ere
red%ced one- tird# and te rail@ay calls a8e also ad
tis e!!ect tro%go%t te Kingdom# tey a8e been
grad%ally draining te deposits o! bankersL Bpp0 23,
22C0
$am%el :%rney Bead o! te ill-!amed !irm o! 38erend, :%rney and ;o0C similarly says:
K7%ring te year 1826 000 tere ad been a
considerable demand !or capital, !or te establisment
o! rail-@ays 000 b%t it did not increase te 8al%e o!
money0000 5ere @as a condensation o! small s%ms
into large masses, and tose large masses @ere %sed in
o%r market# so tat, %pon te @ole, te e!!ect @as to
tro@ more money into te money-market o! te ;ity
tan to take it o%tL /p0 1+*10
?0 6odgson, 7irector o! te 'i8erpool Point-$tock Aank, so@s o@ m%c bills o! excange may
constit%te a reser8e !or bankers:
K&t as been o%r abit to keep at least nine-tents o!
all o%r deposits, and all money @e a8e o! oter
persons, in o%r bill case, in bills tat are !alling d%e
!rom day to day 000 so m%c so, tat d%ring te time o!
te r%n, te bills !alling d%e @ere almost eD%al to te
amo%nt o! te ran %pon %s day by dayL Bp0 +3C0
$pec%lati8e bills0
K+=*<0 Wo @ere tose bills Bagainst sold cottonC
generally accepted byQL I B)0 :ardner, te cotton
man%!act%rer repeatedly mentioned in tis @ork:C
K,rod%ce brokers: a person b%ys cotton, and places it
<>* ;apter JJ4
in te ands o! a broker, and dra@s %pon tat broker,
and gets te bills disco%nted0L I K+=*20 ?nd tey are
taken to te banks at 'i8erpool, and disco%ntedQ I
.es, and in oter parts besides0000 & belie8e i! it ad not
been !or te accommodation t%s granted, and
principally by te 'i8erpool banks, cotton @o%ld
ne8er a8e been so ig last year as it @as by 1Z d0 or
<d0 a po%nd0L I K6==0 .o% a8e stated tat a 8ast
amo%nt o! bills @ere p%t in circ%lation, dra@n by
spec%lators %pon cotton brokers in 'i8erpool# does
tat system extend to yo%r ad8ance on acceptances
%pon colonial and !oreign prod%ce as @ell as on
cottonQL B?0 6odgson, a 'i8erpool banker:C K&t re!ers
to all kinds o! colonial prod%ce, b%t to cotton most
especially0L I K6=10 7o yo%, as a banker, disenco%rage
as !ar as yo% can tat description o! paperQ I We do
not# @e consider it a 8ery legitimate description o!
paper, @en kept in moderation0 5is description o!
paper is !reD%ently rene@ed0L
Swindling in the 0ast Dndian and Chinese Mar-et, ;<=@0 I ;arles 5%rner Bead o! one o! te
leading East &ndian o%ses in 'i8erpoolC:
KWe are all a@are o! te e8ents @ic a8e taken
place as regards te Ma%riti%s trade, and oter trades
o! tat kind0 5e brokers a8e been in te abit 000 not
only o! ad8ancing %pon goods a!ter teir arri8al to
meet te bills dra@n against tose goods, @ic is
per!ectly legitimate, and %pon te bills o! lading 000 b%t
000 tey a8e ad8anced %pon prod%ce be!ore it @as
sipped, and in some cases be!ore it @as
man%!act%red0 -o@, to speak o! my o@n indi8id%al
instance: & a8e bo%gt bills in ;alc%tta to te extent
o! six or se8en to%sand po%nds in one partic%lar
instance# te proceeds o! te bills @ent do@n to te
Ma%riti%s, to elp in te gro@t o! s%gar# tose bills
came to England, and abo8e al! o! tem @ere
protested# !or @en te sipments o! s%gar came
<8= ;apter JJ4
!or@ard, instead o! being eld to pay tose bills, it
ad been mortgaged to tird parties 000 be!ore it @as
sipped, in !act almost be!ore it @as boiledL Bp0>8C0
K-o@ man%!act%rers are insisting %pon cas b%t it
does not amo%nt to m%c, beca%se i! a b%yer as any
credit in 'ondon, e can dra@ %pon te o%se, and get
te bill disco%nted# e goes to 'ondon, @ere
disco%nts no@ are ceap# e gets te bill disco%nted,
and pays cas to te man%!act%rer0000 &t takes t@el8e
monts, at least, !or te sipper o! goods to get is
ret%rn !rom &ndia 000 a man @it ten or !i!teen
to%sand po%nds @o%ld go into te &ndian trade# e
@o%ld open a credit @it a o%se in 'ondon, to a
considerable extent, gi8ing tat o%se one per cent#
e, dra@ing %pon te o%se in 'ondon, on te
%nderstanding tat te proceeds o! te goods tat go
o%t are to be ret%rned to te o%se in 'ondon, b%t it
being per!ectly %nderstood by bot parties tat te
man in 'ondon is to be kept o%t o! a cas ad8ance#
tat is to say, in oter @ords, te bills are to be
rene@ed till te proceeds come ome0 5e bills @ere
disco%nted at 'i8erpool, Mancester 000 or in
'ondon 000 many o! tem lie in te $cotc banksL Bp0
>*C0 I K>860 5ere is one o%se @ic !ailed in
'ondon te oter day, and in examining teir a!!airs, a
transaction o! tis sort @as pro8ed to a8e taken
place# tere is a o%se o! b%siness at Mancester, and
anoter at ;alc%tta# tey opened a credit acco%nt @it
a o%se in 'ondon to te extent o! V<==,===# tat is to
say, te !riends o! tis o%se in Mancester, @o
consigned goods to te East &ndia 6o%se !rom
:lasgo@ and !rom Mancester, ad te po@er o!
dra@ing %pon te o%se in 'ondon to te extent o!
V<==,===# at te same time, tere @as an
%nderstanding tat te corresponding o%se in
;alc%tta @ere to dra@ %pon te 'ondon o%se to te
<81 ;apter JJ4
extent o! V<==,===# @it te proceeds o! tose bills
sold in ;alc%tta, tey @ere to b%y oter bills, and
remit tem to te o%se in 'ondon, to take %p te !irst
bills dra@n !rom :lasgo@000 5ere @o%ld a8e been
V6==,=== o! bills created %pon tat transaction0L I
K*>10 ?t present, i! a o%se in ;alc%tta p%rcase a
cargoL B!or EnglandC, Kand gi8e teir o@n bills %pon
teir correspondent in 'ondon in payment, and tey
send te bills o! lading ome to tis co%ntry, tose
bills o! lading 000 immediately become a8ailable to
tem in 'ombard $treet !or ad8ances, and tey a8e
eigt monts" %se o! te money be!ore teir
correspondents are called %pon to pay0L
&40 &n 1828 a secret committee o! te 6o%se o! 'ords in8estigated te ca%ses o! te 182> crisis0
5e e8idence gi8en to te committee @as not p%blised, o@e8er, %ntil 18+> BMin%tes o!
E8idence, taken be!ore te $ecret ;ommittee o! te 60 o! '0 appointed to inD%ire into te ;a%ses
o! 7istress, etc0, 18+># D%oted as ;070 1828N+>C0 6ere Mr0 'ister, 7irector o! te (nion Aank o!
'i8erpool, testi!ied, among oter tings, to te !ollo@ing:
K<2220 &n te spring o! 1822 tere @as an %nd%e
extension o! credit000 beca%se a man trans!erred
property !rom b%siness into rail@ays and @as still
anxio%s to carry on te same extent o! b%siness0 6e
probably !irst to%gt tat e co%ld sell te rail@ay
sares at a pro!it and replace te money in is
b%siness0 ,eraps e !o%nd tat co%ld not be done,
and e ten got credit in is b%siness @ere !ormerly
e paid in cas0 5ere @as an extension o! credit !rom
tat circ%mstance0L
K<+==0 Were tose bills 000 %pon @ic te banks ad
s%stained a loss by olding tem, principally bills
%pon corn or bills %pon cottonQL I K5ey @ere bills
%pon all kinds o! prod%ce, corn and cotton and s%gar,
all !oreign prod%ce o! all descriptions0 5ere @as
scarcely any ting peraps @it te exception o! oil,
tat did not go do@n0L I K<+=60 ? broker @o accepts
<8< ;apter JJ4
a bill @ill not accept it @ito%t a good margin as to
te 8al%e0L
K<+1<0 5ere are t@o kinds o! bills dra@n against
prod%ce# te !irst is te original bill dra@n abroad
%pon te mercant, @o imports it0000 5e bills @ic
are dra@n against prod%ce !reD%ently !all d%e be!ore
te prod%ce arri8es0 5e mercant, tere!ore, @en it
arri8es, i! e as not s%!!icient capital, as to pledge
tat prod%ce @it te broker till e as time to sell
tat prod%ce0 5en a ne@ species o! bill is
immediately dra@n by te mercant in 'i8erpool
%pon te broker, on te sec%rity o! tat prod%ce0000
5en it is te b%siness o! te banker to ascertain !rom
te broker @eter e as te prod%ce, and to @at
extent e as ad8anced %pon it0 &t is is b%siness to
see tat te broker as property to protect imsel! i!
e makes a loss0L
K<+160 We also recei8e bills !rom abroad0000 ? man
b%ys a bill abroad on England, and sends it to a o%se
in England# @e cannot tell @eter tat bill is dra@n
pr%dently or impr%dently, @eter it is dra@n !or
prod%ce or !or @ind0L
K<+330 .o% said tat almost e8ery kind o! !oreign
prod%ce @as sold at a great loss0 7o yo% tink tat
tat @as in conseD%ence o! %nd%e spec%lation in tat
prod%ceQ I &t arose !rom a 8ery large import, and
tere not being an eD%al cons%mption to take it o!!0 &t
appears tat cons%mption !ell o!! a great deal0L I
K<+320 &n 3ctober prod%ce @as almost %nsaleable0L
6o@ a general sauve 3ui peut de8elops at te eigt o! a crisis is re8ealed in te same report by a
!irst-rate expert, te esteemed cra!ty M%aker, $am%el :%rney, o! 38erend, :%rney and ;o0:
K1<6< 000 Wen a panic exists a man does not ask
imsel! @at e can get !or is bank-notes, or @eter
e sall lose one or t@o per cent by selling is
exceD%er bills, or tree per cent0 &! e is %nder te
<83 ;apter JJ4
in!l%ence o! alarm e does not care !or te pro!it or
loss, b%t makes imsel! sa!e and allo@s te rest o! te
@orld to do as tey please0L
40 ;oncerning te m%t%al satiation o! te t@o markets Mr0 ?lexander, a mercant in te East
&ndia trade, testi!ies be!ore te ;ommittee o! te, 'o@er 6o%se on te Aank ?ct o! 18+> BD%oted
as A0;0 18+>C:
K233=0 ?t te present moment, i! & lay o%t 6s0 in
Mancester, & get +s0 back in &ndia# i! & lay o%t 6s0 in
&ndia, & get +s0 back in 'ondon0L
$o tat te &ndian market is, tere!ore, dr%gged by England, and te Englis by &ndia0 5is @as,
indeed, te case in te s%mmer o! 18+>, barely ten years a!ter te bitter experience o! 182>S
Chapter 26. Accumulation of Money-Capital. Its
Infuence on the Interest Rate
K&n England tere takes place a steady acc%m%lation
o! additional @ealt, @ic as a tendency %ltimately
to ass%me te !orm o! money0 -o@ next in %rgency,
peraps, to te desire to acD%ire money, is te @is to
part @it it again !or some species o! in8estment tat
sall yield eiter interest or pro!it# !or money itsel!, as
money, yields neiter0 (nless, tere!ore, conc%rrently
@it tis ceaseless in!l%x o! s%rpl%s-capital, tere is a
grad%al and s%!!icient extension o! te !ield !or its
employment, @e m%st be s%bHect to periodical
acc%m%lations o! money seeking in8estment, o! more
or less 8ol%me, according to te mo8ement o! e8ents0
For a long series o! years, te grand absorbent o! te
s%rpl%s @ealt o! England @as o%r p%blic debt0000 ?s
soon as in 1816 te debt reaced its maxim%m, and
operated no longer as an absorbent, a s%m o! at least
se8en-and-t@enty million per ann%m @as necessarily
dri8en to seek oter cannels o! in8estment0 Wat
@as more, 8ario%s ret%rn payments o! capital @ere
made0000 Enterprises @ic entail a large capital and
create an opening !rom time to time !or te excess o!
%nemployed capital 000 are absol%tely necessary, at
least in o%r co%ntry, so as to take care o! te
periodical acc%m%lations o! te s%per!l%o%s @ealt o!
society, @ic is %nable to !ind room in te %s%al
!ields o! application0L B4he Currency 4heory
9eviewed, 'ondon, 182+, pp0 3<-320C
3! 182+ te same @ork says:
KWitin a 8ery recent period prices a8e spr%ng
%p@ards !rom te lo@est point o! depression0000
<8+ ;apter JJ4&
;onsols to%c par0000 5e b%llion in te 8a%lts o! te
Aank o! England as 000 exceeded in amo%nt te
treas%re eld by tat establisment since its
instit%tion0 $ares o! e8ery description range at prices
on te a8erage @olly %nprecedented, and interest as
declined to rates @ic are all b%t nominal0 &! tese be
not e8idences tat anoter ea8y acc%m%lation o!
%nemployed @ealt exists at tis o%r in England, tat
anoter period o! spec%lati8e excitement is at and0L
BDbid0, p0 360C
K?lto%g 000 te import o! b%llion is no s%re sign o!
gain %pon te !oreign trade, yet, in te absence o! any
explanatory ca%se, it doesprima facie represent a
portion o! it0L BP0 :0 6%bbard, 4he Currency and the
Country, 'ondon, 1823, pp0 2=-2110C K$%ppose 000 tat
at a period o! steady trade, !air prices 000 and !%ll, b%t
not red%ndant circ%lation, a de!icient ar8est so%ld
gi8e occasion !or an import o! corn, and an export o!
gold to te 8al%e o! !i8e million0 5e circ%lationL
/meaning, as @e sall presently see, idle money-capital rater tan means o! circ%lation I '.001
K@o%ld o! co%rse be red%ced by te same amo%nt0 ?n
eD%al D%antity o! te circ%lation migt still be eld by
indi8id%als, b%t te deposits o! mercants at teir
bankers, te balances o! bankers @it teir money-
broker, and te reser8e in teir till, @ill all be
diminised, and te immediate res%lt o! tis red%ction
in te amo%nt o! %nemployed capital @ill be a rise in
te rate o! interest0 & @ill ass%me !rom 2 per cent to 60
5rade being in a so%nd state, con!idence @ill not be
saken, b%t credit @ill be more igly 8al%ed0L BDbid0,
p0 2<0C KA%t imagine 000 tat all prices !all0000 5e
s%per!l%o%s c%rrency ret%rns to te bankers in
increased deposits-te ab%ndance o! %nemployed
capital lo@ers te rate o! interest to a minim%m, and
tis state o! tings lasts %ntil eiter a ret%rn o! iger
<86 ;apter JJ4&
prices or a more acti8e trade call te dormant
c%rrency into ser8ice, or %ntil it is absorbed by
in8estments in !oreign stocks or !oreign goodsL Bp0
68C0
5e !ollo@ing extracts are also taken !rom te parliamentary )eport on ;ommercial 7istress,
182>-280 I 3@ing to te crop !ail%re and !amine o! 1826-2> large-scale imports o! !oodst%!!s
became necessary0
K5ese circ%mstances ca%sed te imports o! te
co%ntry to be 8ery largely in excess o8er 000 exports 000
a considerable drain %pon te banks, and an increased
application to te disco%nt brokers 000 !or te disco%nt
o! bills0000 5ey began to scr%tinise te bills 000 5e
!acilities o! o%ses ten began to be 8ery serio%sly
c%rtailed, and te @eak o%ses began to !ail0 5ose
o%ses @ic 000 relied %pon teir credit000 @ent do@n0
5is increased te alarm tat ad been pre8io%sly !elt#
and te bankers and oters !inding tat tey @o%ld not
rely @it te same degree o! con!idence tat tey ad
pre8io%sly done %pon t%rning teir bills and oter
money sec%rities into bank-notes, !or te p%rpose o!
meeting teir engagements, still !%rter c%rtailed teir
!acilities, and in many cases re!%sed tem altogeter#
tey locked %p teir bank-notes, in many instances to
meet teir o@n engagements# tey @ere a!raid o!
parting @it tem0000 5e alarm and con!%sion @ere
increased daily# and %nless 'ord Pon )%ssell 0000 ad
iss%ed te letter to te Aank 000 %ni8ersal bankr%ptcy
@o%ld a8e been te iss%eL Bpp0 >2->+C0
)%ssell"s letter s%spended te Aank ?ct0 I 5e pre8io%sly mentioned ;arles 5%rner testi!ies:
K$ome o%ses ad large means, b%t not a8ailable0 5e
@ole o! teir capital @as locked %p in estates in te
Ma%riti%s, or indigo !actories, or s%gar !actories0
6a8ing inc%rred liabilities to te extent o! V+==,===
or V6==,=== tey ad no a8ailable assets to pay teir
bills, and e8ent%ally it pro8ed tat to pay teir bills
<8> ;apter JJ4&
tey @ere entirely dependent %pon teir creditL Bp0
81C0
5e a!orementioned $0 :%rney said /16621:
K?t present B1828C tere is a limitation o! transaction
and a great s%perab%ndance o! money0L I K1>630 & do
not tink it @as o@ing to te @ant o! capital# it @as
o@ing to te alarm tat existed tat te rate o! interest
got so ig0L
&n 182> England paid at least V* million gold to !oreign co%ntries !or imported !oodst%!!s0 3! tis
amo%nt V>Z million came !rom te Aank o! England and 1Z million !rom oter so%rces Bp0 <2+C0
I Morris, :o8ernor o! te Aank o! England:
K5e p%blic stocks in te co%ntry and canal and
rail@ay sares ad already by te <3rd o! 3ctober
182> been depreciated in te aggregate to te amo%nt
o! V112,>+<,<<+L Bp0 31<C0
?gain Morris, @en D%estioned by 'ord :0 Aentinck:
K?re yo% not a@are tat all property in8ested in
stocks and prod%ce o! e8ery description @as
depreciated in te same @ay# tat ra@ cotton, ra@ silk
and %nman%!act%red @ool @ere sent to te continent
at te same depreciated price000 and tat s%gar, co!!ee
and tea @ere sacri!iced as at !orced salesQ I &t @as 000
ine8itable tat te co%ntry so%ld make a considerable
sacri!ice !or te p%rpose o! meeting te e!!l%x o!
b%llion @ic ad taken place in conseD%ence o! te
large importation o! !ood0L I /38281 K7o not yo%
tink it @o%ld a8e been better to trenc %pon te
V8,===,=== lying in te co!!ers o! te Aank tan to
a8e endea8o%red to get te gold back again at s%c a
sacri!iceQ I $o, D do not./ J
-o@ to te commentaries on s%c eroism0 7israeli D%estions Mr0 W0 ;otton, a 7irector and
!ormer :o8ernor o! te Aank o! England:
KWat @as te rate o! di8idend paid to te Aank
proprietors in 1822Q I &t @as > per cent !or te year0L
I KWat is te di8idend 000 !or 182>Q I -ine per cent0L
I K7oes te Aank pay te income tax !or its
<88 ;apter JJ4&
proprietors in tis yearQ I &t does0L I K7id it do so in
1822Q I &t did not0L
1
I K5en tis Aank ?ctL Bo!
1822C Kas @orked 8ery @ell !or te proprietorsQ000
5e res%lt is, tat since te passing o! te ?ct, te
di8idend to te proprietors as been raised !rom > per
cent to * per cent, and te income tax, tat pre8io%sly
to te ?ct @as paid by te proprietors, is no@ paid by
te AankQ I Dt is so./ B-os0 23+6-610C
Mr0 ,ease, a co%ntry banker, ad te !ollo@ing to say concerning oarding in banks d%ring te
crisis o! 182>:
K26=+0 ?s te Aank @as obliged still to raise its rate
o! interest, e8ery one seemed appreensi8e# co%ntry
bankers increased te amo%nt o! b%llion in teir
ands, and increased teir reser8e o! notes, and many
o! %s @o @ere in te abit o! keeping, peraps, a !e@
%ndred po%nds o! gold and bank-notes, immediately
laid %p to%sands in o%r desks and dra@ers, as tere
@as an %ncertainty abo%t disco%nts, and abo%t o%r
bills being c%rrent in te market, a general oarding
ens%ed0L
? member o! te ;ommittee remarks:
K26*10 5en, @ate8er may a8e been te ca%se
d%ring te last 1< years, te res%lt as been rater in
!a8o%r o! te Pe@ and money-dealer, tan te
prod%cti8e classes generally0L
6o@ m%c a money-dealer takes ad8antage o! times o! crisis is re8ealed by 5ooke:
K&n te ard@are districts o! War@icksire and
$ta!!ordsire, a great many orders !or goods @ere
declined to be accepted in 182>, beca%se te rate o!
interest @ic te man%!act%rer ad to pay !or
disco%nting is bills more tan absorbed all is pro!itL
B-o0 +2+1C0
'et %s no@ take anoter parliamentary report cited earlier: )eport o! $elect ;ommittee on Aank
?cts, comm%nicated !rom te ;ommons to te 'ords, 18+> BD%oted !%rter as A0 ;0 18+>C0 &n it
Mr0 -orman, 7irector o! te Aank o! England and a leading !ig%re among te campions o! te
;%rrency ,rinciple, is interrogated as !ollo@s:
<8* ;apter JJ4&
K363+0 .o% stated, tat yo% consider tat te rate o!
interest depends, not %pon te amo%nt o! notes, b%t
%pon te s%pply and demand o! capital0 Will yo% state
@at yo% incl%de in "capital," besides notes and coinQ
I & belie8e tat te ordinary de!inition o! "capital" is
commodities or ser8ices %sed in prod%ction0L I K36360
7o yo% mean to incl%de all commodities in te @ord
"capital" @en yo% speak o! te rate o! interestQ I ?ll
commodities %sed in prod%ction0L I K363>0 .o%
incl%de all tat in te @ord "capital," @en yo% speak
o! @at reg%lates te rate o! interestQ I .es0
$%pposing a cotton man%!act%rer to @ant cotton !or
is !actory, te @ay in @ic e goes to @ork to
obtain it is, probably, by getting an ad8ance !rom is
banker, and @it te notes so obtained e goes to
'i8erpool, and makes a p%rcase0 Wat e really
@ants is te cotton# e does not @ant te notes or te
gold, except as a means o! getting te cotton0 3r e
may @ant te means o! paying is @orkmen# ten
again, e borro@s te notes, and e pays te @ages o!
te @orkmen @it te notes# and te @orkmen, again,
reD%ire !ood and lodging, and te money is te means
o! paying !or tose0L I K36380 A%t interest is paid !or
te moneyQ I &t is, in te !irst instance# b%t take
anoter case0 $%pposing e b%ys te cotton on credit,
@ito%t going to te bank !or an ad8ance, ten te
di!!erence bet@een te ready-money price and te
credit price at te time at @ic e is to pay !or it is
te meas%re o! te interest0 &nterest @o%ld exist i!
tere @as no money at all0L
5is sel!-complacent r%bbis is D%ite !itting !or tis pillar o! te ;%rrency ,rinciple0 First, te
brilliant disco8ery tat bank-notes or gold are means o! b%ying someting, and tat tey are not
borro@ed !or teir o@n sake0 ?nd tis is ad8anced to explain tat te rate o! interest is reg%lated I
b%t by @atQ Ay te demand and s%pply o! commodities, @ic ereto!ore @as kno@n to reg%late
only te market-prices o! commodities0 6o@e8er, 8ery di!!erent rates o! interest are compatible
@it te same market-prices o! commodities0 I A%t no@ tis c%nning0 6e is con!ronted @it te
correct remark: KA%t interest is paid !or te money,L @ic, o! co%rse, contains te implication:
KWat as interest recei8ed by te banker, @o does not deal in commodities at all, to do @it
<*= ;apter JJ4&
tese commoditiesQ ?nd do not man%!act%rers recei8e money at te same rate o! interest,
alto%g tey in8est it in @idely di!!erent markets, ence in markets @it @idely di!!erent
conditions o! demand and s%pply !or te commodities %sed in prod%ctionQL ?ll tat tis
celebrated geni%s as to say in reply to tese D%estions is tat i! te man%!act%rer b%ys cotton on
credit Kte di!!erence bet@een te ready-money price and te credit price at te time at @ic e
is to pay !or it is te meas%re o! te interest0L M%ite te contrary0 5e pre8ailing rate o! interest
@ose reg%lation te great intellect -orman @as asked to explain is te meas%re o! te di!!erence
bet@een te cas price and te credit price %ntil payment is d%e0 First te cotton is to be sold at its
cas price, and tis is determined by te market-price, itsel! reg%lated by te state o! s%pply and
demand0 $ay te price V1,===0 5is concl%des te transaction bet@een te man%!act%rer and te
cotton broker so !ar as b%ying and selling is concerned0 -o@ comes a second transaction0 5is is
one bet@een lender and borro@er0 5e 8al%e o! V1,=== is ad8anced to te man%!act%rer in cotton,
and e as to repay it in money, say, in tree monts0 ?nd tree monts" interest !or V1===,
determined by te market rate o! interest, makes %p te extra carge o8er and abo8e te cas
price0 5e price o! cotton is determined by s%pply and demand0 A%t te price o! te ad8anced
8al%e o! cotton, o! V1,=== ad8anced !or tree monts, is determined by te rate o! interest0 ?nd
tis !act, tat cotton is t%s trans!ormed into money-capital, pro8es to Mr0 -orman tat interest
@o%ld exist e8en i! tere ad been no money0 &! tere @ere no money at all, tere @o%ld certainly
be no general rate o! interest0
5ere is, to begin @it, a 8%lgar conception o! capital as Kcommodities %sed in prod%ction0L &n so
!ar as tese commodities ser8e as capital, teir 8al%e ascapital, as distinct !rom teir 8al%e as
commodities, is expressed in te pro!it @ic is deri8ed !rom teir prod%cti8e or mercantile
employment0 ?nd te rate o! pro!it %nder all circ%mstances as someting to do @it te market-
price o! te p%rcased commodities and @it teir s%pply and demand, b%t is determined by
entirely di!!erent circ%mstances0 ?nd tere is no do%bt tat te interest rate is generally limited by
te rate o! pro!it0 A%t Mr0 -orman so%ld tell %s H%st o@ tis limit is determined0 ?nd it is
determined by te s%pply and demand o! money-capital as distinguished !rom te oter !orms o!
capital0 &t co%ld be !%rter asked: 6o@ are demand and s%pply o! money-capital determinedQ &t is
do%btlessly tr%e tat a tacit connection exists bet@een te s%pply o! material capital and te
s%pply o! money-capital# and, like@ise, tat te demand o! ind%strial capitalists !or money-capital
is determined by conditions o! act%al prod%ction0 &nstead o! enligtening %s on tis point,
-orman o!!ers %s te sage opinion tat te demand !or money-capital is not identical @it te
demand !or money as s%c# and tis sagacity alone, beca%se e, 38erstone, and te oter
;%rrency propets, constantly a8e pricks o! conscience since tey are stri8ing to make capital
o%t o! means o! circ%lation as s%c tro%g te arti!icial inter8ention o! legislation, and to raise
te interest rate0
-o@ to 'ord 38erstone, alias $am%el Pones 'oyd, as e is asked to explain @y e takes 1=T !or
is KmoneyL beca%se KcapitalL is so scarce in is co%ntry0
K36+30 5e !l%ct%ations in te rate o! interest arise
!rom one o! t@o ca%ses: an alteration in te 8al%e o!
capitalL
BexcellentS 4al%e o! capital, generally speaking, signi!ies precisely te rate o! interestS ? cange
in te rate o! interest is t%s made to spring !rom a cange in te rate o! interest0 K4al%e o!
capital,L as @e a8e so@n else@ere, is ne8er concei8ed oter@ise in teory0 3r else, i! 'ord
38erstone means te rate o! pro!it by te prase K8al%e o! capitalL, ten te pro!o%nd tinker
ret%rns to te notion tat te interest rate is reg%lated by te rate o! pro!itSC
<*1 ;apter JJ4&
Kor an alteration in te amo%nt o! money in te
co%ntry0 ?ll great !l%ct%ations o! interest, great eiter
in teir d%ration or in te extent o! te !l%ct%ation,
may be distinctly traced to alterations in te 8al%e o!
capital0 5@o more striking practical ill%strations o!
tat !act cannot be !%rnised tan te rise in te rate
o! interest in 182> and d%ring te last t@o years
B18++-+6C# te minor !l%ct%ations in te rate o!
interest, @ic arise !rom an alteration in te D%antity
o! money, are small bot in extent and in d%ration0
5ey are !reD%ent, and te more rapid and !reD%ent
tey are, te more e!!ect%al tey are !or
accomplising teir destined p%rposeL,
@ic is to enric bankers like 38erstone0 Friend $am%el :%rney expresses it 8ery nai8ely be!ore
te ;ommittee o! 'ords, ;0 70 1828 /18+>1:
K13<20 7o yo% tink tat te great !l%ct%ations in te
rate o! interest @ic a8e taken place in te last year
are ad8antageo%s or not to bankers or dealers in
moneyQ I & tink tey are ad8antageo%s to dealers in
money0 ?ll !l%ct%ations in trade are ad8antageo%s to
te kno@ing man0L
K13<+0 May not te banker s%!!er e8ent%ally !rom te
ig rates o! interest, by impo8erising is best
c%stomersQ I -o# & do not tink it as tat e!!ect
perceptibly0L I
Loil. ce 3ue parler veut dire. /5is is @at ad to be said0 I 0d01
We sall e8ent%ally ret%rn to te in!l%ence o! te D%antity o! a8ailable money on te rate o!
interest0 A%t it is to be noted rigt ere tat 38erstone again makes a 3uid pro 3uo. 5e demand
!or money-capital in 182> Bbe!ore 3ctober tere @as no anxiety o8er money stringency, or te
KD%antity o! money,L as e called itC increased !or 8ario%s reasons, s%c as rising prices !or corn
and cotton, lack o! b%yers o! s%gar d%e to o8er-prod%ction, rail@ay spec%lation and te cras,
o8ercro@ding o! !oreign markets @it cotton goods, and te !orced export to, and import !rom,
&ndia !or te p%rpose o! spec%lation in bills o! excange, @ic @as described abo8e0 ?ll tese
tings, o8er-prod%ction in ind%stry and %nderprod%ction in agric%lt%re I in oter @ords, greatly
di!!ering ca%ses I ga8e rise to an increased demand !or money-capital, i.e., !or credit and money0
5e increased demand !or money-capital ad its origin in te co%rse o! te prod%cti8e process
itsel!0 A%t @ate8er may a8e been te ca%se, it @as te demand !or money1capital @ic made
te interest rate, te 8al%e o! money-capital, climb0 &! 38erstone means to say tat te 8al%e o!
money-capital rose because it rose, ten it is ta%tology0 A%t i!, by K8al%e o! capital,L e means a
rise in te rate o! pro!it as te ca%se o! te rise in te rate o! interest, @e sall immediately see
<*< ;apter JJ4&
tat tis is @rong0 5e demand !or money-capital, and conseD%ently te K8al%e o! capital,L may
rise e8en to%g te pro!it may decrease# as soon as te relati8e s%pply o! money-capital srinks,
its K8al%eL increases0 Wat 38erstone @ised to pro8e is tat te crisis o! 182>, and te attendant
ig interest rate, ad noting to do @it te KD%antity o! money,L i.e.,@it te reg%lations o! te
Aank ?ct o! 1822 @ic e ad inspired# alto%g it @as, indeed, connected @it tem, inasm%c
as te !ear o! exa%sting te bank reser8e I a creation o! 38erstone I contrib%ted a money panic
to te crisis o! 182>-280 A%t tis is not te iss%e ere0 5ere @as a deart o! money-capital,
ca%sed by te excessi8e 8ol%me o! operations compared to te a8ailable means and precipitated
by te dist%rbance in te reprod%ction process d%e to a crop !ail%re, o8er-in8estment in rail@ays,
o8er-prod%ction, partic%larly o! cotton goods, s@indling operations in trade @it &ndia and ;ina,
spec%lation, s%per!l%o%s s%gar imports, etc0 Wat te people, @o ad bo%gt corn at 1<=
sillings per D%arter, lacked @en it !ell to 6= sillings, @ere te 6= sillings @ic tey ad
o8erpaid and te corresponding credit !or tat amo%nt in 'ombard $treet ad8ances on te corn0 &t
@as by no means a lack o! bank-notes tat pre8ented tem !rom con8erting teir corn into money
at its old price o! 1<= sillings0 5e same applied to tose @o ad imported an excess o! s%gar,
@ic became almost %nsaleable0 &t applied like@ise to te gentlemen @o ad tied %p teir
!loating capital in rail@ays and relied on credit to replace it in teir KlegitimateL b%siness0 5o
38erstone all tis signi!ies a Kmoral sense o! te enanced 8al%e o! is money0L A%t tis
enanced 8al%e o! money-capital corresponded directly on te oter and to te depreciated
money-8al%e o! real capital Bcommodity-capital and prod%cti8e capitalC0 5e 8al%e o! capital in
te one !orm rose beca%se te 8al%e o! capital in te oter !ell0 38erstone, o@e8er, seeks to
identi!y tese t@o 8al%es o! di!!erent sorts o! capital in a single 8al%e o! capital in general, and e
tries to do so by opposing bot o! tem to a scarcity o! te medi%m o! circ%lation, o! a8ailable
money0 A%t te same amo%nt o! money-capital may be loaned @it 8ery di!!erent D%antities o! te
circ%lation medi%m0
5ake is example o! 182>0 5e o!!icial bank-rate stood at 3 to 3ZT in Pan%ary# 2 to 2ZT in
Febr%ary0 &n Marc it @as generally 2T0 ?pril BpanicC 2 to >ZT0 May + to +ZT, P%ne, on te
@ole, +T0 P%ly +T0 ?%g%st + to +ZT0 $eptember +T @it tri!ling 8ariations o! +[, +Z, 6T0
3ctober +, +Z, >T0 -o8ember >-1=T0 7ecember > to +T0 I &n tis case te interest rose beca%se
pro!its decreased and te money-8al%es o! commodities !ell enormo%sly0 &!, tere!ore, 38erstone
says ere tat te rate o! interest rose in 182> beca%se te 8al%e o! capital rose, e cannot mean
anyting by 8al%e o! capital b%t te 8al%e o! money-capital, and te 8al%e o! money-capital is te
rate o! interest, and noting else0 A%t later e so@ed te clo8en oo! and identi!ied te 8al%e o!
capital @it te rate o! pro!it0
?s !or te ig rate o! interest paid in 18+6, 38erstone @as indeed ignorant o! te !act tat tis
@as partially a symptom tat te credit Hobbers @ere coming to te !ore, @o paid interest not
!rom teir pro!it, b%t @it te capital o! oters# e maintained H%st a !e@ monts be!ore te crisis
o! 18+> tat Kb%siness is D%ite so%nd0L
6e testi!ied !%rtermore: /A0;0 18+>1
K3><<0 5at idea o! te pro!its o! trade being
destroyed by a rise in te rate o! interest is most
erroneo%s0 &n te !irst place, a rise in te rate o!
interest is seldom o! any long d%ration# in te second
place, i! it is o! long d%ration, and o! great extent, it is
really a rise in te 8al%e o! capital, and @y does
<*3 ;apter JJ4&
8al%e o! capital riseQ Aeca%se te rate o! pro!it is
increased0L
6ere, ten, @e learn, at last, @at te meaning o! K8al%e o! capitalL is0 F%rtermore, te rate o!
pro!it may be ig !or a lengty period, and yet te pro!it o! enterprise may !all and te rate o!
interest rise to a point @ere it s@allo@s te greater portion o! te pro!it0
K3><20 5e rise in te rate o! interest as been in
conseD%ence o! te great increase in te trade o! te
co%ntry, and te great rise in te rate o! pro!its# and to
complain o! te rise in te rate o! interest as being
destr%cti8e o! te t@o tings, @ic a8e been its o@n
ca%se, is a sort o! logical abs%rdity, @ic one does
not kno@ o@ to deal @it0L
5is is H%st as logical as i! e @ere to say: 5e rise in te rate o! pro!it as been in conseD%ence o!
te rise in commodity-prices by spec%lation, and to complain tat te rise in prices destroys its
o@n ca%se, namely, spec%lation, is a logical abs%rdity, etc0 5at anyting can %ltimately destroy
its o@n ca%se is a logical abs%rdity only !or te %s%rer enamo%red o! te ig interest rate0 5e
greatness o! te )omans @as te ca%se o! teir conD%ests, and teir conD%ests destroyed teir
greatness0 Wealt is te ca%se o! l%x%ry and l%x%ry as a destr%cti8e e!!ect on @ealt0 5e
@iseacreS 5e idiocy o! te present-day bo%rgeois @orld cannot be better described tan by te
respect, @ic te KlogicL o! te millionaire I te d%ngill aristocrat I inspired in all England0
F%rtermore, i! a ig rate o! pro!it and an expansion o! b%siness may be ca%ses o! a ig interest
rate, a ig rate o! interest is by no means tere!ore a ca%se o! ig pro!it0 5e D%estion is
precisely @eter s%c a ig interest Bas @as act%ally disco8ered d%ring te crisisC contin%ed or,
@at is more, reaced its climax a!ter te ig rate o! pro!it ad long gone te @ay o! all !les0
K3>180 Wit regard to a great rise in te rate o!
disco%nt, tat is a circ%mstance entirely arising !rom
te increased 8al%e o! capital, and te ca%se o! tat
increased 8al%e o! capital & tink any person may
disco8er @it per!ect clearness0 & a8e already all%ded
to te !act tat d%ring te 13 years tis ?ct as been in
operation, te trade o! tis co%ntry as increased !rom
V2+,===,=== to V1<=,===,===0 'et any person re!lect
%pon all te e8ents @ic are in8ol8ed in tat sort
statement# let im consider te enormo%s demand
%pon capital !or te p%rpose o! carrying on s%c a
gigantic increase o! trade, and let im consider at te
same time tat te nat%ral so%rce !rom @ic tat
great demand so%ld be s%pplied, namely, te ann%al
sa8ings o! tis co%ntry, as !or te last tree or !o%r
<*2 ;apter JJ4&
years been cons%med in te %npro!itable expendit%re
o! @ar0 & con!ess tat my s%rprise is, tat te rate o!
interest is not m%c iger tan it is# or, in oter
@ords, my s%rprise is, tat te press%re !or capital to
carry on tese gigantic operations, is not !ar more
stringent tan yo% a8e !o%nd it to be0L
Wat an amaEing H%mble o! @ords by o%r logician o! %s%ryS 6ere e comes again @it is
increased 8al%e o! capitalS 6e seems to tink tat tis enormo%s expansion o! te reprod%ction
process, ence acc%m%lation o! real capital, took place on one side, and tat on te oter tere
existed a KcapitalL, !or @ic tere arose an Kenormo%s demandL, in order to accomplis tis
gigantic increase o! commerceS Was not tis enormo%s increase o! prod%ction an increase o!
capital itsel!, and i! it created a demand, did it not also create te s%pply, and, sim%ltaneo%sly, an
increased s%pply o! money-capitalQ &! te interest rate rose 8ery ig, ten merely beca%se te
demand !or money-capital increased still more rapidly tan its s%pply, @ic implies, in oter
@ords, tat @it te expansion o! ind%strial prod%ction its operation on a credit basis expanded as
@ell0 5at is to say, te act%al ind%strial expansion ca%sed an increased demand !or
Kaccommodation,L and te latter demand is e8idently @at o%r banker means by te Kenormo%s
demand !or capital0L &t @as s%rely not te expansion o! tis demand !or capital alone, @ic
raised te export b%siness !rom V2+ to V1<= million0 ?nd !%rtermore, @at does 38erstone mean
@en e says tat te co%ntry"s ann%al sa8ings s@allo@ed by te ;rimean War !orm te nat%ral
so%rce o! s%pply !or tis big demandQ in te !irst place, o@ did England acie8e acc%m%lation in
1>*<-181+, @ic @as a !ar di!!erent @ar !rom te little ;rimean oneQ &n te second place, i! te
nat%ral so%rce @as dry, !rom @at so%rce did capital !lo@ at allQ &t is @ell kno@n tat England did
not reD%est loans !rom !oreign co%ntries0 .et i! tere is an arti!icial so%rce besides te nat%ral one,
it @o%ld a8e been best !or a nation to %tilise te nat%ral so%rce in @ar and te arti!icial one in
b%siness0 A%t i! only te old money-capital @as a8ailable, co%ld it do%ble its e!!ecti8eness
tro%g a ig rate o! interestQ Mr0 38erstone e8idently tinks tat te co%ntry"s ann%al sa8ings
B@ic, o@e8er, @ere s%pposed to a8e been cons%med in tis caseC are con8erted only into
money-capital0 A%t i! no real acc%m%lation, i.e., expansion o! prod%ction and a%gmentation o! te
means o! prod%ction, ad taken place, @at good @o%ld tere be !rom te acc%m%lation o!
debtor"s money claims on tis prod%ctionQ
5e increase in te K8al%e o! capitalL springing !rom a ig rate o! pro!it is identi!ied by
38erstone @it an increase ca%sed by a greater demand !or money-capital0 5is demand may
climb !or reasons D%ite independent o! te rate o! pro!it0 6e imsel! cites te example o! its rise
in 182> as a res%lt o! te depreciation o! real capital0 7epending on @at s%its is p%rpose, e
ascribes te 8al%e o! capital to real capital or money-capital0
5e disonesty o! o%r banking lord, and is narro@-minded banker"s point o! 8ie@ @it its
didactic !la8o%ring are !%rter re8ealed in te !ollo@ing:
B3><80 M%estion:C K.o% a8e stated tat te rate o!
disco%nt is o! no material moment yo% tink to te
mercant# @ill yo% be kind eno%g to state @at yo%
consider te ordinary rate o! pro!itQL
Mr0 38erstone declares tat it is KimpossibleL to ans@er tis D%estion0
<*+ ;apter JJ4&
K3><*0 $%pposing te a8erage rate o! pro!it to be, say,
!rom > to 1=T, a 8ariation o! !rom < to > or 8T in te
rate o! disco%nt m%st materially a!!ect te rate o!
pro!it, m%st it notQ K
B5is D%estion itsel! l%mps togeter te rate o! pro!it o! enterprise @it te rate o! pro!it, and0
passes o8er te !act tat te rate o! pro!it is te common so%rce o! interest and pro!it o!
enterprise0 5e interest rate may lea8e te rate o! pro!it %nto%ced, b%t not te pro!it o! enterprise0
38erstone replied:C
K&n te !irst place parties @ill not pay a rate o!
disco%nt @ic serio%sly interr%pts teir pro!its# tey
@ill discontin%e teir b%siness rater tan do tat0L
B.es, i! tey can do so @ito%t r%ining temsel8es0 $o long as teir pro!it is ig, tey pay te
disco%nt beca%se tey @is to, and @en it is lo@, beca%se tey a8e to0C
KWat is te meaning o! disco%ntQ Wy does a person
disco%nt a billQ 000 Aeca%se e @ants to obtain te
command o! a greater D%antity o! capital0L
B(alte1l.R beca%se e @ants to anticipate te ret%rn in money o! is tied-%p capital and to pre8ent
is b%siness !rom stopping# beca%se e m%st meet payments d%e0 6e demands more capital only
@en b%siness is good, or @en e spec%lates on anoter"s capital, to%g b%siness may be bad0
5e disco%nt is by no means simply a de8ice to expand b%siness0C
K?nd @y does e @ant to obtain te command o! a
greater D%antity o! capitalQ Aeca%se e @ants to
employ tat capital# and @y does e @ant to employ
tat capitalQ Aeca%se it is pro!itable to im to do so# it
@o%ld not be pro!itable to im to do so i! te disco%nt
destroyed is pro!it0L
5is sm%g logician ass%mes tat bills o! excange are disco%nted only !or te p%rpose o!
expanding b%siness, and tat b%siness is expanded beca%se it is pro!itable0 5e !irst ass%mption is
@rong0 5e ordinary b%sinessman disco%nts, in order to anticipate te money-!orm o! is capital
and tereby to keep is process o! reprod%ction in !lo@# not in order to expand is b%siness or
sec%re additional capital, b%t in order to balance te credit e gi8es by te credit e recei8es0 ?nd
i! e @ants to expand is b%siness on credit, disco%nting bills @ill do im little good beca%se it is
merely con8ersion o! te money-capital @ic e already as in is ands !rom one !orm into
anoter# e @ill rater take a direct loan !or a longer period0 5e credit s@indler @ill get is
accommodation bills disco%nted to expand is b%siness acti8ity, to co8er one sD%alid b%siness
deal by anoter# not to make pro!its b%t to obtain possession o! anoter"s capital0
?!ter Mr0 38erstone as t%s identi!ied disco%nting @it borro@ing additional capital Binstead o!
@it con8erting bills representing capital into ard casC, e beats an instant retreat as soon as te
scre@s are applied to im0
B3>3=0 M%estion:C KMercants being engaged in
b%siness, m%st tey not !or a certain period carry on
<*6 ;apter JJ4&
teir operations in despite o! any temporary increase
in te rate o! disco%ntQL I B38erstone:C K5ere is no
do%bt tat in any partic%lar transaction, i! a person
can get is command o! capital at a lo@ rate o!
interest rater tan at a ig rate o! interest, taken in
tat limited 8ie@ o! te matter, tat is con8enient to
im0L
A%t it is a 8ery %nlimited point o! 8ie@, on te oter and, @ic enables Mr0 38erstone D%ite
s%ddenly to %nderstand only is, banker"s capital, as Kcapital,L and to ass%me tat te man @o
disco%nts a bill o! excange @it im is a man @ito%t capital, H%st beca%se is capital exists in
te !orm o! commodities, or beca%se te money-!orm o! is capital is a bill o! excange, @ic
Mr0 38erstone con8erts into anoter money-!orm0
3>3<0 KWit re!erence to te ?ct o! 1822, can yo%
state @at as been abo%t te a8erage rate o! interest
in proportion to te amo%nt o! b%llion in te Aank#
@o%ld it be a !act tat @en te amo%nt o! b%llion as
been abo%t V*,===,=== or V1=,===,=== te rate o!
interest as been 6 or > per cent, and tat @en it as
been V16,===,===, te rate o! interest as been, say,
!rom 3 to 2 per centQL
B5e examiner @ises to press im to explain te rate o! interest, so !ar as it is in!l%enced by te
amo%nt o! b%llion in te Aank, on te basis o! te rate o! interest, so !ar as it is in!l%enced by te
8al%e o! capital0C
K& do not appreend tat tat is so000 b%t i! it is, ten &
tink @e m%st take still more stringent meas%res tan
tose adopted by te ?ct o! 1822, beca%se i! it be tr%e
tat te greater te store o! b%llion, te lo@er te rate
o! interest, @e o%gt to set to @ork, according to tat
8ie@ o! te matter, to increase te store o! b%llion to
an inde!inite amo%nt, and ten @e so%ld get te
interest do@n to noting0L
5e examiner, ;ayley, %nmo8ed by tis poor Hoke, contin%es:
K3>330 &! tat be so, s%pposing tat V+,===,=== o!
b%llion @as to be restored to te Aank, in te co%rse
o! te next six monts te b%llion ten @o%ld amo%nt,
say, to V16,===,===, and s%pposing tat te rate o!
interest @as t%s to !all to 3 or 2 per cent, o@ co%ld
<*> ;apter JJ4&
it be stated tat tat !all in te rate o! interest arose
!rom a great decrease o! te trade o! te co%ntryQ I &
said tat te recent rise in te rate o! interest, not tat
te !all in te rate o! interest, @as closely connected
@it te great increase in te trade o! te co%ntry0L
A%t @at ;ayley says is tis: &! a rise o! interest rate togeter @it a contraction o! te gold
reser8e, is an indication o! an expansion in b%siness, ten a !all o! te interest rate togeter @it
an expansion o! te gold reser8e, m%st be an indication o! a contraction o! b%siness0 38erstone
as no ans@er to tis0
B3>360 M%estion:C K& obser8ed yo%L Bin te text al@ays
K.o%r 'ordsipLC Kto say tat money @as te
instr%ment !or obtaining capital0L
B,recisely tis is te mistake, to concei8e money as an instr%ment# it is a !orm o! capital0C
K(nder a drain o! b%llion Bo! te Aank o! EnglandC is
not te great strain, on te contrary, !or capitalists to
obtain moneyQL I B38erstone:C K-o, it is not te
capitalists, it is tose @o are not capitalists, @o
@ant to obtain money and @y do tey @ant to obtain
moneyQ 000 Aeca%se tro%g te money tey obtain te
command o! te capital o! te capitalist to carry on
te b%siness o! te persons @o are not capitalists0L
6ere e declares point-blank tat man%!act%rers and mercants are not capitalists, and tat te
capitalist"s capital is only money-capital0
K3>3>0 ?re not te parties @o dra@ bills o! excange
capitalistsQ I 5e parties @o dra@ bills o! excange
may be, and may not be, capitalists0L
6ere e is st%ck0
6e is ten asked @eter mercants" bills o! excange represent commodities @ic a8e been
sold or sipped0 6e denies tat tese bills represent te 8al%e o! commodities in te same @ay
tat a bank-note represents gold0 B3>2=, 3>210C 5is is some@at insolent0
K3>2<0 &s it not te mercant"s obHect to get moneyQ I
-o# getting money is not te obHect in dra@ing te
bill# getting money is te obHect in disco%nting te
bill0L
7ra@ing bills o! excange is con8erting commodities into a !orm o! credit-money, H%st as
disco%nting bills o! excange is con8erting tis credit-money into anoter, namely bank-notes0 ?t
any rate, Mr0 38erstone admits ere tat te p%rpose o! disco%nting is to obtain money0 ? @ile
ago e said tat disco%nting @as a @ay not o! con8erting capital !rom one !orm into anoter, b%t
o! obtaining additional capital0
<*8 ;apter JJ4&
K3>230 Wat is te great desire o! te mercantile
comm%nity %nder press%re o! panic, s%c as yo% state
to a8e occ%rred in 18<+, 183> and 183*# is teir
obHect to get possession o! capital or te legal tenderQ
I 5eir obHect is to get te command o! capital to
s%pport teir b%siness0L
5eir p%rpose is to obtain means o! payment !or d%e bills o! excange on temsel8es, on acco%nt
o! te pre8ailing lack o! credit, so tat tey @ill not a8e to let teir commodities go belo@ price0
&! tey a8e no capital at all temsel8es, tey recei8e it along @it te means o! payment, beca%se
tey recei8e 8al%e @ito%t an eD%i8alent0 5e %rge to obtain money as s%c consists al@ays in te
@is to con8ert 8al%e !rom te !orm o! commodities or creditor"s claims into te !orm o! money0
6ence, e8en aside !rom te crises, te great di!!erence bet@een borro@ing capital and disco%nt,
te latter being a mere con8ersion o! money claims !rom one !orm into anoter, or into real
money0
/& take te liberty at tis point in my capacity o! editor to interpolate a !e@ remarks0
Wit respect to -orman, as @ell as 'oyd-38erstone, te banker is al@ays te one @o Kad8ances
capitalL to oters, and is c%stomers are tose @o demand KcapitalL !rom im0 5%s, 38erstone
says tat people a8e bills o! excange disco%nted tro%g im, Kbeca%se tey @is to obtain te
command o!capitalL B3><*C, and tat it is pleasant !or s%c people i! tey can Kget command of
capital at a lo@ rate o! interestL B3>3=C0 KMoney is te instr%ment !or obtaining capitalL B3>36C,
and d%ring a panic te great desire o! te mercantile comm%nity is to Kget te command o!
capitalL B3>23C0 For all o! 'oyd-38erstone"s con!%sion o8er @at capital is, it is at least clear tat
e designates @at te banker gi8es to is client as capital, as a capital @ic te client did not
!ormerly possess, b%t @ic @as ad8anced to im to s%pplement @at e already possessed0
5e banker as become so acc%stomed to act as distrib%tor Btro%g loansC o! te social capital
a8ailable in money-!orm tat e considers e8ery !%nction @ereby e ands o%t money, as
loaning0 ?ll te money e pays o%t appears to im as a loan0 &! te money is directly loaned, tis
is literally tr%e0 &! it is in8ested in te bill-disco%nting b%siness, it is in !act ad8anced by imsel!
%ntil te bill becomes d%e0 5e notion t%s gro@s on im tat all te payments e makes are
ad8ances# !%rtermore, tat tey are ad8ances not merely in te sense tat e8ery in8estment o!
money @it te obHect o! deri8ing interest or pro!it, is economically considered an ad8ance o!
money @ic te o@ner o! money concerned, in is capacity o! pri8ate indi8id%al, makes to
imsel! in is capacity as entreprene%r, b%t ad8ances in te de!inite sense tat te banker lends is
client a s%m o! money @ic a%gments te capital already at te latter"s disposal0
&t is tis conception, @ic, trans!erred !rom te banker"s o!!ice to political economy, as created
te con!%sing contro8ersy, @eter tat @ic te banker places at is client"s disposal in ard
cas is capital or mere money, a medi%m o! circ%lation, or c%rrency0 5o decide tis I
!%ndamentally simple I contro8ersy, @e m%st p%t o%rsel8es in te place o! a bank client0 &t all
depends on @at tis c%stomer reD%ests and recei8es0
&! te bank allo@s its client a loan simply on is personal credit, @ito%t any sec%rity on is part,
ten te matter is clear0 6e ten certainly recei8es an ad8ance o! de!inite 8al%e as a s%pplement to
te capital e as already in8ested0 6e recei8es it in te !orm o! money# ence, not merely money,
b%t also money-capital.
&!, on te oter and, e recei8es te ad8ance against sec%rities, etc0, ten it is an ad8ance in te
sense o! money paid to im on condition tat e pay it back0 A%t it is not an ad8ance o! capital0
For te sec%rities also represent capital, and a larger amo%nt at tat tan te ad8ance0 5e
recipient tere!ore recei8es less capital-8al%e tan e deposits as sec%rity# tis represents !or im
<** ;apter JJ4&
no acD%isition o! additional capital0 6e does not enter into te transaction beca%se e needs
capital I e as tat in is sec%rities I b%t beca%se e needs money0 6ere @e, tere!ore, a8e an
ad8ance o! money, not o! capital0
&! te loan is granted by disco%nting bills, ten e8en te form o! an ad8ance disappears0 5en it is
p%rely a matter o! b%ying and selling0 5e bill passes by endorsement into te possession o! te
bank, @ile te money passes into te possession o! te client0 5ere is no D%estion o! any ret%rn
payment on is part0 &! te client b%ys ard cas @it a bill o! excange or some similar
instr%ment o! credit, it is no more and no less an ad8ance tan @ere e to b%y cas money @it
is oter commodities, s%c as cotton, iron, or corn0 $till less can tis be called an ad8ance o!
capital. E8ery p%rcase and sale bet@een one mercant and anoter is a trans!er o! capital0 A%t an
ad8ance o! capital occ%rs only @en te trans!er o! capital is not reciprocal, b%t %nilateral and !or
a period o! time0 ?n ad8ance o! capital tro%g disco%nt can, tere!ore, only occ%r @en a bill is
a spec%lati8e one, @ic does not represent any sold commodities, and no banker @ill take s%c a
bill i! e is a@are o! its nat%re0 &n te reg%lar disco%nting b%siness te bank client does not,
tere!ore, recei8e an ad8ance, eiter o! capital or o! money0 Wat e recei8es is money !or sold
commodities0
5e cases in @ic te c%stomer demands and recei8es capital !rom a bank are t%s clearly
disting%ised !rom tose, in @ic e merely recei8es an ad8ance o! money, or b%ys money !rom
te bank0 ?nd since least o! all Mr0 'oyd-38erstone e8er ad8anced is !%nds @ito%t collateral
except on te rarest occasions Be @as te banker o! my !irm in MancesterC, it is like@ise
e8ident tat is lyric descriptions o! te great D%antities o! capital loaned by genero%s bankers to
man%!act%rers in need o! capital are gross in8entions0
Ay te @ay, in ;apter JJJ&& Marx says essentially te same ting: K5e demand !or means o!
payment is a mere demand !or convertibility into money, so !ar as mercants and prod%cers a8e
good sec%rities to o!!er# it is a demand !or money1capital @ene8er tere is no collateral, so tat
an ad8ance o! means o! payment gi8es tem not only te form of money b%t also te e3uivalent
tey lack, @ate8er its !orm, @it @ic to make payment0L I ?nd again in ;apter JJJ&&&:
K(nder a de8eloped system o! credit, @it te money concentrated in te ands o! bankers, it is
tey, at least nominally,@o ad8ance it0 5is ad8ance re!ers only to money in circ%lation0 &t is an
ad8ance o! circulation, not an ad8ance o! capitals @ic it circ%lates0L Mr0 ;apman, @o so%ld
kno@, like@ise corroborates tis conception o! te disco%nting b%siness: A0 ;0 18+>:
K5e banker as te bill, te banker as bought the
bill./E8id0 M%estion +13*0
We sall, o@e8er, ret%rn to tis s%bHect in ;apter JJ4&&&0 I '. 0.1
K3>220 Will yo% be good eno%g to describe @at yo%
act%ally mean by te term fcapitalGQL I B38erstone:C
K;apital consists o! 8ario%s commodities, by means
o! @ic trade is carried on# tere is !ixed capital and
tere is circ%lating capital0 .o%r sips, yo%r docks,
yo%r @ar8es 000 are !ixed capital# yo%r pro8isions,
yo%r clotes, etc0, are circ%lating capital0L
K3>2+0 &s te co%ntry oppressed %nder a drain o!
b%llionQ I -ot in te rational sense o! te @ord0L
B5en comes te old )icardian teory o! money0C
3== ;apter JJ4&
K&n te nat%ral state o! tings te money o! te @orld
is distrib%ted amongst te di!!erent co%ntries o! te
@orld in certain proportions, tose proportions being
s%c tat %nder tat distrib%tion Bo! moneyC te
interco%rse bet@een any one co%ntry and all te oter
co%ntries o! te @orld Hointly @ill be an interco%rse o!
barter# b%t dist%rbing circ%mstances @ill arise to
a!!ect tat distrib%tion, and @en tose arise, a certain
portion o! te money o! any gi8en co%ntry passes to
oter co%ntries0L I K3>260 .o%r 'ordsip no@ %ses te
term fmoney0G & %nderstood yo% be!ore to say tat it
@as a loss o! capital0 I 5at @at @as a loss o!
capitalQL I K3>2>0 5e export o! b%llionQ I -o, & did
not say so0 &! yo% treat b%llion as capital, no do%bt it is
a loss o! capital# it is parting @it a certain proportion
o! tose precio%s metals @ic constit%te te money
o! te @orld0L I K3>280 & %nderstood .o%r 'ordsip to
say tat an alteration in te rate o! disco%nt @as a
mere sign o! an alteration in te 8al%e o! capitalQ I &
did0L I K3>2*0 ?nd tat te rate o! disco%nt generally
alters @it te state o! te store o! b%llion in te Aank
o! EnglandQ I .es, b%t & a8e already stated tat te
!l%ct%ations in te rate o! interest, @ic arise !rom an
alteration in te D%antity o! moneyL B@at e
tere!ore means ere is te D%antity o! act%ally
existing goldC Kin a co%ntry, are 8ery small0L
K3>+=0 5en, does .o%r 'ordsip mean tat tere is a
less capital tan tere @as, @en tere is a more
contin%o%s yet temporary increase in te rate o!
disco%nt tan %s%alQ I 'ess, in one sense o! te @ord0
5e proportion bet@een capital and te demand !or it
is altered# it may be by an increased demand, not by a
dimin%tion o! te D%antity o! capital0L
BA%t a moment ago it @as capital R money or gold, and a little be!ore tat e ad explained te
rise in interest rate by a ig rate o! pro!it, d%e to an expansion rater tan a contraction o!
b%siness or capital0C
3=1 ;apter JJ4&
K3>+10 Wat is te capital @ic yo% partic%larly
all%de toQ I 5at depends entirely %pon @at te
capital is @ic eac person @ants0 &t is te capital
@ic te co%ntry as at its command !or cond%cting
its b%siness, and @en tat b%siness is do%bled, tere
m%st be a great increase in te demand !or te capital
@it @ic it is to be carried on0L
B5is sre@d banker do%bles !irst te b%siness acti8ity and ten te demand !or capital @it
@ic it is to be do%bled0 ?ll e sees is is client, @o asks Mr0 'oyd !or more capital by @ic
to do%ble te 8ol%me o! is b%siness0C
K;apital is like any oter commodityL Bb%t according
to Mr0 'oyd capital is noting b%t te totality o!
commoditiesC, Kit @ill 8ary in its priceL Bence,
commodities cange teir price t@ice, one time as
commodities and te second as capitalC, Kaccording to
te s%pply and demand0L
K3>+<0 5e canges in te rate o! disco%nt are
generally connected @it te canges in te amo%nt
o! gold @ic tere is in te co!!ers o! te Aank0 &s it
tat capital to @ic .o%r 'ordsip re!ersQ I -o0L I
K3>+30 ;an .o%r 'ordsip point to any instance in
@ic tere as been a large store o! capital in te
Aank o! England connected @it a ig rate o!
disco%ntQ I 5e Aank o! England is not a place !or te
deposit o! capital, it is a place !or te deposit o!
money0L I K3>+20 .o%r 'ordsip as stated tat te
rate o! interest depends %pon te amo%nt o! capital#
@ill yo% be kind eno%g to state @at capital yo%
mean, and @eter yo% can point to any instance in
@ic tere as been a large store o! b%llion in te
Aank and at te same time a ig rate o! interestQ I &t
is 8ery probable BaaSC tat te acc%m%lation o!
b%llion in te Aank may be coincident @it a lo@ rate
o! interest, beca%se a period in @ic tere is a
diminised demand !or capitalL
3=< ;apter JJ4&
Bnamely, money-capital# te period to @ic re!erence is made ere, 1822 and 182+, @as a period
o! prosperityC
Kis a period, d%ring @ic, o! co%rse, te means or
instr%ment tro%g @ic yo% command capital may
acc%m%late0L I K3>++0 5en yo% tink tat tere is no
connection bet@een te rate o! disco%nt and te
amo%nt o! b%llion in te co!!ers o! te AankQ I 5ere
may be a connection, b%t it is not a connection o!
principleL Bis Aank ?ct o! 1822, o@e8er, made it a
principle o! te Aank o! England to reg%late te
interest rate by te D%antity o! b%llion in its
possessionC, Ktere may be a coincidence o! time0L I
K3>+80 7o & rigtly %nderstand yo% to say, tat te
di!!ic%lty o! mercants in tis co%ntry, %nder a state o!
press%re, in conseD%ence o! a ig rate o! disco%nt, is
in getting capital, and not in getting moneyQ I .o% are
p%tting t@o tings togeter @ic & do not Hoin in tat
!orm# teir di!!ic%lty is in getting capital, and teir
di!!ic%lty also is in getting money0000 5e di!!ic%lty o!
getting money and te di!!ic%lty o! getting capital is
te same di!!ic%lty taken in t@o s%ccessi8e stages o!
its progress0L
6ere te !is is ca%gt in te net again0 5e !irst di!!ic%lty is to disco%nt a bill o! excange,
or to obtain a loan against te sec%rity o! commodities0 &t is te di!!ic%lty o! con8erting capital, or
a commercial token o! capital into money0 ?nd tis di!!ic%lty is mani!ested, among oter tings,
in a ig rate o! interest0 A%t as soon as te money is obtained, @at is te second di!!ic%ltyQ
7oes anyone e8er !ind any di!!ic%lty in getting rid o! is money @en it is merely a matter o!
payingQ ?nd i! it is a matter o! b%ying, as anyone e8er ad any di!!ic%lty in p%rcasing d%ring
times o! crisisQ ?nd, !or te sake o! arg%ment, so%ld tis re!er to a speci!ic deart in corn,
cotton, etc0, tis di!!ic%lty co%ld only appear in te price o! tese commodities, not in te 8al%e o!
money-capital, i0e0, not in te rate o! interest# and tis di!!ic%lty is o8ercome, in te !inal analysis,
by te !act tat o%r man no@ as te money to b%y tem0
K3>6=0 A%t a iger rate o! disco%nt is an increased
di!!ic%lty o! getting moneyQ I &t is an increased
di!!ic%lty o! getting money, b%t it is not beca%se yo%
@ant to a8e te money# it is only te !ormL Band tis
!orm brings pro!it into te banker"s pocketC Kin @ic
te increased di!!ic%lty o! getting capital presents
3=3 ;apter JJ4&
itsel! according to te complicated relations o! a
ci8ilised state0L
K3>630 B38erstone"s reply:C 5e banker is te go-
bet@een @o recei8es deposits on te one side, and
on te oter applies tose deposits, entr%sting tem,
in the form of capital, to te ands o! persons, @o,
etc0L
?t last @e a8e @at e means by capital0 6e con8erts money into capital by Kentr%stingL it, less
e%pemistically, by loaning it at interest0
?!ter Mr0 38erstone as stated tat a cange in te rate o! disco%nt is not essentially connected
@it a cange in D%antity o! te gold reser8e in a bank, or in te D%antity o! a8ailable money, b%t
tat tere is at best only a coincidence in time, e repeats:
K38=+0 Wen te money in te co%ntry is diminised
by a drain, its 8al%e increases, and te Aank o!
England m%st con!orm to tat alteration in te 8al%e
o! moneyL
Bence, te 8al%e o! money as capitalP in oter @ords, te rate o! interest, !or te 8al%e o! money
as money, compared @it commodities, remains te sameC,
K@ic is meant by te tecnical term o! raising te
rate o! interest0L
K381*0 & ne8er con!o%nd tose t@o0L
Meaning money and capital, and !or te simple reason tat e ne8er di!!erentiated bet@een tem0
K38320 5e 8ery large s%m, @ic ad to be paidL B!or
corn in 182>C, K@ic @as in point of fact capital, !or
te s%pply o! te necessary pro8isions o! te co%ntry0L
K38210 5e 8ariations in te rate o! disco%nt a8e no
do%bt a 8ery close relation to te state o! te reser8e K
Bo! te Aank o! EnglandC, Kbeca%se te state o! te
reser8e is te indicator o! te increase or te decrease
o! te D%antity o! money in te co%ntry# and in
proportion as te money in te co%ntry increases or
decreases, te 8al%e o! tat money @ill increase or
decrease, and te bank-rate o! disco%nt @ill con!orm
to tat cange0L
5%s, 38erstone admits ere @at e empatically denied in -o0 3>++0
3=2 ;apter JJ4&
K382<0 5ere is an intimate connection bet@een
tem0L
Meaning te D%antity o! b%llion in te iss%e department, on te one and, and te reser8e o! notes
in te banking department, on te oter0 6ere e explains te cange in te rate o! interest by te
cange in te D%antity o! money0 A%t tis statement is @rong0 5e reser8e may srink beca%se te
circ%lating money in te co%ntry increases0 5is is te case @en te p%blic takes more notes and
te oard o! metal does not decrease0 A%t in s%c case te interest rate rises, beca%se ten te
banking capital o! te Aank o! England is limited by te ?ct o! 18220 A%t e dare not mention
tis, beca%se d%e to tis la@ te t@o departments a8e noting to do @it one anoter0
K38+*0 ? ig rate o! pro!it @ill al@ays create a great
demand !or capital# a great demand !or capital @ill
raise te 8al%e o! it0L
6ere, at last, @e a8e te connection bet@een a ig rate o! pro!it and a demand !or capital as
38erstone concei8es it0 -o@, a ig rate o! pro!it pre8ailed in, !or example, 1822-2+ in te cotton
ind%stry, beca%se ra@ cotton @as ceap, and remained so, @ereas te demand !or cotton goods
@as strong0 5e 8al%e o! capital Band in an earlier statement 38erstone calls capital tat @ic
e8eryone needs in is b%sinessC, in tis case tere!ore te 8al%e o! ra@ cotton, @as not increased
!or te man%!act%rer0 5e ig rate o! pro!it may a8e ind%ced some cotton man%!act%rer to
obtain money on credit !or te p%rpose o! expanding is b%siness0 5ereby is demand rose !or
money-capital, b%t !or noting else0
K388*0 A%llion may or may not be money, H%st as
paper may or may not be a bank-note0L
K38*60 7o & correctly %nderstand .o%r 'ordsip tat
yo% gi8e %p te arg%ment, @ic yo% %sed in 182=,
tat te !l%ct%ations in te notes o%t o! te Aank o!
England o%gt to con!orm to te !l%ct%ations in te
amo%nt o! b%llionQ I & gi8e it %p so !ar as tis000 tat
no@ @it te means o! in!ormation @ic @e possess,
te notes o%t o! te Aank o! England m%st a8e added
to tem te notes @ic are in te banking reser8e o!
te Aank o! England0L
5is is s%perlati8e0 5e arbitrary pro8ision tat te Aank may make o%t as many paper notes as it
as gold in te treas%ry and 12 million more, implies, o! co%rse, tat its iss%e o! notes !l%ct%ates
@it te !l%ct%ations o! te gold reser8e0 A%t since te present Kmeans o! in!ormation @ic @e
possessL clearly so@ed tat te mass o! notes, @ic te Aank can t%s man%!act%re Band @ic
te iss%e department trans!ers to te banking departmentC I tat tis circ%lation bet@een te t@o
departments o! te Aank o! England, !l%ct%ating @it te !l%ct%ations o! te gold reser8e, does
not determine te !l%ct%ations in te circ%lation o! bank-notes o%tside te Aank o! England, ten
te latter I te real circ%lation I becomes a matter o! indi!!erence to te bank administration, and
te circ%lation bet@een te t@o departments o! te Aank, @ose di!!erence !rom te real
circ%lation is mirrored in te reser8e, alone becomes decisi8e0 5o te o%tside @orld tis internal
circ%lation is signi!icant only beca%se te reser8e indicates o@ close te Aank is approacing te
3=+ ;apter JJ4&
legal maxim%m o! its note iss%e, and o@ m%c its clients can still recei8e !rom te banking
department0
5e !ollo@ing is a brilliant example o! 38erstone"s mala fidesI
K2<230 7oes te D%antity o! capital, do yo% tink,
oscillate !rom mont to mont to s%c a degree as to
alter its 8al%e in te @ay exibited o! late years in te
oscillations in te rate o! disco%ntQ I 5e relation
bet@een te demand and te s%pply o! capital may
%ndo%btedly !l%ct%ate e8en @itin sort periods0000 &!
France tomorro@ p%t o%t a notice tat se @ises to
borro@ a 8ery large loan, tere is no do%bt tat it
@o%ld immediately ca%se a great alteration in the
value of money, tat is to say, in the value of capital,
in tis co%ntry0L
K2<2+0 &! France anno%nces, tat se @ants s%ddenly,
!or any p%rpose, 3= million"s @ort o! commodities
tere @ill be a great demand !or capital, to %se te
more scienti!ic and te simpler term0L
K2<260 5e capital, @ic France @o%ld @is to b%y
@it er loan, is one ting, and te money @it @ic
se b%ys it is another, is it te money, @ic alters in
8al%e, or notQ I We seem to be re8i8ing te old
D%estion, @ic & tink is more !it !or te camber o!
a st%dent tan !or tis committee room0L
?nd @it tis e retires, b%t not into te camber o! a st%dent0
<

Chapter 27. The Role of Credit in Capitalist
Production
5e general remarks, @ic te credit system so !ar elicited !rom %s, @ere te !ollo@ing:
&0 &ts necessary de8elopment to e!!ect te eD%alisation o! te rate o! pro!it, or te mo8ements o!
tis eD%alisation, %pon @ic te entire capitalist prod%ction rests0
&&0 )ed%ction o! te costs o! circ%lation0
1C 3ne o! te principal costs o! circ%lation is money itsel!, being 8al%e in itsel!0 &t is economised
tro%g credit in tree @ays0
?0 Ay dropping a@ay entirely in a great many transactions0
A0 Ay te accelerated circ%lation o! te circ%lating medi%m0
i8
5is corresponds in part @it @at
is to be said %nder <C0 3n te one and, te acceleration is tecnical# i.e., @it te same
magnit%de and n%mber o! act%al t%rno8ers o! commodities !or cons%mption, a smaller D%antity o!
money or money tokens per!orms te same ser8ice0 5is is bo%nd %p @it te tecniD%e o!
banking0 3n te oter and, credit accelerates te 8elocity o! te metamorposes o! commodities
and tereby te 8elocity o! money circ%lation0
;0 $%bstit%tion o! paper !or gold money0
<C ?cceleration, by means o! credit, o! te indi8id%al pases o! circ%lation or o! te
metamorposis o! commodities, later te metamorposis o! capital, and @it it an acceleration o!
te process o! reprod%ction in general0 B3n te oter and, credit elps to keep te acts o! b%ying
and selling longer apart and ser8es tereby as a basis !or spec%lation0C ;ontraction o! reser8e
!%nds, @ic may be 8ie@ed in t@o @ays: as a red%ction o! te circ%lating medi%m, on te one
and, and, on te oter, as a red%ction o! tat part o! capital @ic m%st al@ays exist in te !orm
o! money0
8

&&&0 Formation o! stock companies0 5ereby:
1C ?n enormo%s expansion o! te scale o! prod%ction and o! enterprises, tat @as impossible !or
indi8id%al capitals0 ?t te same time, enterprises tat @ere !ormerly go8ernment enterprises,
become p%blic0
<C 5e capital, @ic in itsel! rests on a social mode o! prod%ction and pres%pposes a social
concentration o! means o! prod%ction and labo%r-po@er, is ere directly endo@ed @it te !orm
o! social capital Bcapital o! directly associated indi8id%alsC as distinct !rom pri8ate capital, and its
%ndertakings ass%me te !orm o! social %ndertakings as distinct !rom pri8ate %ndertakings0 &t is
te abolition o! capital as pri8ate property @itin te !rame@ork o! capitalist prod%ction itsel!0
3C 5rans!ormation o! te act%ally !%nctioning capitalist into a mere manager, administrator o!
oter people"s capital, and o! te o@ner o! capital into a mere o@ner, a mere money-capitalist0
E8en i! te di8idends @ic tey recei8e incl%de te interest and te pro!it o! enterprise, i.e., te
total pro!it B!or te salary o! te manager is, or so%ld be, simply te @age o! a speci!ic type o!
skilled labo%r, @ose price is reg%lated in te labo%r-market like tat o! any oter labo%rC, tis
total pro!it is ence!ort recei8ed only in te !orm o! interest, i.e., as mere compensation !or
o@ning capital tat no@ is entirely di8orced !rom te !%nction in te act%al process o!
reprod%ction, H%st as tis !%nction in te person o! te manager is di8orced !rom o@nersip o!
capital0 ,ro!it t%s appears Bno longer only tat portion o! it, te interest, @ic deri8es its
H%sti!ication !rom te pro!it o! te borro@erC as a mere appropriation o! te s%rpl%s-labo%r o!
3=> ;apter JJ4&&
oters, arising !rom te con8ersion o! means o! prod%ction into capital, i.e., !rom teir alienation
8is-O-8is te act%al prod%cer, !rom teir antitesis as anoter"s property to e8ery indi8id%al
act%ally at @ork in prod%ction, !rom manager do@n to te last day-labo%rer0 &n stock companies
te !%nction is di8orced !rom capital o@nersip, ence also labo%r is entirely di8orced !rom
o@nersip o! means o! prod%ction and s%rpl%s-labo%r0 5is res%lt o! te %ltimate de8elopment o!
capitalist prod%ction is a necessary transitional pase to@ards te recon8ersion o! capital into te
property o! prod%cers, alto%g no longer as te pri8ate property o! te indi8id%al prod%cers, b%t
rater as te property o! associated prod%cers, as o%trigt social property0 3n te oter and, te
stock company is a transition to@ard te con8ersion o! all !%nctions in te reprod%ction process
@ic still remain linked @it capitalist property, into mere !%nctions o! associated prod%cers,
into social !%nctions0
Ae!ore @e go any !%rter, tere is still te !ollo@ing economically important !act to be noted:
$ince pro!it ere ass%mes te p%re !orm o! interest, %ndertakings o! tis sort are still possible i!
tey yield bare interest, and tis is one o! te ca%ses, stemming te !all o! te general rate o!
pro!it, since s%c %ndertakings, in @ic te ratio o! constant capital to te 8ariable is so
enormo%s, do not necessarily enter into te eD%alisation o! te general rate o! pro!it0
/$ince Marx @rote te abo8e, ne@ !orms o! ind%strial enterprises a8e de8eloped, as @e kno@,
representing te second and tird degree o! stock companies0 5e daily gro@ing speed @it
@ic prod%ction may be enlarged in all !ields o! large-scale ind%stry today, is o!!set by te e8er-
greater slo@ness @it @ic te market !or tese increased prod%cts expands0 Wat te !ormer
t%rns o%t in monts, can scarcely be absorbed by te latter in years0 ?dd to tis te protecti8e
tari!! policy, by @ic e8ery ind%strial co%ntry s%ts itsel! o!! !rom all oters, partic%larly !rom
England, and also arti!icially increases domestic prod%ction capacity0 5e res%lts are a general
cronic o8er-prod%ction, depressed prices, !alling and e8en @olly disappearing pro!its# in sort,
te old boasted !reedom o! competition as reaced te end o! its teter and m%st itsel! anno%nce
its ob8io%s, scandalo%s bankr%ptcy0 ?nd in e8ery co%ntry tis is taking place tro%g te big
ind%strialists o! a certain branc Hoining in a cartel !or te reg%lation o! prod%ction0 ? committee
!ixes te D%antity to be prod%ced by eac establisment and is te !inal a%tority !or distrib%ting
te incoming orders0 3ccasionally e8en international cartels @ere establised, as bet@een te
Englis and :erman iron ind%stries0 A%t e8en tis !orm o! association in prod%ction did not
s%!!ice0 5e antagonism o! interests bet@een te indi8id%al !irms broke tro%g it only too o!ten,
restoring competition0 5is led in some brances, @ere te scale o! prod%ction permitted, to te
concentration o! te entire prod%ction o! tat branc o! ind%stry in one big Hoint-stock company
%nder single management0 5is as been repeatedly e!!ected in ?merica# in E%rope te biggest
example so !ar is te (nited ?lkali 5r%st, @ic as bro%gt all Aritis alkali prod%ction into te
ands o! a single b%siness !irm0 5e !ormer o@ners o! te more tan tirty indi8id%al plants a8e
recei8ed sares !or te appraised 8al%e o! teir entire establisments, totalling abo%t V+ million,
@ic represent te !ixed capital o! te tr%st0 5e tecnical management remains in te same
ands as be!ore, b%t b%siness control is concentrated in te ands o! te general management0 5e
!loating capital, totalling abo%t V1 million, @as o!!ered to te p%blic !or s%bscription0 5e total
capital is, tere!ore, V6 million0 5%s, in tis branc, @ic !orms te basis o! te @ole cemical
ind%stry, competition as been replaced by monopoly in England, and te road as been pa8ed,
most grati!yingly, !or !%t%re expropriation by te @ole o! society, te nation0 I '.0.1
5is is te abolition o! te capitalist mode o! prod%ction @itin te capitalist mode o! prod%ction
itsel!, and ence a sel!-dissol8ing contradiction, @icprima facie represents a mere pase o!
transition to a ne@ !orm o! prod%ction0 &t mani!ests itsel! as s%c a contradiction in its e!!ects0 &t
establises a monopoly in certain speres and tereby reD%ires state inter!erence0 &t reprod%ces a
ne@ !inancial aristocracy, a ne@ 8ariety o! parasites in te sape o! promoters, spec%lators and
simply nominal directors# a @ole system o! s@indling and ceating by means o! corporation
3=8 ;apter JJ4&&
promotion, stock iss%ance, and stock spec%lation0 &t is pri8ate prod%ction @ito%t te control o!
pri8ate property0
&40 ?side !rom te stock-company b%siness, @ic represents te abolition o! capitalist pri8ate
ind%stry on te basis o! te capitalist system itsel! and destroys pri8ate ind%stry as it expands and
in8ades ne@ speres o! prod%ction, credit o!!ers to te indi8id%al capitalist# or to one @o is
regarded a capitalist, absol%te control @itin certain limits o8er te capital and property o! oters,
and tereby o8er te labo%r o! oters0
8i
5e control o8er social capital, not te indi8id%al capital
o! is o@n, gi8es im control o! social labo%r0 5e capital itsel!, @ic a man really o@ns or is
s%pposed to o@n in te opinion o! te p%blic, becomes p%rely a basis !or te s%perstr%ct%re o!
credit0 5is is partic%larly tr%e o! @olesale commerce, tro%g @ic te greatest portion o! te
social prod%ct passes0 ?ll standards o! meas%rement, all exc%ses more or less still H%sti!ied %nder
capitalist prod%ction, disappear ere0 Wat te spec%lating @olesale mercant risks is social
property, not his own. ED%ally sordid becomes te prase relating te origin o! capital to sa8ings,
!or @at e demands is tat others so%ld sa8e !or im0 /P%st as all France recently sa8ed %p one
and a al! billion !rancs !or te ,anama ;anal s@indlers0 &n !act, a description o! te entire
,anama s@indle is ere correctly anticipated, !%lly t@enty years be!ore it occ%rred0 I '.0.1 5e
oter prase concerning abstention is sD%arely re!%ted by is l%x%ry, @ic is no@ itsel! a means
o! credit0 ;onceptions @ic a8e some meaning on a less de8eloped stage o! capitalist
prod%ction, become D%ite meaningless ere0 $%ccess and !ail%re bot lead ere to a centralisation
o! capital, and t%s to expropriation on te most enormo%s scale0 Expropriation extends ere !rom
te direct prod%cers to te smaller and te medi%m-siEed capitalists temsel8es0 &t is te point o!
depart%re !or te capitalist mode o! prod%ction# its accomplisment is te goal o! tis prod%ction0
&n te last instance, it aims at te expropriation o! te means o! prod%ction !rom all indi8id%als0
Wit te de8elopment o! social prod%ction te means o! prod%ction cease to be means o! pri8ate
prod%ction and prod%cts o! pri8ate prod%ction, and can terea!ter be only means o! prod%ction in
te ands o! associated prod%cers, i.e., te latter"s social property, m%c as tey are teir social
prod%cts0 6o@e8er, tis expropriation appears @itin te capitalist system in a contradictory
!orm, as appropriation o! social property by a !e@# and credit lends te latter more and more te
aspect o! p%re ad8ent%rers0 $ince property ere exists in te !orm o! stock, its mo8ement and
trans!er become p%rely a res%lt o! gambling on te stock excange, @ere te little !is are
s@allo@ed by te sarks and te lambs by te stock-excange @ol8es0 5ere is antagonism
against te old !orm in te stock companies, in @ic social means o! prod%ction appear as
pri8ate property# b%t te con8ersion to te !orm o! stock still remains ensnared in te trammels o!
capitalism# ence, instead o! o8ercoming te antitesis bet@een te caracter o! @ealt as social
and as pri8ate @ealt, te stock companies merely de8elop it in a ne@ !orm0
5e co-operati8e !actories o! te labo%rers temsel8es represent @itin te old !orm te !irst
spro%ts o! te ne@, alto%g tey nat%rally reprod%ce, and m%st reprod%ce, e8ery@ere in teir
act%al organisation all te sortcomings o! te pre8ailing system0 A%t te antitesis bet@een
capital and labo%r is o8ercome @itin tem, i! at !irst only by @ay o! making te associated
labo%rers into teir o@n capitalist, i.e., by enabling tem to %se te means o! prod%ction !or te
employment o! teir o@n labo%r0 5ey so@ o@ a ne@ mode o! prod%ction nat%rally gro@s o%t
o! an old one, @en te de8elopment o! te material !orces o! prod%ction and o! te
corresponding !orms o! social prod%ction a8e reaced a partic%lar stage0 Wito%t te !actory
system arising o%t o! te capitalist mode o! prod%ction tere co%ld a8e been no co-operati8e
!actories0 -or co%ld tese a8e de8eloped @ito%t te credit system arising o%t o! te same mode
o! prod%ction0 5e credit system is not only te principal basis !or te grad%al trans!ormation o!
capitalist pri8ate enterprises into capitalist stock companies, b%t eD%ally o!!ers te means !or te
grad%al extension o! co-operati8e enterprises on a more or less national scale0 5e capitalist stock
companies, as m%c as te co-operati8e !actories, so%ld be considered as transitional !orms !rom
3=* ;apter JJ4&&
te capitalist mode o! prod%ction to te associated one, @it te only distinction tat te
antagonism is resol8ed negati8ely in te one and positi8ely in te oter0
$o !ar @e a8e considered te de8elopment o! te credit system I and te implicit latent abolition
o! capitalist property I mainly @it re!erence to ind%strial capital0 &n te !ollo@ing capters @e
sall consider credit @it re!erence to interest-bearing capital as s%c, and to its e!!ect on tis
capital, and te !orm it tereby ass%mes# and tere are generally a !e@ more speci!ically
economic remarks still to be made0
A%t !irst tis:
5e credit system appears as te main le8er o! o8er-prod%ction and o8er-spec%lation in commerce
solely beca%se te reprod%ction process, @ic is elastic by nat%re, is ere !orced to its extreme
limits, and is so !orced beca%se a large part o! te social capital is employed by people @o do
not o@n it and @o conseD%ently tackle tings D%ite di!!erently tan te o@ner, @o anxio%sly
@eigs te limitations o! is pri8ate capital in so !ar as e andles it imsel!0 5is simply
demonstrates te !act tat te sel!-expansion o! capital based on te contradictory nat%re o!
capitalist prod%ction permits an act%al !ree de8elopment only %p to a certain point, so tat in !act
it constit%tes an immanent !etter and barrier to prod%ction, @ic are contin%ally broken tro%g
by te credit system0
8ii
6ence, te credit system accelerates te material de8elopment o! te
prod%cti8e !orces and te establisment o! te @orld-market0 &t is te istorical mission o! te
capitalist system o! prod%ction to raise tese material !o%ndations o! te ne@ mode o! prod%ction
to a certain degree o! per!ection0 ?t te same time credit accelerates te 8iolent er%ptions o! tis
contradiction I crises I and tereby te elements o! disintegration o! te old mode o! prod%ction0
5e t@o caracteristics immanent in te credit system are, on te one and, to de8elop te
incenti8e o! capitalist prod%ction, enricment tro%g exploitation o! te labo%r o! oters, to te
p%rest and most colossal !orm o! gambling and s@indling, and to red%ce more and more te
n%mber o! te !e@ @o exploit te social @ealt# on te oter and, to constit%te te !orm o!
transition to a ne@ mode o! prod%ction0 &t is tis ambig%o%s nat%re, @ic endo@s te principal
spokesmen o! credit !rom 'a@ to &saac ,Freire @it te pleasant caracter mixt%re o! s@indler
and propet0
Chapter 28. Medium of Circulation and Capital;
Views of Tooke and Fullarton
5e distinction bet@een c%rrency and capital, as 5ooke, Wilson, and oters dra@ it, @ereby te
di!!erences bet@een medi%m o! circ%lation as money, as money-capital generally, and as interest-
bearing capital Bmoneyed capital in te Englis senseC are tro@n togeter pell-mell, comes do@n
to t@o tings0
8iii

;%rrency circ%lates on te one and as coin BmoneyC, so !ar as it promotes te ependiture of
revenue, ence te tra!!ic bet@een te indi8id%al cons%mers and te retail mercants, to @ic
category belong all mercants @o sell to te cons%mers I to te indi8id%al cons%mers as distinct
!rom prod%cti8e cons%mers or prod%cers0 6ere money circ%lates in te !%nction o! coin, alto%g
it contin%ally replaces capital. ? certain portion o! money in a partic%lar co%ntry is contin%ally
de8oted to tis !%nction, alto%g tis portion consists o! perpet%ally canging indi8id%al coins0
&n so !ar as money promotes te transfer of capital, o@e8er, eiter as a means o! p%rcase
Bmedi%m o! circ%lationC or as a means o! payment, it is capital. &t is, tere!ore, neiter its !%nction
as a means o! p%rcase, nor tat as a means o! payment, @ic disting%ises it !rom coin, !or it
may also act as a means o! p%rcase bet@een one dealer and anoter so !ar as tey b%y !rom one
anoter in ard cas, and also as a means o! payment bet@een dealer and cons%mer so !ar as
credit is gi8en and te re8en%e cons%med be!ore it is paid0 5e di!!erence is, tere!ore, tat in te
second case tis money not only replaces te capital !or one side, te seller, b%t is expended,
ad8anced, by te oter side, te b%yer, as capital0 5e di!!erence, ten, is in !act tat bet@een the
money1form of revenue and the money1form of capital, b%t not tat bet@een c%rrency and capital,
!or a certain D%antity o! money circulates in te transactions bet@een dealers as @ell as in te
transactions bet@een cons%mers and dealers0 &t is, tere!ore, eD%ally currency in both !%nctions0
5ooke"s conception introd%ces con!%sion into tis D%estion in 8ario%s @ays:
1C Ay con!%sing te !%nctional distinctions#
<C Ay introd%cing te D%estion o! te D%antity o! money circ%lating togeter in bot !%nctions#
3C Ay introd%cing te D%estion o! te relati8e proportions o! te D%antities o! c%rrency circ%lating
in te t@o !%nctions and t%s in te t@o speres o! te process o! reprod%ction0
?d 1C ;on!%sing te !%nctional distinctions tat money in one !orm is c%rrency, and capital in te
oter0 &n so !ar as money ser8es in one or anoter !%nction, be it to realise re8en%e or trans!er
capital, it !%nctions in b%ying and selling, or in paying, as a means o! p%rcase or a means o!
payment, and, in te @ider sense o! te @ord, as c%rrency0 5e !%rter p%rpose @ic it as in te
calc%lations o! its spender or recipient, o! being capital or re8en%e !or im, alters absol%tely
noting, and tis is do%bly demonstrated0 ?lto%g te kinds o! money circ%lating in te t@o
speres are di!!erent, te same piece o! money, !or instance a !i8e-po%nd note, passes !rom one
spere into te oter and alternately per!orms bot !%nctions# @ic is ine8itable, i! only beca%se
te retail mercant can gi8e is capital te !orm o! money only in te sape o! te coin @ic e
recei8es !rom is c%stomers0 &t may be ass%med tat te act%al small cange as its circ%lation
centre o! gra8ity in te domain o! retail trade# te retail dealer needs it contin%ally to make
cange and recei8es it back contin%ally in payment !rom is c%stomers0 A%t e also recei8es
money, i.e., coin, in tat metal @ic ser8es as a standard o! 8al%e, ence in England one-po%nd
coins, or e8en bank-notes, partic%larly notes o! small denominations, s%c as !i8e- and ten-po%nd
notes0 5ese gold coins and notes, @it @ate8er small cange e as to spare, are deposited by
te retail dealer e8ery day, or e8ery @eek, in is bank, and e pays !or is p%rcases by dra@ing
311 ;apter JJ4&&&
ceD%es on is bank deposit0 A%t te same gold coins and ank-notes are H%st as steadily
@itdra@n !rom te bank, directly or indirectly B!or instance, small cange by man%!act%rers !or
te payment o! @agesC, as te money-!orm o! its re8en%e by te entire p%blic in its capacity o!
cons%mer, and !lo@ contin%ally back to te retail dealers, !or @om tey t%s again realise a
portion o! teir capital, b%t at te same time also a portion o! teir re8en%e0 5is last circ%mstance
is important, and is @olly o8erlooked by 5ooke0 3nly @ere money is expended as money-
capital, early in te reprod%ction process BAook &&, ,art 1C, does capital-8al%e exist p%rely as s%c0
For te prod%ced commodities contain not merely capital, b%t also s%rpl%s-8al%e# tey are not
only capital in temsel8es, b%t already capital realised as capital, capital @it te so%rce o!
re8en%e incorporated in it0 Wat te retail dealer gi8es a@ay !or te money ret%rning to im, is
commodities, tere!ore, is !or im capital pl%s pro!it, capital pl%s re8en%e0
F%rtermore, in ret%rning to te retailer, circ%lating money restores te money-!orm o! is capital0
5o red%ce te di!!erence bet@een circ%lation as circ%lation o! re8en%e and circ%lation o! capital
into a di!!erence bet@een c%rrency and capital is, tere!ore, altogeter @rong0 5is mode o!
expression is in 5ooke"s case d%e to is simply ass%ming te standpoint o! a banker iss%ing is
o@n bank-notes0 5ose o! is notes @ic are contin%ally in te p%blic"s ands Be8en i! consisting
o! e8er di!!erent notesC and ser8ing as c%rrency cost im noting, sa8e te cost o! te paper and
te printing0 5ey are circ%lating certi!icates o! indebtedness Bbills o! excangeC made o%t in is
o@n name, b%t tey bring im money and t%s ser8e as a means o! expanding is capital0 5ey
di!!er !rom is capital, o@e8er, @eter it be is o@n or borro@ed0 5at is @y tere is a special
distinction !or im bet@een c%rrency and capital, @ic, o@e8er, as noting to do @it te
de!inition o! tese terms as s%c, least o! all @it tat made by 5ooke0
5e distinct attrib%te I @eter it ser8es as te money-!orm o! re8en%e or o! capital I canges
noting in te caracter o! money as a medi%m o! circ%lation# it retains tis caracter no matter
@ic o! te t@o !%nctions it per!orms0 5r%e, money ser8es more as an act%al medi%m o!
circ%lation Bcoin, means o! p%rcaseC @en acting as te money-!orm o! re8en%e, d%e to te
dispersion o! p%rcases and sales, and beca%se te maHority o! disb%rsers o! re8en%e, te
labo%rers, can b%y relati8ely little on credit# @ereas in te tra!!ic o! te b%siness @orld, @ere
te medi%m o! circ%lation is te money-!orm o! capital, money ser8es mainly as a means o!
payment, partly on acco%nt o! te concentration, and partly on acco%nt o! te pre8ailing credit
system0 A%t te distinction bet@een money as a means o! payment and money as a means o!
p%rcase Bmeans o! circ%lationC is a distinction tat re!ers to te money itsel!0 &t is not a
distinction bet@een money and capital0 More copper and sil8er circ%late in te retail b%siness,
and more gold in te @olesale b%siness0 .et te distinction bet@een sil8er and copper on te one
and, and gold on te oter, is not te distinction bet@een circ%lation and capital0
?d <C &ntrod%cing te D%estion o! te D%antity o! money circ%lating togeter in bot !%nctions: $o
!ar as money circ%lates, be it as a means o! p%rcase or as a means o! payment I no matter in
@ic o! te t@o speres and independently o! its !%nction o! realising re8en%e or capital I te
D%antity o! its circ%lating mass comes %nder te la@s de8eloped pre8io%sly in disc%ssing te
simple circ%lation o! commodities B4ol0 &, ;0 &&&, <, bC0 5e 8elocity o! circ%lation, ence te
n%mber o! repetitions o! te same !%nction as means o! p%rcase and means o! payment by te
same pieces o! money in a gi8en term, te mass o! sim%ltaneo%s p%rcases and sales, or
payments, te s%m o! te prices o! te circ%lating commodities, and !inally te balances o!
payments to be settled in te same period, determine in eiter case te mass o! circ%lating money,
o! c%rrency0 Weter money so employed represents capital or re8en%e !or te payer or recei8er,
is immaterial, and in no @ay alters te matter0 &ts mass is simply determined by its !%nction as a
medi%m o! p%rcase and payment0
?d 3C 3n te D%estion o! te relati8e proportions o! te amo%nts o! c%rrency circ%lating in bot
!%nctions and t%s in bot speres o! te reprod%ction process0 Aot speres o! circ%lation are
connected internally, !or, on te one and, te mass o! re8en%es to be spent expresses te 8ol%me
31< ;apter JJ4&&&
o! cons%mption, and, on te oter, te magnit%de o! te masses o! capital circ%lating in
prod%ction and commerce expresses te 8ol%me and 8elocity o! te reprod%ction process0
-e8erteless, te same circ%mstances a8e a di!!erent e!!ect, @orking e8en in opposite directions,
%pon te D%antities o! money circ%lating in bot !%nctions or speres, or on te amo%nt o!
c%rrency, as te Englis p%t it in banking parlance0 ?nd tis gi8es ne@ ca%se !or 5ooke"s 8%lgar
distinction bet@een capital and c%rrency0 5e !act tat te gentlemen o! te ;%rrency 5eory
con!%se t@o di!!erent tings is no reason to present tem as t@o di!!erent concepts0
&n times o! prosperity, intense expansion, acceleration and 8igo%r o! te reprod%ction process,
labo%rers are !%lly employed0 :enerally, tere is also a rise in @ages @ic makes %p in some
meas%re !or teir !all belo@ a8erage d%ring oter periods o! te b%siness cycle0 ?t te same time,
te re8en%es o! te capitalists gro@ considerably0 ;ons%mption increases generally0 ;ommodity-
prices also rise reg%larly, at least in te 8ario%s 8ital brances o! b%siness0 ;onseD%ently, te
D%antity o! circ%lating money gro@s at least @itin de!inite limits, since te greater 8elocity o!
circ%lation, in t%rn, sets %p certain barriers to te gro@t o! te amo%nt o! c%rrency0 $ince tat
portion o! te social re8en%e @ic consists o! @ages is originally ad8anced by te ind%strial
capitalist in te !orm o! 8ariable capital, and al@ays in money-!orm, it reD%ires more money !or
its circ%lation in times o! prosperity0 A%t @e m%st not co%nt tis t@ice I !irst as money reD%ired
!or te circ%lation o! 8ariable capital, and ten as money reD%ired !or te circ%lation o! te
labo%rers" re8en%e0 5e money paid to te labo%rers as @ages is spent in retail trade and ret%rns
abo%t once a @eek to te banks as te retailers" deposits, a!ter negotiating miscellaneo%s
intermediary transactions in smaller cycles0 &n times o! prosperity te re!l%x o! money proceeds
smootly !or te ind%strial capitalists, and t%s te need !or money accommodation does not
increase beca%se more @ages a8e to be paid and more money is reD%ired !or te circ%lation o!
teir 8ariable capital0
5e total res%lt is tat te mass o! circ%lating media ser8ing te expendit%re o! re8en%e gro@s
decidedly in periods o! prosperity0
?s concerns te circ%lation reD%ired !or te trans!er o! capital, ence reD%ired excl%si8ely
bet@een capitalists, a period o! brisk b%siness is sim%ltaneo%sly a period o! te most elastic and
easy credit0 5e 8elocity o! circ%lation bet@een capitalist and capitalist is reg%lated directly by
credit, and te mass o! circ%lating medi%m reD%ired to settle payments, and e8en in cas
p%rcases, decreases accordingly0 &t may increase in absol%te terms, b%t decreases relati8ely
%nder all circ%mstances compared to te expansion o! te reprod%ction process0 3n te one and,
greater mass payments are settled @ito%t te mediation o! money# on te oter, o@ing to te
8igo%r o! te process, tere is a D%icker mo8ement o! te same amo%nts o! money, bot as means
o! p%rcase and o! payment0 5e same D%antity o! money promotes te re!l%x o! a greater n%mber
o! indi8id%al capitals0
3n te @ole, te c%rrency o! money in s%c periods appears !%ll, alto%g its 7epartment &&
Btrans!er o! capitalC is, at least relati8ely, contracted, @ile its 7epartment & Bexpendit%re o!
re8en%eC expands in absol%te terms0
5e re!l%xes express te recon8ersion o! commodity-capital into money, M I ; I M", as @e a8e
seen in te disc%ssion o! te reprod%ction process, Aook &&, ,art &0 ;redit renders te re!l%x in
money-!orm independent o! te time o! act%al re!l%x bot !or te ind%strial capitalist and te
mercant0 Aot o! tem sell on credit# teir commodities are t%s alienated be!ore tey are
recon8erted into money !or tem, ence be!ore tey !lo@ back to tem in money-!orm0 3n te
oter and, tey b%y on credit, and in tis @ay te 8al%e o! teir commodities is recon8erted, be it
into prod%cti8e capital or commodity-capital, e8en be!ore tis 8al%e as really been trans!ormed
into money, i.e., be!ore te commodity-price is d%e and paid !or0 &n s%c times o! prosperity te
re!l%x passes o!! smootly and easily0 5e retailer sec%rely pays te @olesaler, te @olesaler
pays te man%!act%rer, te man%!act%rer pays te importer o! ra@ materials, etc0 5e appearance
o! rapid and reliable re!l%xes al@ays keeps %p !or a longer period a!ter tey are o8er0 &n reality by
313 ;apter JJ4&&&
8irt%e o! te credit tat is %nder @ay, since credit re!l%xes take te place o! te real ones0 5e
banks scent danger as soon as teir clients deposit more bills o! excange tan money0 $ee te
testimony o! te 'i8erpool bank director, p0 3*80 /,resent edition: ;0 JJ40 I 0d.1
5o insert @at & a8e noted earlier: K&n periods o! predominant credit, te 8elocity o! te
circ%lation o! money increases !aster tan commodity-prices, @ereas in times o! declining credit
commodity-prices drop slo@er tan te 8elocity o! circ%lation0L B%ur Hriti- der politischen
:e-onomie, 18+*, $0 83, 820C
5e re8erse is tr%e in a period o! crisis0 ;irc%lation -o0 & contracts, prices !all, similarly @ages#
te n%mber o! employed labo%rers is red%ced, te mass o! transactions decreases0 3n te contrary,
te need !or money accommodation increases in circ%lation -o0 && @it te contraction o! credit0
We sall examine tis point in greater detail immediately0
5ere is no do%bt tat @it te decrease o! credit @ic goes and in and @it stagnation in te
reprod%ction process, te circ%lation mass reD%ired !or -o0 &, te expendit%re o! re8en%e,
contracts, @ile tat reD%ired !or -o0 &&, te trans!er o! capital, expands0 A%t to @at extent tis
statement coincides @it @at is maintained by F%llarton and oters still remains to e analysed:
K? demand !or capital on loan and a demand !or
additional circ%lation are D%ite distinct tings, and not
o!ten !o%nd associated0L BF%llarton, 10 c0, p0 8<, title o!
;apter +0C
ix

&n te !irst place it is e8ident tat in te !irst o! te t@o cases mentioned abo8e, d%ring times o!
prosperity, @en te mass o! te circ%lating medi%m m%st increase, te demand !or it increases0
A%t it is like@ise e8ident tat, @en a man%!act%rer dra@s more or less o! is deposit o%t o! a
bank in gold or bank-notes beca%se e as to expend more capital in te !orm o! money, is
demand !or capital does not tereby increase0 Wat increases is merely is demand !or tis
partic%lar !orm in @ic e expends is capital0 5e demand re!ers only to te tecnical !orm, in
@ic e tro@s is capital into circ%lation0 P%st as in te case o! a di!!erent de8elopment o! te
credit system, te same 8ariable capital, !or example, or te same D%antity o! @ages, reD%ires a
greater mass o! means o! circ%lation in one co%ntry tan in anoter# in England more tan in
$cotland, !or instance, and in :ermany more tan in England0 'ike@ise in agric%lt%re, te same
capital acti8e in te reprod%ction process reD%ires di!!erent D%antities o! money in di!!erent
seasons !or te per!ormance o! its !%nction0
A%t te contrast dra@n by F%llarton is not correct0 &t is by no means te strong demand !or loans
as e says, @ic disting%ises te period o! depression !rom tat o! prosperity, b%t te ease @it
@ic tis demand is satis!ied in periods o! prosperity, and te di!!ic%lties @ic it meets in
periods o! depression0 &t is precisely te enormo%s de8elopment o! te credit system d%ring a
prosperity period, ence also te enormo%s increase in te demand !or loan capital and te
readiness @it @ic te s%pply meets it in s%c periods, @ic brings abo%t a sortage o! credit
d%ring a period o! depression0 &t is not, tere!ore, te di!!erence in 8ol%me o! demand !or loans
@ic caracterises bot periods0
?s @e a8e pre8io%sly remarked, bot periods are primarily disting%ised by te !act tat te
demand !or c%rrency bet@een cons%mers and dealers predominates in periods o! prosperity, and
te demand !or c%rrency bet@een capitalists predominates in periods o! depression0 7%ring a
depression te !ormer decreases, and te latter increases0
Wat strikes F%llarton and oters as decisi8ely important is te penomenon tat in s%c periods
@en sec%rities in possession o! te Aank o! England are on te increase, its circ%lation o! notes
decreases, and 8ice 8ersa0 5e le8el o! te sec%rities, o@e8er, expresses te 8ol%me o! te
pec%niary accommodation, te 8ol%me o! disco%nted bills o! excange and o! ad8ances made
312 ;apter JJ4&&&
against marketable collateral0 5%s F%llarton says in te abo8e passage tat te sec%rities in te
ands o! te Aank o! England !l%ct%ate mostly in an opposite direction to its circ%lation, and tis
corroborates te 8ie@ long eld by pri8ate banks tat no bank can increase its iss%e o! bank-notes
beyond a certain point determined by te needs o! its p%blic# b%t i! a bank @ants to make
ad8ances beyond tis limit, it m%st make tem o%t o! its capital, ence it m%st eiter realise on
sec%rities or %tilise deposits @ic it @o%ld oter@ise a8e in8ested in sec%rities0
5is, o@e8er, re8eals also @at F%llarton means by capital0 Wat does capital signi!y ereQ 5at
te Aank can no longer make ad8ances @it its o@n bank-notes, or promissory notes, @ic, o!
co%rse, cost it noting0 A%t @at does it make ad8ances @it in tat caseQ Wit te s%ms realised
!rom te sale o! sec%rities eld in reser8e, i.e., go8ernment bonds, stocks, and oter interest-
bearing paper0 ?nd @at does it get in payment !or te sale o! s%c paperQ Money-gold or bank-
notes, so !ar as te latter are legal tender, s%c as tose o! te Aank o! England0 Wat te bank
ad8ances, tere!ore, is %nder all circ%mstances money0 5is money, o@e8er, no@ constit%tes a
part o! its capital0 &! it ad8ances gold, tis is %nderstandable0 &! it ad8ances notes, ten tese notes
represent capital, beca%se it as gi8en %p some act%al 8al%e !or tem, s%c as interest-bearing
paper0 &n te case o! pri8ate banks te notes sec%red by tem tro%g te sale o! sec%rities cannot
be anyting else, in te main, b%t Aank o! England notes or teir o@n notes, since oters @o%ld
ardly be taken in payment !or sec%rities0 &! it is te Aank o! England itsel!, ten its o@n notes,
@ic it recei8es in ret%rn, cost it capital, tat is, interest-bearing paper0 Aesides, it tereby
@itdra@s its o@n notes !rom circ%lation0 $o%ld it reiss%e tese notes, or iss%e ne@ notes in teir
stead to te same amo%nt, tey no@ represent capital0 ?nd tey do so eD%ally @ell, @en %sed !or
ad8ances to capitalists, or @en %sed later, @en te demand !or s%c pec%niary accommodation
decreases, !or rein8estment in sec%rities0 &n all tese cases te term capital is employed only !rom
te banker"s point o! 8ie@, and means tat te banker is compelled to loan more tan is mere
credit0
?s is kno@n, te Aank o! England makes all its ad8ances in its o@n notes0 -o@, i! despite tis, as
a r%le, te bank-note circ%lation o! te Aank decreases in proportion as te disco%nted bills o!
excange and collateral in its ands, and t%s its ad8ances increase I @at becomes o! te notes
tro@n into circ%lationQ 6o@ do tey ret%rn to te AankQ
5o begin @it, i! te demand !or money accommodation arises !rom an %n!a8o%rable national
balance o! payments and tereby implies a drain o! gold, te matter is 8ery simple0 5e bills o!
excange are disco%nted in bank-notes0 5e bank-notes are excanged !or gold by te Aank itsel!,
in its iss%e department, and tis gold is exported0 &t is as to%g te Aank paid o%t gold directly,
@ito%t te mediation o! notes, on disco%nting bills0 $%c an increased demand, @ic may in
certain cases be V> to V1= million, nat%rally does not add a single !i8e-po%nd note to te co%ntry"s
domestic circ%lation0 &! it is no@ said tat te Aank ad8ances capital, and not c%rrency, tis means
t@o tings0 First, tat it does not ad8ance credit, b%t act%al 8al%es, a part o! its o@n capital or o!
capital deposited @it it0 $econdly, tat it does not ad8ance money !or inland, b%t !or
international circ%lation, tat it ad8ances @orld-money# and !or tis p%rpose money m%st al@ays
exist in its !orm o! a oard, in its metallic state# in te !orm in @ic it is not merely a !orm o!
8al%e, b%t 8al%e itsel!, @ose money-!orm it is0 ?lto%g tis gold no@ represents capital, bot
!or te Aank and te exporting gold-dealer, i.e., banking or commercial capital, te demand !or it
is not !or capital, b%t !or te absol%te !orm o! money-capital0 5is demand arises precisely at te
moment @en !oreign markets are o8ercro@ded @it %nsaleable Englis commodity-capital0
Wat is @anted, tere!ore, is capital, not as capital, b%t capital as money, in te !orm in @ic
money ser8es as a %ni8ersal @orld-market commodity# and tis is its original !orm o! precio%s
metal0 5e drain o! gold is not, tere!ore, as F%llarton, 5ooke, etc0, claim, Ka mere D%estion o!
capital0L )ater, it is a KD%estion o! money,L e8en i! in a speci!ic !%nction0 5e !act tat it is not a
D%estion o! inland circ%lation as te ad8ocates o! te ;%rrency 5eory maintain, does not pro8e
31+ ;apter JJ4&&&
at all, as F%llarton and oters tink, tat it is merely a D%estion o! capital0 &t is a D%estion o!
money in te !orm in @ic money is an international means o! payment0
KWeter tat capitalL Bte p%rcase price !or te
million o! D%arters o! !oreign @eat a!ter a crop
!ail%re in te ome co%ntryC Kis transmitted in
mercandise or in specie, is a point @ic in no @ay
a!!ects te nat%re o! te transaction0L BF%llarton, 10 c0,
p0 1310C
A%t it signi!icantly a!!ects te D%estion, @eter tere is a drain o! gold, or not0 ;apital is
trans!erred in te !orm o! precio%s metal, beca%se it eiter cannot be trans!erred at all, or only at a
great loss in te sape o! commodities0 5e !ear @ic te modern banking system as o! gold
drain exceeds anyting e8er imagined by te monetary system, @ic considers precio%s metals
as te only tr%e @ealt0 5ake, !or instance, te !ollo@ing e8idence o! te :o8ernor o! te Aank o!
England, Morris, be!ore te ,arliamentary ;ommittee on te crisis o! 182>-28:
B38260 M%estion:C KWen & spoke o! te depreciation
o! stocks and !ixed capital, are yo% not a@are tat all
property in8ested in stocks and prod%ce o! e8ery
description @as depreciated in te same @ay# tat ra@
cotton, ra@ silk, and %nman%!act%red @ool @ere sent
to te continent at te same depreciated price, and tat
s%gar, co!!ee and tea @ere sacri!iced as at !orced
salesQ I &t @as ine8itable tat te co%ntry so%ld
make a considerable sacrifice !or te p%rpose o!
meeting te efflu of bullion @ic ad taken place in
conseD%ence o! te large importation o! !ood0L I
K38280 7o not yo% tink it @o%ld a8e been better to
trenc %pon te V8 million lying in te co!!ers o! te
Aank, tan to a8e endea8o%red to get te gold back
again at s%c a sacri!iceQ I $o, D do not./ J
&t is gold @ic ere stands !or te only tr%e @ealt0
F%llarton D%otes te disco8ery by 5ooke tat
K@it only one or t@o exceptions, and tose admitting
o! satis!actory explanation, e8ery remarkable !all o!
excange, !ollo@ed by a drain o! gold, tat as
occ%rred d%ring te last al!-cent%ry, as been
coincident tro%go%t @it a comparati8ely lo@ state
316 ;apter JJ4&&&
o! te circ%lating medi%m, and 8ice 8ersa0L BF%llarton,
p0 1<10C
5is disco8ery pro8es tat s%c drains o! gold occ%r generally a!ter a period o! animation and
spec%lation, as
Kte signal o! a collapse already commenced an
indication o! o8erstocked markets, o! a cessation o!
te !oreign demand !or o%r prod%ctions, o! delayed
ret%rns, and, as te necessary seD%el o! all tese, o!
commercial discredit, man%!actories s%t %p, artisans
star8ing, and a general stagnation o! ind%stry and
enterpriseL Bp0 1<*C0
5is, nat%rally, is at once te best re!%tation o! te claim o! te ad8ocates o! te ;%rrency 5eory,
tat
Ka !%ll circ%lation dri8es o%t b%llion and a lo@
circ%lation attracts it0L
3n te contrary, @ile te Aank o! England generally carries a strong gold reser8e d%ring a
period o! prosperity, tis oard is generally !ormed d%ring te slack period, @ic !ollo@s a!ter a
storm0
?ll tis sagacity concerning te drain o! gold, ten, amo%nts to saying tat te demand !or
international media o! circ%lation and payment di!!ers !rom te demand !or internal media o!
circ%lation and payment Band it goes @ito%t saying, tere!ore, tat Kte existence o! a drain does
not necessarily imply any dimin%tion o! te internal demand !or circ%lation,L as F%llarton as it
on page 11< o! is @orkC and tat te export o! precio%s metal and its being tro@n into
international circ%lation is not te same as tro@ing notes or specie into internal circ%lation0 ?s
!or te rest, & a8e so@n on a pre8io%s occasion /Englis edition: 4ol0 10 I 0d01 tat te
mo8ements o! a oard concentrated as a reser8e !%nd !or international payments a8e as s%c
noting to do @it te mo8ements o! money as a medi%m o! circ%lation0 ?t any rate, te D%estion0
is complicated by te !act tat te di!!erent !%nctions o! a oard, @ic & a8e de8eloped !rom te
nat%re o! money I s%c as its !%nction as a reser8e !%nd o! means o! payment to co8er d%e bills in
domestic b%siness# te !%nction o! a reser8e !%nd o! c%rrency# and !inally, te !%nction o! a
reser8e !%nd o! @orld-money I are ere attrib%ted to one sole reser8e !%nd0 &t also !ollo@s !rom
tis tat %nder certain circ%mstances a drain o! gold !rom te Aank to te ome market may
combine @it a drain abroad0 5e D%estion is !%rter complicated o@e8er by te !act tat tis
oard is arbitrarily b%rdened @it te additional !%nction o! ser8ing as a !%nd g%aranteeing te
con8ertibility o! bank-notes in co%ntries, in @ic te credit system and credit-money are
de8eloped0 ?nd in addition to all tis comes 1C te concentration o! te national reser8e !%nd in
one single central bank, and <C its red%ction to te smallest possible minim%m0 6ence, also,
F%llarton"s complaint Bp0123C:
K3ne cannot contemplate te per!ect silence and
!acility @it @ic 8ariations o! te excange %s%ally
pass o!! in continental co%ntries, compared @it te
state o! !e8eris disD%iet and alarm al@ays prod%ced
31> ;apter JJ4&&&
in England @ene8er te treas%re at te Aank seems
to be at all approacing to exa%stion, @ito%t being
str%ck @it te great ad8antage in tis respect @ic a
metallic c%rrency possesses0L
6o@e8er, i! @e no@ lea8e aside te drain o! gold, o@ can a bank tat iss%es notes, like te Aank
o! England, increase te amo%nt o! money accommodation granted by it @ito%t increasing its
iss%e o! bank-notesQ
$o !ar as te bank itsel! is concerned, all te notes o%tside its @alls, @eter circ%lating or in
pri8ate oards, are in circ%lation, i.e., are o%t o! its ands0 6ence, i! te bank extends its
disco%nting and money-lending b%siness, its ad8ances on sec%rities, all te bank-notes iss%ed by
it !or tat p%rpose m%st ret%rn, !or oter@ise tey @o%ld increase te 8ol%me o! circ%lation,
someting @ic is not s%pposed to appen0 5is ret%rn may take place in t@o @ays0
'irst: 5e bank pays ? notes against sec%rities# ? %ses tem to pay !or bills o! excange d%e to A,
and A deposits notes once more in te bank0 5is brings to a close te circ%lation o! tese notes,
b%t te loan remains0
K5e loan remains, and te c%rrency, i! not @anted,
!inds its @ay back to te iss%er0L BF%llarton, p0 *>0C
5e notes, @ic te bank ad8anced to ?, a8e no@ ret%rned to it# b%t it is te creditor o! ?, or
@oe8er may a8e been te dra@er o! te bill disco%nted by ?, and te debtor o! A !or te
amo%nt o! 8al%e expressed in tese notes, and A t%s disposes o! a corresponding portion o! te
capital o! te bank0
Secondly: ? pays to A, and A imsel!, or ;, to @om e pays te notes, %ses tese notes to pay
bills d%e to te bank, directly or indirectly0 &n tat case te bank is paid in its o@n notes0 5is
concl%des te transaction Bpending ?"s ret%rn payment to te bankC0
5o @at extent, no@, sall te bank"s ad8ance to ? be regarded as an ad8ance o! capital, or as a
mere ad8ance o! means o! paymentQ
x

/5is depends on te nat%re o! te loan itsel!0 5ree cases m%st be disting%ised0
'irst case0 I ? recei8es !rom te bank amo%nts loaned on is o@n personal credit, @ito%t gi8ing
any sec%rity !or tem0 &n tis case e does not merely recei8e means o! payment, b%t also
%nD%estionably a ne@ capital, @ic e may employ in is b%siness and realise as an additional
capital %ntil te mat%rity date0
Second case0 I ? as gi8en to te bank sec%rities, national bonds, or stocks as collateral, and
recei8ed !or tem, say, %p to t@o-tirds o! teir momentary 8al%e as a cas loan0 &n tis case e
as recei8ed te means o! payment e needed, b%t no additional capital, !or e entr%sted to te
bank a larger capital-8al%e tan e recei8ed !rom it0 A%t tis larger capital-8al%e @as, on te one
and, %na8ailable !or is momentary needs Bmeans o! paymentC, beca%se in8ested in a partic%lar
interest-bearing !orm# on te oter and, ? ad is o@n reasons !or not @anting to con8ert tis
capital-8al%e directly into means o! payment by selling it0 6is sec%rities ser8ed, among oter
tings, as a reser8e capital, and e set tem in motion as s%c0 5e transaction bet@een ? and te
bank, tere!ore, consists in a temporary m%t%al trans!er o! capital, so tat ? does not recei8e any
additional capital BD%ite te contrarySC alto%g e recei8es te desired means o! payment0 For te
bank, on te oter and, tis transaction constit%tes a temporary lodgement o! money-capital in
te !orm o! a loan, a con8ersion o! money-capital !rom one !orm into anoter, and tis con8ersion
is precisely te essential !%nction o! te banking b%siness0
4hird case0 I ? ad te bank disco%nt a bill o! excange and recei8ed its 8al%e in cas a!ter te
ded%ction o! disco%nt0 &n tis case e sold a non-con8ertible money-capital to te bank !or te
318 ;apter JJ4&&&
amo%nt o! 8al%e in con8ertible !orm0 6e sold is still r%nning bill !or cas money0 5e bill is no@
te property o! te bank0 &t does not alter te matter tat ? as last endorser o! te bill is
responsible !or it to te bank in de!a%lt o! payment0 6e sares tis responsibility @it te oter
endorsers and @it te dra@er o! te bill, all o! @om are d%ly responsible to im0 &n tis case,
tere!ore, @e do not a8e a loan, b%t only an ordinary p%rcase and sale0 For tis reason, ? as
noting to pay back to te bank0 &t reimb%rses itsel! by casing te bill @en it becomes d%e0
6ere, too, a trans!er o! capital as taken place bet@een ? and te bank, and in exactly te same
manner as in te sale and p%rcase o! any oter commodity, and !or tis 8ery reason ? did not
recei8e any additional capital0 Wat e needed and recei8ed @ere means o! payment, and e
recei8ed tem by a8ing te bank con8ert one !orm o! is money-capital I is bill I into anoter
I money0
&t is tere!ore only in te !irst case tat tere is any D%estion o! a real ad8ance o! capital# in te
second and tird cases, te matter can be so regarded only in te sense tat e8ery in8estment o!
capital implies an Kad8ance o! capital0L &n tis sense te bank ad8ances money-capital to ?# b%t
!or ? it is money1capital at best in te sense tat it is a portion o! is capital in general0 ?nd e
reD%ires it and %ses it not speci!ically as capital, b%t rater as speci!ically a means o! payment0
3ter@ise, e8ery ordinary sale o! commodities by @ic means o! payment are sec%red migt be
considered as recei8ing an ad8ance o! capital0 I '. 0.1
&n te case o! pri8ate banks @ic iss%e teir o@n notes @e a8e tis di!!erence, tat i! teir notes
remain neiter in local circ%lation, nor ret%rn to tem in te !orm o! deposits, or in payment !or
d%e bills o! excange, tey !all into te ands o! persons @o compel te pri8ate bank to cas
tese notes in gold or in notes o! te Aank o! England0 &n tis e8ent, tere!ore, its loan in !act
represents an ad8ance o! notes o! te Aank o! England, or, @at amo%nts to te same ting !or te
pri8ate bank, o! gold, ence a portion o! its bank capital0 5e same olds good in case te Aank
o! England itsel!, or some oter bank, @ic as a !ixed legal maxim%m !or its iss%e o! notes,
m%st sell sec%rities to @itdra@ its o@n notes !rom circ%lation and ten iss%e tem once more in
te sape o! ad8ances# in tat case, te bank"s o@n notes represent a portion o! its mobilised bank
capital0
E8en i! te circ%lation @ere p%rely metallic, it @o%ld be possible 1C !or a drain o! gold /Marx
e8idently re!ers ere to a drain o! gold tat @o%ld, at least partially, go abroad I '. 0.1 to empty
te treas%ry, and <C since gold @o%ld be cie!ly @anted by te bank to make payments Bin
settlement o! erst@ile transactionsC, te ad8ance against collateral co%ld gro@ considerably, b%t
@o%ld !lo@ back to it in te !orm o! deposits or in payment o! d%e bills o! excange# so tat, on
one side, te total treas%re o! te bank @o%ld decrease @it an increase o! te sec%rities in its
ands, @ile on te oter, it @o%ld no@ be olding te same amo%nt, @ic it possessed !ormerly
as o@ner, as debtor o! its depositors, and !inally te total D%antity o! c%rrency @o%ld decrease0
3%r ass%mption so !ar as been tat te loans are made in notes, so tat tey carry @it tem at
least a !leeting, e8en i! instantly disappearing, increase in te iss%e o! notes0 A%t tis is not
necessary0 &nstead o! a paper note, te bank may open a credit acco%nt !or ?, in @ic case tis ?,
te bank"s debtor, becomes its imaginary depositor0 6e pays is creditors @it ceD%es on te
bank, and te recipient o! tese ceD%es passes tem on to is o@n banker, @o excanges tem
!or te ceD%es o%tstanding against im in te clearing o%se0 &n tis case no mediation o! notes
takes place at all, and te entire transaction is con!ined to te !act tat te bank settles its o@n
debt @it a ceD%e dra@n on itsel!, and its act%al recompense consists in its claim on ?0 &n tis
case te bank as loaned a portion o! its o@n bank capital, beca%se its o@n debt claims, to ?0
&n so !ar as tis demand !or pec%niary accommodation is a demand !or capital, it is so only !or
money-capital0 &t is capital only !rom te standpoint o! te banker, namely gold Bin te case o!
gold exports abroadC or notes o! te -ational Aank, @ic a pri8ate bank can obtain only by
p%rcase against an eD%i8alent, and @ic, tere!ore, represent capital !or it0 3r, again, it is a case
o! interest-bearing papers, go8ernment bonds, stocks, etc0, @ic m%st be sold in order to obtain
31* ;apter JJ4&&&
gold or bank-notes0 $%c papers, o@e8er, i! in go8ernment bonds, are capital only !or te b%yer,
!or @om tey represent te p%rcase price, te capital e in8ested in tem0 &n temsel8es tey
are not capital, b%t merely debt claims0 &! mortgages, tey are mere titles on !%t%re gro%nd-rent0
?nd i! tey are sares o! stock, tey are mere titles o! o@nersip, @ic entitle te older to a
sare in !%t%re s%rpl%s-8al%e0 ?ll o! tese are not real capital0 5ey do not !orm constit%ent parts
o! capital, nor are tey 8al%es in temsel8es0 Ay @ay o! similar transactions money belonging to
te bank may be trans!ormed into deposits, so tat te bank becomes te debtor instead o! o@ner
o! tis money, and olds it %nder a di!!erent title o! o@nersip0 6o@e8er important tis may be to
te bank, it alters noting in te mass o! reser8e capital, or e8en o! money-capital a8ailable in a
partic%lar co%ntry0 ;apital, tere!ore, represents ere only money-capital, and, i! not a8ailable in
te act%al !orm o! money, it represents a mere title on capital0 5is is 8ery important, since a
scarcity o!, and pressing demand !or, ban-ing capital is con!o%nded @it a decrease o! actual
capital, @ic con8ersely is in s%c cases rater ab%ndant in te !orm o! means o! prod%ction and
prod%cts, and s@amps te markets0
&t is, tere!ore, easy to explain o@ te mass o! sec%rities eld by a bank as collateral increases,
ence o@ te gro@ing demand !or pec%niary accommodation can be satis!ied by te bank, @ile
te total mass o! c%rrency remains te same or decreases0 5is total mass is eld in ceck d%ring
s%c periods o! money stringency in t@o @ays: 1C by a drain o! gold# <C by a demand !or money
in its capacity as a mere means o! payment, @en te iss%ed bank-notes ret%rn immediately# or
@en te transactions take place @ito%t te mediation o! notes by means o! book credit# @en,
tere!ore, payments are made simply tro%g a credit transaction, te settlement o! tese
payments being te sole p%rpose o! te operation0 &t is a pec%liarity o! money, @en it ser8es
merely to settle acco%nts Band in times o! crises loans are taken %p to pay, rater tan to b%y# to
@ind %p pre8io%s transactions, not to initiate ne@ onesC, tat its circ%lation is no more tan
!leeting, e8en @ere balances are not settled by mere credit operations, @ito%t te mediation o!
money, so tat, @en tere is a strong demand !or pec%niary accommodation, an enormo%s
D%antity o! s%c transactions can take place @ito%t expanding te circ%lation0 A%t te mere !act
tat te circ%lation o! te Aank o! England remains stable or e8en decreases sim%ltaneo%sly @it
an extensi8e accommodation o! money on its part, does notprima facie pro8e, as F%llarton, 5ooke
and oters ass%me Bo@ing to teir erroneo%s notion tat pec%niary accommodation is identical
@it recei8ing capital on loan as additional capitalC, tat te circ%lation o! money Bo! bank-notesC
in its !%nction as a means o! payment is not increased and extended0 $ince te circ%lation o! notes
as means o! p%rcase decreases d%ring a b%siness depression, @en s%c extensi8e
accommodation is necessary, teir circ%lation as means o! payment may increase, and te
aggregate amo%nt o! te circ%lation, te s%m o! notes !%nctioning as means o! p%rcase and
payment, may remain stable or may e8en decrease0 5e circ%lation as a means o! payment o!
bank-notes immediately ret%rning to te bank tat iss%es tem is simply not circ%lation in te
eyes o! tose economists0
$o%ld circ%lation as a means o! payment increase at a iger rate tan it decreases as a means o!
p%rcase, te aggregate circ%lation @o%ld increase, alto%g te money ser8ing as a means o!
p%rcase @o%ld decrease considerably in D%antity0 ?nd tis act%ally occ%rs in certain periods o!
crisis, namely, @en credit collapses completely and @en not only commodities and sec%rities
are %nsaleable b%t bills o! excange are %ndisco%ntable and noting co%nts any more b%t money
payment, or, as te mercant p%ts it, cas0 $ince F%llarton et al. do not %nderstand tat te
circ%lation o! notes as means o! payment is te caracteristic !eat%re o! s%c periods o! money
sortage, tey treat tis penomenon as accidental0
KWit respect again to tose examples o! eager
competition !or te possession o! bank-notes, @ic
caracterise seasons o! panic and @ic may
3<= ;apter JJ4&&&
sometimes, as at te close o! 18<+, lead to a s%dden,
to%g only temporary, enlargement o! te iss%es,
e8en @ile te e!!l%x o! b%llion is still going on,
tese, & appreend, are not to be regarded as among
te nat%ral or necessary concomitants o! a lo@
excange# te demand in s%c cases is not !or
circ%lationL Bread circ%lation as a means o! p%rcaseC,
Kb%t !or oarding, a demand on te part o! alarmed
bankers and capitalists @ic arises generally in te
last act o! te crisisL Bence, !or a reser8e o! means o!
paymentC, Ka!ter a long contin%ation o! te drain, and
is te prec%rsor o! its termination0L BF%llarton, p0
13=0C
&n te disc%ssion o! money as a means o! payment B4ol0 &, ;0 &&&, 3, bC @e a8e already
explained, in @at manner, @en te cain o! payments is s%ddenly interr%pted, money t%rns
!rom its ideal !orm into a material and, at te same time, absol%te !orm o! 8al%e 8is-O-8is te
commodities0 5is @as ill%strated by some examples B!ootnotes 1== and 1=1C0 5is interr%ption
itsel! is partly an e!!ect, partly a ca%se o! te instability o! credit and o! te circ%mstances
accompanying it, s%c as o8erstocking o! markets, depreciation o! commodities, interr%ption o!
prod%ction, etc0
&t is e8ident, o@e8er, tat F%llarton trans!orms te distinction bet@een money as a means o!
p%rcase and money as a means o! payment into a !alse distinction bet@een c%rrency and capital0
5is is again d%e to te narro@-minded banker"s conception o! circ%lation0
&t migt yet be asked: @ic is it, capital or money in its speci!ic !%nction as a means o! payment
tat is in sort s%pply in s%c periods o! stringencyQ ?nd tis is a @ell-kno@n contro8ersy0
&n te !irst place, so !ar as te stringency is marked by a drain o! gold, it is e8idently international
means o! payment tat are demanded0 A%t money in its speci!ic capacity o! international means
o! payment is gold in its metallic act%ality, as a 8al%able s%bstance in itsel!, as a D%antity o! 8al%e0
&t is at te same time capital, not capital as commodity-capital, b%t as money-capital, capital not
in te !orm o! commodities b%t in te !orm o! money Band, at tat, o! money in te eminent sense
o! te @ord, in @ic it exists as %ni8ersal @orld-market commodityC0 &t is not a contradiction
ere bet@een a demand !or money as a means o! payment and a demand !or capital0 5e
contradiction is rater bet@een capital in its money-!orm and capital in its commodity-!orm# and
te !orm @ic is ere demanded and in @ic alone it can !%nction, is its money-!orm0
?side !rom tis demand !or gold Bor sil8erC it cannot be said tat tere is any deart @ate8er o!
capital in s%c periods o! crisis0 (nder extraordinary circ%mstances, s%c as rise in te price o!
corn, or a cotton !amine, etc0, tis may be te case# b%t tese penomena are not necessary or
reg%lar accompaniments o! s%c periods# and te existence o! s%c a lack o! capital cannot be
ass%med be!oreand @ito%t !%rter ado !rom te mere !act tat tere is a ea8y demand !or
pec%niary accommodation0 3n te contrary0 5e markets are o8erstocked, s@amped @it
commodity-capital0 6ence, it is not, in any case, a lack o! commodity1capital @ic ca%ses te
stringency0 We sall ret%rn to tis D%estion later0
Chapter 29. Component Parts of Bank Capital
&t is no@ necessary to examine te component parts o! bank capital in greater detail0
We a8e H%st seen tat F%llarton and oters trans!orm te distinction bet@een money as a medi%m
o! circ%lation and money as a means o! payment I also %ni8ersal money in so !ar as it concerns a
drain o! gold I into a distinction bet@een c%rrency and capital0
5e pec%liar role played by capital in tis instance is te reason @y bankers" economics teaces
tat money is indeed capital par ecellence as insistently as enligtened economics ta%gt tat
money is not capital0
&n s%bseD%ent analyses, @e sall demonstrate tat money-capital is being con!%sed ere @it
moneyed capital in te sense o! interest-bearing capital, @ile in te !ormer sense, money-capital
is al@ays merely a transient !orm o! capital I in contradistinction to te oter !orms o! capital,
namely, commodity-capital and prod%cti8e capital0
Aank capital consists o! 1C cas money, gold or notes# <C sec%rities0 5e latter can be s%bdi8ided
into t@o parts: commercial paper or bills o! excange, @ic r%n !or a period, become d%e !rom
time to time, and @ose disco%nting constit%tes te essential b%siness o! te banker# and p%blic
sec%rities, s%c as go8ernment bonds, treas%ry notes, stocks o! all kinds, in sort, interest-bearing
paper @ic is o@e8er signi!icantly di!!erent !rom bills o! excange0 Mortgages may also be
incl%ded ere0 5e capital composed o! tese tangible component parts can again be di8ided into
te banker"s in8ested capital and into deposits, @ic constit%te is banking capital, or borro@ed
capital0 &n te case o! banks @ic iss%e notes, tese m%st be incl%ded0 We sall lea8e te
deposits and notes o%t o! consideration !or te present0 &t is e8ident at any rate tat te act%al
component parts o! te banker"s capital Bmoney, bills o! excange, deposit c%rrencyC remain
%na!!ected @eter te 8ario%s elements represent te banker"s o@n capital or deposits, i.e., te
capital o! oter people0 5e same di8ision @o%ld remain, @eter e @ere to carry on is
b%siness @it only is o@n capital or only @it deposited capital0
5e !orm o! interest-bearing capital is responsible !or te !act tat e8ery de!inite and reg%lar
money re8en%e appears as interest on some capital, @eter it arises !rom some capital or not0
5e money income is !irst con8erted into interest, and !rom te interest one can determine te
capital !rom @ic it arises0 &n like manner, in te case o! interest-bearing capital, e8ery s%m o!
8al%e appears as capital as long as it is not expended as re8en%e# tat is, it appears as principal in
contrast to possible or act%al interest @ic it may yield0
5e matter is simple0 'et te a8erage rate o! interest be +T ann%ally0 ? s%m o! V+== @o%ld ten
yield V<+ ann%ally i! con8erted into interest-bearing capital0 E8ery !ixed ann%al income o! V<+
may ten be considered as interest on a capital o! V+==0 5is, o@e8er, is and remains a p%rely
ill%sory conception, except in te case @ere te so%rce o! te V<+, @eter it be a mere title o!
o@nersip or claim, or an act%al element o! prod%ction s%c as real estate, is directly trans!erable
or ass%mes a !orm in @ic it becomes trans!erable0 'et %s take te national debt and @ages as
ill%strations0
5e state as to ann%ally pay its creditors a certain amo%nt o! interest !or te capital borro@ed
!rom tem0 &n tis case, te creditor cannot recall is in8estment !rom is debtor, b%t can only sell
is claim, or is title o! o@nersip0 5e capital itsel! as been cons%med, i.e., expended by te
state0 &t no longer exists0 Wat te creditor o! te state possesses is 1C te state"s promissory note,
amo%nting to, say, V1==# <C tis promissory note gi8es te creditor a claim %pon te ann%al
re8en%e o! te state, tat is, te ann%al tax proceeds, !or a certain amo%nt, e.g., V+ or +T# 3C te
creditor can sell tis promissory note o! V1== at is discretion to some oter person0 &! te rate o!
3<< ;apter JJ&J
interest is +T, and te sec%rity gi8en by te state is good, te o@ner ? can sell tis promissory
note, as a r%le, to A !or V1==# !or it is te same to A @eter e lends V1== at +T ann%ally, or
@eter e sec%res !or imsel! by te payment o! V1== an ann%al trib%te !rom te state
amo%nting to V+0 A%t in all tese cases, te capital, as @ose o!!soot BinterestC state payments
are considered, is ill%sory, !ictitio%s capital0 -ot only tat te amo%nt loaned to te state no longer
exists, b%t it @as ne8er intended tat it be expended as capital, and only by in8estment as capital
co%ld it a8e been trans!ormed into a sel!-preser8ing 8al%e0 5o te original creditor ?, te sare
o! ann%al taxes accr%ing to im represents interest on is capital, H%st as te sare o! te
spendtri!t"s !ort%ne accr%ing to te %s%rer appears to te latter, alto%g in bot cases te loaned
amo%nt @as not in8ested as capital0 5e possibility o! selling te state"s promissory note
represents !or ? te potential means o! regaining is principal0 ?s !or A, is capital is in8ested,
!rom is indi8id%al point o! 8ie@, as interest-bearing capital0 $o !ar as te transaction is
concerned, A as simply taken te place o! ? by b%ying te latter"s claim on te state"s re8en%e0
-o matter o@ o!ten tis transaction is repeated, te capital o! te state debt remains p%rely
!ictitio%s, and, as soon as te promissory notes become %nsaleable, te ill%sion o! tis capital
disappears0 -e8erteless, tis !ictitio%s capital as its o@n la@s o! motion, as @e sall presently
see0
We sall no@ consider labo%r-po@er in contrast to te capital o! te national debt, @ere a
negati8e D%antity appears as capital I H%st as interest-bearing capital, in general, is te
!o%ntainead o! all manner o! insane !orms, so tat debts, !or instance, can appear to te banker
as commodities0 Wages are concei8ed ere as interest, and tere!ore labo%r-po@er as te capital
yielding tis interest0 For example, i! te @age !or one year amo%nts to V+= and te rate o!
interest is +T, te ann%al labo%r-po@er is eD%al to a capital o! V1,===0 5e insanity o! te
capitalist mode o! conception reaces its climax ere, !or instead o! explaining te expansion o!
capital on te basis o! te exploitation o! labo%r-po@er, te matter is re8ersed and te prod%cti8ity
o! labo%r po@er is explained by attrib%ting tis mystical D%ality o! interest-bearing capital to
labo%r-po@er itsel!0 &n te second al! o! te 1>t cent%ry, tis %sed to be a !a8o%rite conception
B!or example, o! ,ettyC, b%t it is %sed e8en no@adays in all serio%sness by some 8%lgar
economists and more partic%larly by some :erman statisticians0
xi
(n!ort%nately t@o disagreeably
!r%strating !acts mar tis to%gtless conception0 &n te !irst place, te labo%rer m%st @ork in
order to obtain tis interest0 &n te second place, e cannot trans!orm te capital-8al%e o! is
labo%r-po@er into cas by trans!erring it0 )ater, te ann%al 8al%e o! is labo%r-po@er is eD%al to
is a8erage ann%al @age, and @at e as to gi8e te b%yer in ret%rn tro%g is labo%r is tis
same 8al%e pl%s a s%rpl%s-8al%e, i.e., te increment added by is labo%r0 &n a sla8e society, te
labo%rer as a capital-8al%e, namely, is p%rcase price0 ?nd @en e is ired o%t, te irer m%st
pay, in te !irst place, te interest on tis p%rcase price, and, in addition, replace te ann%al @ear
and tear on te capital0
5e !ormation o! a !ictitio%s capital is called capitalisation0 E8ery periodic income is capitalised
by calc%lating it on te basis o! te a8erage rate o! interest, as an income @ic @o%ld be realised
by a capital loaned at tis rate o! interest0 For example, i! te ann%al income is V1== and te rate
o! interest +T, ten te V1== @o%ld represent te ann%al interest on V<,===, and te V<,=== is
regarded as te capital-8al%e o! te legal title o! o@nersip on te V1== ann%ally0 For te person
@o b%ys tis title o! o@nersip, te ann%al income o! V1== represents indeed te interest on is
capital in8ested at +T0 ?ll connection @it te act%al expansion process o! capital is t%s
completely lost, and te conception o! capital as someting @it a%tomatic sel!-expansion
properties is tereby strengtened0
E8en @en te promissory note I te sec%rity I does not represent a p%rely !ictitio%s capital, as it
does in te case o! state debts, te capital-8al%e o! s%c paper is ne8erteless @olly ill%sory0 We
a8e pre8io%sly seen in @at manner te credit system creates associated capital0 5e paper
ser8es as title o! o@nersip @ic represents tis capital0 5e stocks o! rail@ays, mines,
3<3 ;apter JJ&J
na8igation companies, and te like, represent act%al capital, namely, te capital in8ested and
!%nctioning in s%c enterprises, or te amo%nt o! money ad8anced by te stockolders !or te
p%rpose o! being %sed as capital in s%c enterprises0 5is does not precl%de te possibility tat
tese may represent p%re s@indle0 A%t tis capital does not exist t@ice, once as te capital-8al%e
o! titles o! o@nersip BstocksC on te one and and on te oter and as te act%al capital
in8ested, or to be in8ested, in tose enterprises0 &t exists only in te latter !orm, and a sare o!
stock is merely a title o! o@nersip to a corresponding portion o! te s%rpl%s-8al%e to be realised
by it0 ? may sell tis title to A, and A may sell it to ;0 5ese transactions do not alter anyting in
te nat%re o! te problem0 ? or A ten as is title in te !orm o! capital, b%t ; as trans!ormed
is capital into a mere title o! o@nersip to te anticipated s%rpl%s-8al%e !rom te stock capital0
5e independent mo8ement o! te 8al%e o! tese titles o! o@nersip, not only o! go8ernment
bonds b%t also o! stocks, adds @eigt to te ill%sion tat tey constit%te real capital alongside o!
te capital or claim to @ic tey may a8e title0 For tey become commodities, @ose price as
its o@n caracteristic mo8ements and is establised in its o@n @ay0 5eir market-8al%e is
determined di!!erently !rom teir nominal 8al%e, @ito%t any cange in te 8al%e Be8en to%g
te expansion may cangeC o! te act%al capital0 3n te one and, teir market-8al%e !l%ct%ates
@it te amo%nt and reliability o! te proceeds to @ic tey a!!ord legal title0 &! te nominal
8al%e o! a sare o! stock, tat is, te in8ested s%m originally represented by tis sare, is V1==,
and te enterprise pays 1=T instead o! +T, ten its market-8al%e, e8eryting else remaining
eD%al, rises to V<==, as long as te rate o! interest is +T, !or @en capitalised at +T, it no@
represents a !ictitio%s capital o! V<==0 Woe8er b%ys it !or V<== recei8es a re8en%e o! +T on tis
in8estment o! capital0 5e con8erse is tr%e @en te proceeds !rom te enterprise diminis0 5e
market-8al%e o! tis paper is in part spec%lati8e, since it is determined not only by te act%al
income, b%t also by te anticipated income, @ic is calc%lated in ad8ance0 A%t ass%ming te
expansion o! te act%al capital as constant, or @ere no capital exists, as in te case o! state debts,
te ann%al income to be !ixed by la@ and oter@ise s%!!iciently sec%red, te price o! tese
sec%rities rises and !alls in8ersely as te rate o! interest0 &! te rate o! interest rises !rom +T to
1=T, ten sec%rities g%aranteeing an income o! V+ @ill no@ represent a capital o! only V+=0
;on8ersely, i! te rate o! interest !alls to <ZT# te same sec%rities @ill represent a capital o!
V<==0 5eir 8al%e is al@ays merely capitalised income, tat is, te income calc%lated on te basis
o! a !ictitio%s capital at te pre8ailing rate o! interest0 5ere!ore, @en te money-market is tigt
tese sec%rities @ill !all in price !or t@o reasons: !irst, beca%se te rate o! interest rises, and
secondly, beca%se tey are tro@n on te market in large D%antities in order to con8ert tem into
cas0 5is drop in price takes place regardless o! @eter te income tat tis paper g%arantees its
o@ner is constant, as is te case @it go8ernment bonds, or @eter te expansion o! te act%al
capital, @ic it represents, as in ind%strial enterprises, is possibly a!!ected by dist%rbances in te
reprod%ction process0 &n te latter e8ent, tere is only still anoter depreciation added to tat
mentioned abo8e0 ?s soon as te storm is o8er, tis paper again rises to its !ormer le8el, in so !ar
as it does not represent a b%siness !ail%re or s@indle0 &ts depreciation in times o! crisis ser8es as a
potent means o! centralising !ort%nes0
xii

5o te extent tat te depreciation or increase in 8al%e o! tis paper is independent o! te
mo8ement o! 8al%e o! te act%al capital tat it represents, te @ealt o! te nation is H%st as great
be!ore as a!ter its depreciation or increase in 8al%e0
K5e p%blic stocks and canal and rail@ay sares ad
already by te <3rd o! 3ctober, 182>, been
depreciated in te aggregate to te amo%nt o!
V112,>+<,<<+0L BMorris, :o8ernor o! te Aank o!
3<2 ;apter JJ&J
England, testimony in te )eport on ;ommercial
7istress, 182>-28 /-o0 38==10C
(nless tis depreciation re!lected an act%al stoppage o! prod%ction and o! tra!!ic on canals and
rail@ays, or a s%spension o! already initiated enterprises, or sD%andering capital in positi8ely
@ortless 8ent%res, te nation did not gro@ one cent poorer by te b%rsting o! tis soap b%bble o!
nominal money-capital0
?ll tis paper act%ally represents noting more tan acc%m%lated claims, or legal titles, to !%t%re
prod%ction @ose money or capital 8al%e represents eiter no capital at all, as in te case o! state
debts, or is reg%lated independently o! te 8al%e o! real capital @ic it represents0
&n all co%ntries based on capitalist prod%ction, tere exists in tis !orm an enormo%s D%antity o!
so-called interest-bearing capital, or moneyed capital0 ?nd by acc%m%lation o! money-capital
noting more, in te main, is connoted tan an acc%m%lation o! tese claims on prod%ction, an
acc%m%lation o! te market-price, te ill%sory capital-8al%e o! tese claims0
? part o! te banker"s capital is no@ in8ested in tis so-called interest-bearing paper0 5is is itsel!
a portion o! te reser8e capital, @ic does not per!orm any !%nction in te act%al b%siness o!
banking0 5e most important portion o! tis paper consists o! bills o! excange, tat is, promises
to pay made by ind%strial capitalists or mercants0 For te money-lender tese bills o! excange
are interest-bearing, in oter @ords, @en e b%ys tem, e ded%cts interest !or te time @ic
tey still a8e to r%n0 5is is called disco%nting0 &t depends on te pre8ailing rate o! interest, o@
m%c o! a ded%ction is made !rom te s%m represented by te bill o! excange0
Finally, te last part o! te capital o! a banker consists o! is money reser8e in gold and notes0
5e deposits, %nless tied %p by agreement !or a certain time, are al@ays at te disposal o! te
depositors0 5ey are in a state o! contin%al !l%ct%ation0 A%t @ile one depositor dra@s on is
acco%nt, anoter deposits, so tat te general a8erage s%m total o! deposits !l%ct%ates little d%ring
periods o! normal b%siness0
5e reser8e !%nds o! te banks, in co%ntries @it de8eloped capitalist prod%ction, al@ays express
on te a8erage te D%antity o! money existing in te !orm o! a oard, and a portion o! tis oard
in t%rn consists o! paper, mere dra!ts %pon gold, @ic a8e no 8al%e in temsel8es0 5e greater
portion o! banker"s capital is, tere!ore, p%rely !ictitio%s and consists o! claims Bbills o!
excangeC, go8ernment sec%rities B@ic represent spent capitalC, and stocks Bdra!ts on !%t%re
re8en%eC0 ?nd it so%ld not be !orgotten tat te money-8al%e o! te capital represented by tis
paper in te sa!es o! te banker is itsel! !ictitio%s, in so !ar as te paper consists o! dra!ts on
g%aranteed re8en%e Be.g., go8ernment sec%ritiesC, or titles o! o@nersip to real capital Be.g.,
stocksC, and tat tis 8al%e is reg%lated di!!erently !rom tat o! te real capital, @ic te paper
represents at least in part# or, @en it represents mere claims on re8en%e and no capital, te claim
on te same re8en%e is expressed in contin%ally canging !ictitio%s money-capital0 &n addition to
tis, it m%st be noted tat tis !ictitio%s banker"s capital represents largely, not is o@n capital, b%t
tat o! te p%blic, @ic makes deposits @it im, eiter interest-bearing or not0
7eposits are al@ays made in money, in gold or notes, or in dra!ts %pon tese0 Wit te exception
o! te reser8e !%nd, @ic contracts or expands in accordance @it te reD%irements o! act%al
circ%lation, tese deposits are in !act al@ays in te ands o! te ind%strial capitalists and
mercants, on te one and, @ose bills o! excange are tereby disco%nted and @o t%s recei8e
ad8ances# on te oter and, tey are in te ands o! dealers in sec%rities Bexcange brokersC, or
in te ands o! pri8ate parties @o a8e sold teir sec%rities, or in te ands o! te go8ernment
Bin te case o! treas%ry notes and ne@ loansC0 5e deposits temsel8es play a do%ble role0 3n te
one and, as @e a8e H%st mentioned, tey are loaned o%t as interest-bearing capital and are,
tere!ore, not in te sa!es o! te banks, b%t !ig%re merely on teir books as credits o! te
depositors0 3n te oter and, tey !%nction merely as s%c book entries, in so !ar as te m%t%al
3<+ ;apter JJ&J
claims o! te depositors are balanced by ceD%es on teir deposits and can be @ritten o!! against
eac oter0 &n tis connection, it is immaterial @eter tese deposits are entr%sted to te same
banker, @o can t%s balance te 8ario%s acco%nts against eac oter, or @eter tis is done in
di!!erent banks, @ic m%t%ally excange ceD%es and pay only te balances to one anoter0
Wit te de8elopment o! interest-bearing capital and te credit system, all capital seems to do%ble
itsel!, and sometimes treble itsel!, by te 8ario%s modes in @ic te same capital, or peraps
e8en te same claim on a debt, appears in di!!erent !orms in di!!erent ands0
xiii
5e greater portion
o! tis Kmoney-capitalL is p%rely !ictitio%s0 ?ll te deposits, @it te exception o! te reser8e
!%nd, are merely claims on te banker, @ic, o@e8er, ne8er exist as deposits0 5o te extent tat
tey ser8e in clearing-o%se transactions, tey per!orm te !%nction o! capital !or te bankers I
a!ter te latter a8e loaned tem o%t0 5ey pay one anoter teir m%t%al dra!ts %pon te non-
existing deposits by balancing teir m%t%al acco%nts0
?dam $mit says @it regard to te role played by capital in te loaning o! money:
KE8en in te moneyed interest, o@e8er, te money
is, as it @ere, b%t te deed o! assignment @ic
con8eys !rom one and to anoter tose capitals
@ic te o@ners do not care to employ temsel8es0
5ose capitals may be greater in almost any
proportion tan te amo%nt o! te money, @ic
ser8es as te instr%ment o! teir con8eyance, te same
pieces o! money s%ccessi8ely ser8ing !or many
di!!erent loans, as @ell as !or many di!!erent
p%rcases0 ?, !or example, lends to W V1,===, @it
@ic W immediately p%rcases o! A V1,=== @ort o!
goods0 A, a8ing no occasion !or te money imsel!,
lends te identical pieces to J, @it @ic J
immediately p%rcases o! ; anoter V1,=== @ort o!
goods0 ;, in te same manner, and !or te same
reason, lends tem to ., @o again p%rcases goods
@it tem o! 70 &n tis manner te same pieces, eiter
o! coin or o! paper, may, in te co%rse o! a !e@ days,
ser8e as te instr%ment o! tree di!!erent loans, and o!
tree di!!erent p%rcases, eac o! @ic is, in 8al%e,
eD%al to te @ole amo%nt o! tose pieces0 Wat te
tree moneyed men, ?, A and ;, assign to te tree
borro@ers, W, J and ., is te po@er o! making tose
p%rcases0 &n tis po@er consist bot te 8al%e and
te %se o! te loans0 5e stock lent by te tree
moneyed men is eD%al to te 8al%e o! te goods @ic
3<6 ;apter JJ&J
can be p%rcased @it it, and is tree times greater
tan tat o! te money @it @ic te p%rcases are
made0 5ose loans, o@e8er, may be all per!ectly @ell
sec%red, te goods p%rcased by te di!!erent debtors
being so employed, as, in d%e time, to bring back,
@it a pro!it, an eD%al 8al%e eiter o! coin or o! paper0
?nd as te same pieces o! money can t%s ser8e as
te instr%ment o! di!!erent loans to tree, or !or te
same reason, to tirty times teir 8al%e, so tey may
like@ise s%ccessi8ely ser8e as te instr%ment o!
repayment0 B/+n Dn3uiry into the $ature and Causes
o6 the "ealth of $ations, ?berdeen, 'ondon, 1828,
p0FC?. J 0d01 Aook &&, ;ap0 &40C
$ince te same piece o! money can be %sed !or 8ario%s p%rcases, corresponding to its 8elocity o!
circ%lation, it can similarly be %sed !or 8ario%s loans, since te p%rcases take it !rom one person
to anoter, and a loan is b%t a trans!er !rom one person to anoter @ito%t te mediation o! a
p%rcase0 5o e8ery seller, money represents te trans!ormed sape o! is commodities0
-o@adays, @en e8ery 8al%e is expressed as capital-8al%e, it represents in te 8ario%s loans
8ario%s capitals in s%ccession0 5is is simply anoter @ay o! expressing te earlier statement tat
it can s%ccessi8ely realise 8ario%s commodity-8al%es0 ?t te same time it ser8es as a medi%m o!
circ%lation, in order to trans!er te real capitals !rom person to person0 &n te case o! loans, it does
not pass !rom person to person as a medi%m o! circ%lation0 ?s long as it remains in te ands o!
te lender, it is in is ands not a medi%m o! circ%lation, b%t te 8al%e existence o! is capital0
?nd in tis !orm e trans!ers it @en lending it to anoter0 &! ? ad lent te money to A, and A to
;, @ito%t te mediation o! p%rcases, te same money @o%ld not represent tree capitals, b%t
only one I a single capital-8al%e0 5e n%mber o! capitals @ic it act%ally represents depends on
te n%mber o! times tat it !%nctions as te 8al%e-!orm o! 8ario%s commodity-capitals0
5e same ting tat ?dam $mit says abo%t loans in general also applies to deposits, @ic are
merely anoter name !or te loans @ic te p%blic makes to te bankers0 5e same pieces o!
money may ser8e as te instr%ments !or any n%mber o! deposits0
K&t is %nD%estionably tr%e tat te V1,=== @ic yo%
deposit at ? today may be reiss%ed tomorro@, and
!orm a deposit at A0 5e day a!ter tat, reiss%ed !rom
A, it may !orm a deposit at ;000 and so on to
in!init%de# and tat te same V1,=== in money may,
t%s, by a s%ccession o! trans!ers, m%ltiply itsel! into a
s%m o! deposits absol%tely inde!inite0 &t is possible,
tere!ore, tat nine-tents o! all te deposits in te
(nited Kingdom may a8e no existence beyond teir
record in te books o! te bankers @o are
3<> ;apter JJ&J
respecti8ely acco%ntable !or tem0000 5%s in $cotland,
!or instance, c%rrency as ne8er exceeded V3 million,
te deposits in te banks are estimated at V<> million0
(nless a r%n on te banks be made, te same V1,===
@o%ld, i! sent back %pon its tra8els, cancel @it te
same !acility a s%m eD%ally inde!inite0 ?s te same
V1,===, @it @ic yo% cancel yo%r debt to a
tradesman today, may cancel is debt to te mercant
tomorro@, te mercant"s debt to te bank te day
!ollo@ing, and so on @ito%t end# so te same V1,===
may pass !rom and to and, and bank to bank, and
cancel any concei8able s%m o! deposits0L B4he
Currency 4heory 9eviewed, pp0 6<-630C
P%st as e8eryting in tis credit system is do%bled and trebled and trans!ormed into a mere
pantom o! te imagination, so it is @it te Kreser8e !%nd,L @ere one @o%ld at last ope to
grasp on to someting solid0
'et %s listen once more to Mr0 Morris, :o8ernor o! te Aank o! England:
K5e reser8es o! te pri8ate bankers are in te ands
o! te Aank o! England in te sape o! deposits0000 ?n
export o! gold acts excl%si8ely, in te !irst instance,
%pon te reser8e o! te Aank o! England# b%t it @o%ld
also be acting %pon te reser8es o! te bankers,
inasm%c as it is a @itdra@al o! a portion o! te
reser8es @ic tey a8e in te Aank o! England0 &t
@o%ld be acting %pon te reser8es o! all te bankers
tro%go%t te co%ntry0L B;ommercial 7istress, 182>-
28, -os0 363*, 362<0C
(ltimately, ten, te reser8e !%nds act%ally merge @it te reser8e !%nd o! te Aank o! England0
xi8
6o@e8er, tis reser8e !%nd also as a do%ble existence0 5e reser8e !%nd o! te banking
department is eD%al to te s%rpl%s o! notes @ic te Aank is a%torised to iss%e o8er and abo8e
te notes in circ%lation0 5e legal maxim%m o! te note iss%e is V12 million B!or @ic no b%llion
reser8e is reD%ired# it is te approximate amo%nt o@ed by te state to te AankC pl%s te amo%nt
o! te Aank"s s%pply o! precio%s metal0 &! te s%pply o! precio%s metal in te Aank amo%nts to
V12 million, te Aank can t%s iss%e V<8 million in notes, and i! V<= million o! tese are in
circ%lation, te reser8e !%nd o! te banking department is V8 million0 5ese V8 million"s @ort o!
notes are ten legally te banker"s capital at te disposal o! te Aank, and at te same time te
reser8e !%nd !or its deposits0 -o@, i! a drain o! gold takes place, @ereby te s%pply o! precio%s
metal in te Aank is red%ced by V6 million I reD%iring te destr%ction o! an eD%i8alent n%mber o!
notes I te reser8e o! te banking department @o%ld !all !rom V8 million to V< million0 3n te
one and, te Aank @o%ld raise its rate o! interest considerably# on te oter and, te banks
3<8 ;apter JJ&J
a8ing deposits @it it, and te oter depositors, @o%ld obser8e a large decrease in te reser8e
!%nd co8ering teir o@n credits in te Aank0 &n 18+>, te !o%r largest stock banks o! 'ondon
treatened to call in teir deposits, and tereby bankr%pt te banking department, %nless te Aank
o! England @o%ld sec%re a Kgo8ernment letterL s%spending te Aank ?ct o! 18220
x8
&n tis @ay
te banking department co%ld !ail, as in 182>, @ile any n%mber o! millions Be.g., 8 million in
182>C are eld in its iss%e department to g%arantee te con8ertibility o! te circ%lating notes0 A%t
tis is again ill%sory0
K5at large portion Bo! depositsC !or @ic te
bankers temsel8es a8e no immediate demand
passes into te ands o! te bill-brokers, @o gi8e to
te banker in ret%rn commercial bills already
disco%nted by tem !or persons in 'ondon and in
di!!erent parts o! te co%ntry as a sec%rity !or te s%m
ad8anced by te banker0 5e bill-broker is responsible
to te banker !or payment o! tis money at call# and
s%c is te magnit%de o! tese transactions, tat Mr0
-ea8e, te present :o8ernor o! te Aank /o!
England1, stated in e8idence, "We kno@ tat one
broker ad + million, and @e @ere led to belie8e tat
anoter ad bet@een 8 and 1= million# tere @as one
@it 2, anoter @it 3Z, and a tird @it abo8e 80 &
speak o! deposits @it te brokers0"K B)eport o!
;ommittee on Aank ?cts, 18+>-+8, p0 +, $ection 80C
K5e 'ondon bill-brokers carried on teir enormo%s
transactions @ito%t any cas reser8e, relying on te
r%n o!! o! teir bills !alling d%e, or in extremity, on te
po@er o! obtaining ad8ances !rom te Aank o!
England on te sec%rity o! bills %nder disco%nt0L
Dbid., p0 4&&&, $ection 1>0 K5@o bill-broking o%ses in
'ondon s%spended payment in 182># bot a!ter@ards
res%med b%siness0 &n 18+>, bot s%spended again0 5e
liabilities o! one o%se in 182> @ere, in ro%nd
n%mbers, V<,683,===, @it a capital o! V18=,===# te
liabilities o! te same o%se, in 18+>, @ere
V+,3==,===, te capital probably not more tan one-
!o%rt o! @at it @as in 182>0 5e liabilities o! te
oter !irm @ere bet@een V3,===,=== and V2,===,===
3<* ;apter JJ&J
at eac period o! stoppage, @it a capital not
exceeding V2+,===0L )Dbid., p0 JJ&, $ection +<0C
Chapter 30. Money-Capital and Real Capital.
I.
5e only di!!ic%lt D%estions, @ic @e are no@ approacing in connection @it te credit system,
are te !ollo@ing:
'irst: 5e acc%m%lation o! te act%al money-capital0 5o @at extent is it, and to @at extent is it
not, an indication o! an act%al acc%m%lation o! capital, i.e., o! reprod%ction on an extended scaleQ
&s te so-called pletora o! capital I an expression %sed only @it re!erence to te interest-bearing
capital, i.e., moneyed capital I only a special @ay o! expressing ind%strial o8er-prod%ction, or
does it constit%te a separate penomenon alongside o! itQ 7oes tis pletora, or excessi8e s%pply
o! money-capital, coincide @it te existence o! stagnating masses o! money Bb%llion, gold coin
and bank-notesC, so tat tis s%perab%ndance o! act%al money is te expression and external !orm
o! tat pletora o! loan capitalQ
Secondly: 5o @at extent does a scarcity o! money, i.e., a sortage o! loan capital, express a
sortage o! real capital Bcommodity-capital and prod%cti8e capitalCQ 5o @at extent does it
coincide, on te oter and, @it a sortage o! money as s%c, a sortage o! te medi%m o!
circ%lationQ
&n so !ar as @e a8e iterto considered te pec%liar !orm o! acc%m%lation o! money-capital and
o! money @ealt in general, it as resol8ed itsel! into an acc%m%lation o! claims o! o@nersip
%pon labo%r0 5e acc%m%lation o! te capital o! te national debt as been re8ealed to mean
merely an increase in a class o! state creditors, @o a8e te pri8ilege o! a !irm claim %pon a
certain portion o! te tax re8en%e0
x8i
Ay means o! tese !acts, @ereby e8en an acc%m%lation o!
debts may appear as an acc%m%lation o! capital, te eigt o! distortion taking place in te credit
system becomes apparent0 5ese promissory notes, @ic are iss%ed !or te originally loaned
capital long since spent, tese paper d%plicates o! cons%med capital, ser8e !or teir o@ners as
capital to te extent tat tey are saleable commodities and may, tere!ore, be recon8erted into
capital0
5itles o! o@nersip to p%blic @orks, rail@ays, mines, etc0, are indeed, as @e a8e also seen, titles
to real capital0 A%t tey do not place tis capital at one"s disposal0 &t is not s%bHect to @itdra@al0
5ey merely con8ey legal claims to a portion o! te s%rpl%s-8al%e to be prod%ced by it0 A%t tese
titles like@ise become paper d%plicates o! te real capital# it is as to%g a bill o! lading @ere to
acD%ire a 8al%e separate !rom te cargo, bot concomitantly and sim%ltaneo%sly @it it0 5ey
come to nominally represent non-existent capital0 For te real capital exists side by side @it
tem and does not cange ands as a res%lt o! te trans!er o! tese d%plicates !rom one person to
anoter0 5ey ass%me te !orm o! interest-bearing capital, not only beca%se tey g%arantee a
certain income, b%t also beca%se, tro%g teir sale, teir repayment as capital-8al%es can be
obtained0 5o te extent tat te acc%m%lation o! tis paper expresses te acc%m%lation o!
rail@ays, mines, steamsips, etc0, to tat extent does it express te extension o! te act%al
reprod%ction process I H%st as te extension o!, !or example, a tax list on mo8able property
indicates te expansion o! tis property0 A%t as d%plicates @ic are temsel8es obHects o!
transactions as commodities, and t%s able to circ%late as capital-8al%es, tey are ill%sory, and
teir 8al%e may !all or rise D%ite independently o! te mo8ement o! 8al%e o! te real capital !or
@ic tey are titles0 5eir 8al%e, tat is, teir D%otation on te $tock Excange, necessarily as a
tendency to rise @it a !all in te rate o! interest I in so !ar as tis !all, independent o! te
caracteristic mo8ements o! money-capital, is d%e merely to te tendency !or te rate o! pro!it to
331 ;apter JJJ
!all# tere!ore, tis imaginary @ealt expands, i! !or tis reason alone, in te co%rse o! capitalist
prod%ction in accordance @it te expressed 8al%e !or eac o! its aliD%ot parts o! speci!ic original
nominal 8al%e0
x8ii

:ain and loss tro%g !l%ct%ations in te price o! tese titles o! o@nersip, and teir
centralisation in te ands o! rail@ay kings, etc0, become, by teir 8ery nat%re, more and more a
matter o! gamble, @ic appears to take te place o! labo%r as te original metod o! acD%iring
capital @ealt and also replaces naked !orce0 5is type o! imaginary money @ealt not only
constit%tes a 8ery considerable part o! te money @ealt o! pri8ate people, b%t also o! bankerGs
capital, as @e a8e already indicated0
&n order to D%ickly settle tis D%estion, let %s point o%t tat one co%ld also mean by te
acc%m%lation o! money-capital te acc%m%lation o! @ealt in te ands o! bankers Bmoney-
lenders by pro!essionC, acting as middlemen bet@een pri8ate money-capitalists on te one and,
and te state, comm%nities, and reprod%cing borro@ers on te oter0 For te entire 8ast extension
o! te credit system, and all credit in general, is exploited by tem as teir pri8ate capital0 5ese
!ello@s al@ays possess capital and incomes in money-!orm or in direct claims on money0 5e
acc%m%lation o! te @ealt o! tis class may take place completely di!!erently tan act%al
acc%m%lation, b%t it pro8es at any rate tat tis class pockets a good deal o! te real
acc%m%lation0
'et %s red%ce te scope o! te problem be!ore %s0 :o8ernment sec%rities, like stocks and oter
sec%rities o! all kinds, are speres o! in8estment !or loanable capital I capital intended !or bearing
interest0 5ey are !orms o! loaning s%c capital0 A%t tey temsel8es are not te loan capital,
@ic is in8ested in tem0 3n te oter and, in so !ar as credit plays a direct role in te
reprod%ction process, @at te ind%strialist or mercant needs @en e @ises to a8e a bill
disco%nted or a loan granted is neiter stocks nor go8ernment sec%rities0 Wat e needs is money0
6e, tere!ore, pledges or sells tose sec%rities i! e cannot sec%re money in any oter @ay0 &t is
te acc%m%lation o! this loan capital @it @ic @e a8e to deal ere, and more partic%larly
acc%m%lation o! loanable money-capital0 We are not concerned ere @it loans o! o%ses,
macines, or oter !ixed capital0 -or are @e concerned @it te ad8ances ind%strialists and
mercants make to one anoter in commodities and @itin te compass o! te reprod%ction
process# alto%g @e m%st also in8estigate tis point be!oreand in more detail0 We are concerned
excl%si8ely @it money loans, @ic are made by bankers, as middlemen, to ind%strialists and
mercants0
'et %s ten, to begin @it, analyse commercial credit, tat is, te credit @ic te capitalists
engaged in reprod%ction gi8e to one anoter0 &t !orms te basis o! te credit system0 &t is
represented by te bill o! excange, a promissory note @it a de!inite term o! payment, i.e., a
doc%ment o! de!erred payment0 E8eryone gi8es credit @it one and and recei8es credit @it te
oter0 'et %s completely disregard, !or te present, bankerGs credit, @ic constit%tes an entirely
di!!erent spere0 5o te extent tat tese bills o! excange circ%late among te mercants
temsel8es as means o! payment again, by endorsement !rom one to anoter I @ito%t, o@e8er,
te mediation o! disco%nting I it is merely a trans!er o! te claim !rom ? to A and does not
cange te pict%re in te least0 &t merely replaces one person by anoter0 ?nd e8en in tis case,
te liD%idation can take place @ito%t te inter8ention o! money0 $pinner ?, !or example, as to
pay a bill to cotton broker A, and te latter to importer ;0 -o@, i! ; also exports yarn, @ic
appens o!ten eno%g, e may b%y yarn !rom ? on a bill o! excange and te spinner ? may pay
te broker A @it te brokerGs o@n bill @ic @as recei8ed in payment !rom ;0 ?t most, a
balance @ill a8e to be paid in money0 5e entire transaction ten consists merely in te
excange o! cotton and yarn0 5e exporter represents only te spinner, and te cotton broker, te
cotton planter0
33< ;apter JJJ
5@o tings are no@ to be noted in te circ%it o! tis p%rely commercial credit0
'irst: 5e settlement o! tese m%t%al claims depends %pon te ret%rn !lo@ o! capital, tat is, on ;
I M, @ic is merely de!erred0 &! te spinner as recei8ed a bill o! excange !rom a cotton goods
man%!act%rer, ten man%!act%rer can pay i! te cotton goods @ic e as on te market a8e
been sold in te interim0 &! te corn spec%lator as a bill o! excange dra@n %pon is agent, te
agent can pay te money i! te corn as been sold in te interim at te expected price0 5ese
payments, tere!ore, depend on te !l%idity o! reprod%ction, tat is, te prod%ction and
cons%mption processes0 A%t since te credits are m%t%al, te sol8ency o! one depends %pon te
sol8ency o! anoter# !or in dra@ing is bill o! excange, one may a8e co%nted eiter on te
ret%rn !lo@ o! te capital in is o@n b%siness or on te ret%rn !lo@ o! te capital in a tird partyGs
b%siness @ose bill o! excange is d%e in te meantime0 ?side !rom te prospect o! ret%rn !lo@ o!
capital, payment can only be possible by means o! reser8e capital at te disposal o! te person
dra@ing te bill o! excange, in order to meet is obligations in case te ret%rn !lo@ o! capital
so%ld be delayed0
Secondly: 5is credit system does not do a@ay @it te necessity !or cas payments0 For one
ting, a large portion o! expenses m%st al@ays be paid in cas, e.g., @ages, taxes, etc0
F%rtermore, capitalist A, @o as recei8ed !rom ; a bill o! excange in place o! cas payment,
may a8e to pay a bill o! is o@n @ic as !allen d%e to 7 be!ore ;Gs bill becomes d%e, and so
e m%st a8e ready cas0 ? complete circ%it o! reprod%ction as tat ass%med abo8e, i.e., !rom
cotton planter to cotton spinner and back again, can only constit%te an exception# it @ill be
constantly interr%pted at many points0 We a8e seen in te disc%ssion o! te reprod%ction process
B4ol &&, ,art &&&C tat te prod%cers o! constant capital excange, in part, constant capital among
temsel8es0 ?s a res%lt, te bills o! excange can, more or less, balance eac oter o%t0 $imilarly,
in te ascending line o! prod%ction, @ere te cotton broker dra@s on te cotton spinner, te
spinner on te man%!act%rer o! cotton goods, te man%!act%rer on te exporter, te exporter on
te importer Bperaps o! cotton againC0 A%t te circ%it o! transactions, and, tere!ore, te t%rn
abo%t o! te series o! claims, does not take place at te same time0 For example, te claim o! te
spinner on te @ea8er is not settled by te claim o! te coal-dealer on te macine-b%ilder0 5e
spinner ne8er as any co%nter-claims on te macine-b%ilder, in is b%siness, beca%se is
prod%ct, yarn, ne8er enters as an element in te macine-b%ilderGs reprod%ction process0 $%c
claims m%st, tere!ore, be settled by money0
5e limits o! tis commercial credit, considered by temsel8es, are 1C te @ealt o! te
ind%strialists and mercants, tat is, teir command o! reser8e capital in case o! delayed ret%rns#
<C tese ret%rns temsel8es0 5ese ret%rns may be delayed, or te prices o! commodities may !all
in te meantime or te commodities may become momentarily %nsaleable d%e to a stagnant
market0 5e longer te bills o! excange r%n, te larger m%st be te reser8e capital, and te
greater te possibility o! a dimin%tion or delay o! te ret%rns tro%g a !all in prices or a gl%t on
te market0 ?nd, !%rtermore, te ret%rns are so m%c less sec%re, te more te original
transaction @as conditioned %pon spec%lation on te rise or !all o! commodity-prices0 A%t it is
e8ident tat @it te de8elopment o! te prod%cti8e po@er o! labo%r, and t%s o! prod%ction on a
large scale: 1C te markets expand and become more distant !rom te place o! prod%ction# <C
credits m%st, tere!ore, be prolonged# 3C te spec%lati8e element m%st t%s more and more
dominate te transactions0 ,rod%ction on a large scale and !or distant markets tro@s te total
prod%ct into te ands o! commerce# b%t it is impossible tat te capital o! a nation so%ld do%ble
itsel! in s%c a manner tat commerce so%ld itsel! be able to b%y %p te entire national prod%ct
@it its o@n capital and to sell it again0 ;redit is, tere!ore, indispensable ere# credit, @ose
8ol%me gro@s @it te gro@ing 8ol%me o! 8al%e o! prod%ction and @ose time d%ration gro@s
@it te increasing distance o! te markets0 ? m%t%al interaction takes place ere0 5e
de8elopment o! te prod%ction process extends te credit, and credit leads to an extension o!
ind%strial and commercial operations0
333 ;apter JJJ
Wen @e examine tis credit detaced !rom bankerGs credit, it is e8ident tat it gro@s @it an
increasing 8ol%me o! ind%strial capital itsel!0 'oan capital and ind%strial capital are identical ere0
5e loaned capital is commodity-capital @ic is intended eiter !or %ltimate indi8id%al
cons%mption or !or te replacement o! te constant elements o! prod%cti8e capital0 Wat appears
ere as loan capital is al@ays capital existing in some de!inite pase o! te reprod%ction process,
b%t @ic by means o! p%rcase and sale passes !rom one person to anoter, @ile its eD%i8alent
is not paid by te b%yer %ntil some later stip%lated time0 For example, cotton is trans!erred to te
spinner !or a bill o! excange, yarn to te man%!act%rer o! cotton goods !or a bill o! excange,
cotton goods to te mercant !or a bill, !rom @ose ands tey go to te exporter !or a bill, and
ten, !or a bill to some mercant in &ndia, @o sells te goods and b%ys indigo instead, etc0
7%ring tis trans!er !rom and to and te trans!ormation o! cotton into cotton goods is e!!ected,
and te cotton goods are !inally transported to &ndia and excanged !or indigo, @ic is sipped
to E%rope and tere enters into te reprod%ction process again0 5e 8ario%s pases o! te
reprod%ction process are promoted ere by credit, @ito%t any payment on te part o! te spinner
!or te cotton, te man%!act%rer o! cotton goods !or te yarn, te mercant !or te cotton goods,
etc0 &n te !irst stages o! te process, te commodity, cotton, goes tro%g its 8ario%s prod%ction
pases, and tis transition is promoted by credit0 A%t as soon as te cotton as recei8ed in
prod%ction its %ltimate !orm as a commodity, te same commodity-capital passes only tro%g te
ands o! 8ario%s mercants @o promote its transportation to distant markets, and te last o!
@om !inally sells tese commodities to te cons%mer and b%ys oter commodities in teir stead,
@ic eiter become cons%med or go into te reprod%ction process0 &t is necessary, ten, to
di!!erentiate bet@een t@o stages ere:
&n te !irst stage, credit promotes te act%al s%ccessi8e pases in te prod%ction o! te same
article# in te second, credit merely promotes te trans!er o! te article, incl%ding its
transportation, !rom one mercant to anoter, in oter @ords, te process ; I M0 A%t ere also te
commodity is at least in te process o! circ%lation, tat is, in a pase o! te reprod%ction process0
&t !ollo@s, ten, tat it is ne8er idle capital @ic is loaned ere, b%t capital @ic m%st cange
its !orm in te ands o! its o@ner# it exists in a !orm tat !or im is merely commodity-capital,
i.e., capital @ic m%st be retrans!ormed, and, to begin @it, at least con8erted into money0 &t is,
tere!ore, te metamorposis o! commodities tat is ere promoted by credit# not merely ; I M,
b%t also M I ; and te act%al prod%ction process0 ? large D%antity o! credit @itin te
reprod%cti8e circ%it BbankerGs credit exceptedC does not signi!y a large D%antity o! idle capital,
@ic is being o!!ered !or loan and is seeking pro!itable in8estment0 &t means rater a large
employment o! capital in te reprod%ction process0 ;redit, ten, promotes ere 1C as !ar as te
ind%strial capitalists are concerned, te transition o! ind%strial capital !rom one pase into
anoter, te connection o! related and do8etailing speres o! prod%ction# <C as !ar as te
mercants are concerned, te transportation and transition o! commodities !rom one person to
anoter %ntil teir de!inite sale !or money or teir excange !or oter commodities0
5e maxim%m o! credit is ere identical @it te !%llest employment o! ind%strial capital, tat is,
te %tmost exertion o! its reprod%cti8e po@er @ito%t regard to te limits o! cons%mption0 5ese
limits o! cons%mption are extended by te exertions o! te reprod%ction process itsel!0 3n te one
and, tis increases te cons%mption o! re8en%e on te part o! labo%rers and capitalists, on te
oter and, it is identical @it an exertion o! prod%cti8e cons%mption0
?s long as te reprod%ction process is contin%o%s and, tere!ore, te ret%rn !lo@ ass%red, tis
credit exists and expands, and its expansion is based %pon te expansion o! te reprod%ction
process itsel!0 ?s soon as a stoppage takes place, as a res%lt o! delayed ret%rns, gl%tted markets, or
!allen prices, a s%perab%ndance o! ind%strial capital becomes a8ailable, b%t in a !orm in @ic it
cannot per!orm its !%nctions0 6%ge D%antities o! commodity-capital, b%t %nsaleable0 6%ge
D%antities o! !ixed capital, b%t largely idle d%e to stagnant reprod%ction0 ;redit is contracted 1C
beca%se tis capital is idle, i.e., blocked in one o! its pases o! reprod%ction beca%se it cannot
332 ;apter JJJ
complete its metamorposis# <C beca%se con!idence in te contin%ity o! te reprod%ction process
as been saken# 3C beca%se te demand !or tis commercial credit diminises0 5e spinner, @o
c%rtails is prod%ction and as a large D%antity o! %nsold yarn in stock, does not need to b%y any
cotton on credit# te mercant does not need to b%y any commodities on credit beca%se e as
more tan eno%g o! tem0
6ence, i! tere is a dist%rbance in tis expansion or e8en in te normal !lo@ o! te reprod%ction
process, credit also becomes scarce# it is more di!!ic%lt to obtain commodities on credit0 6o@e8er,
te demand !or cas payment and te ca%tion obser8ed to@ard sales on credit are partic%larly
caracteristic o! te pase o! te ind%strial cycle !ollo@ing a cras0 7%ring te crisis itsel!, since
e8eryone as prod%cts to sell, cannot sell tem, and yet m%st sell tem in order to meet payments,
it is not te mass o! idle and in8estment-seeking capital, b%t rater te mass o! capital impeded in
its reprod%ction process, tat is greatest H%st @en te sortage o! credit is most ac%te Band
tere!ore te rate o! disco%nt igest !or bankerGs creditC0 5e capital already in8ested is ten,
indeed, idle in large D%antities beca%se te reprod%ction process is stagnant0 Factories are closed,
ra@ materials acc%m%late, !inised prod%cts !lood te market as commodities0 -oting is more
erroneo%s, tere!ore, tan to blame a scarcity o! prod%cti8e capital !or s%c a condition0 &t is
precisely at s%c times tat tere is a s%perab%ndance o! prod%cti8e capital, partly in relation to
te normal, b%t temporarily red%ced scale o! reprod%ction, and partly in relation to te paralysed
cons%mption0
'et %s s%ppose tat te @ole o! society is composed only o! ind%strial capitalists and @age-
@orkers0 'et %s !%rtermore disregard price !l%ct%ations, @ic pre8ent large portions o! te total
capital !rom replacing temsel8es in teir a8erage proportions and @ic, o@ing to te general
interrelations o! te entire reprod%ction process as de8eloped in partic%lar by credit, m%st al@ays
call !ort general stoppages o! a transient nat%re0 'et %s also disregard te sam transactions and
spec%lations, @ic te credit system !a8o%rs0 5en, a crisis co%ld only be explained as te res%lt
o! a disproportion o! prod%ction in 8ario%s brances o! te economy, and as a res%lt o! a
disproportion bet@een te cons%mption o! te capitalists and teir acc%m%lation0 A%t as matters
stand, te replacement o! te capital in8ested in prod%ction depends largely %pon te cons%ming
po@er o! te non-prod%cing classes# @ile te cons%ming po@er o! te @orkers is limited partly
by te la@s o! @ages, partly by te !act tat tey are %sed only as long as tey can be pro!itably
employed by te capitalist class0 5e %ltimate reason !or all real crises al@ays remains te
po8erty and restricted cons%mption o! te masses as opposed to te dri8e o! capitalist prod%ction
to de8elop te prod%cti8e !orces as to%g only te absol%te cons%ming po@er o! society
constit%ted teir limit0
? real lack o! prod%cti8e capital, at least among capitalistically de8eloped nations, can be said to
exist only in times o! general crop !ail%res, eiter in te principal !oodst%!!s or in te principal
ind%strial ra@ materials0
6o@e8er, in addition to tis commercial credit @e a8e act%al money credit0 5e ad8ances o! te
ind%strialists and mercants among one anoter are amalgamated @it te money ad8ances made
to tem by te bankers and money-lenders0 &n disco%nting bills o! excange te ad8ance is only
nominal0 ? man%!act%rer sells is prod%ct !or a bill o! excange and gets tis bill disco%nted by
some bill-broker0 &n reality, te latter ad8ances only te credit o! is banker, @o in t%rn ad8ances
to te broker te money-capital o! is depositors0 5e depositors consist o! te ind%strial
capitalists and mercants temsel8es and also o! @orkers Btro%g sa8ings-banksC I as @ell as
gro%nd-rent recipients and oter %nprod%cti8e classes0 &n tis @ay e8ery indi8id%al ind%strial
man%!act%rer and mercant gets aro%nd te necessity o! keeping a large reser8e !%nd and being
dependent %pon is act%al ret%rns0 3n te oter and, te @ole process becomes so complicated,
partly by simply manip%lating bills o! excange, partly by commodity transactions !or te sole
p%rpose o! man%!act%ring bills o! excange, tat te semblance o! a 8ery sol8ent b%siness @it a
smoot !lo@ o! ret%rns can easily persist e8en long a!ter ret%rns act%ally come in only at te
33+ ;apter JJJ
expense partly o! s@indled money-lenders and partly o! s@indled prod%cers0 5%s b%siness
al@ays appears almost excessi8ely so%nd rigt on te e8e o! a cras0 5e best proo! o! tis is
!%rnised, !or instance, by te )eports on Aank ?cts o! 18+> and 18+8, in @ic all bank
directors, mercants, in sort all te in8ited experts @it 'ord 38erstone at teir ead,
congrat%lated one anoter on te prosperity and so%ndness o! b%siness I H%st one mont be!ore
te o%tbreak o! te crisis in ?%g%st 18+>0 ?nd, strangely eno%g, 5ooke in is (istory of &rices
s%cc%mbs to tis ill%sion once again as istorian !or eac crisis0 A%siness is al@ays toro%gly
so%nd and te campaign in !%ll s@ing, %ntil s%ddenly te debacle takes place0
We re8ert no@ to te acc%m%lation o! money-capital0
-ot e8ery a%gmentation o! loanable money-capital indicates a real acc%m%lation o! capital or
expansion o! te reprod%ction process0 5is becomes most e8ident in te pase o! te ind%strial
cycle immediately !ollo@ing a crisis, @en loan capital lies aro%nd idle in great D%antities0 ?t
s%c times, @en te prod%ction process is c%rtailed Bprod%ction in te Englis ind%strial districts
@as red%ced by one-tird a!ter te crisis o! 182>C, @en te prices o! commodities are at teir
lo@est le8el, @en te spirit o! enterprise is paralysed, te rate o! interest is lo@, @ic in tis
case indicates noting more tan an increase in loanable capital precisely as a res%lt o!
contraction and paralysation o! ind%strial capital0 &t is D%ite ob8io%s tat a smaller D%antity o! a
circ%lation medi%m is reD%ired @en te prices o! commodities a8e !allen, te n%mber o!
transactions decreased, and te capital laid o%t !or @ages red%ced# tat, on te oter and, no
additional money is reD%ired to !%nction as @orld-money a!ter !oreign debts a8e been liD%idated
eiter by te export o! gold or as a res%lt o! bankr%ptcies# tat, !inally, te 8ol%me o! b%siness
connected @it disco%nting bills o! excange diminises in proportion @it te red%ced n%mber
and magnit%des o! te bills o! excange tem-sel8es0 6ence te demand !or loanable money-
capital, eiter to act as a medi%m o! circ%lation or as a means o! payment Bte in8estment o! ne@
capital is still o%t o! te D%estionC, decreases and tis capital, tere!ore, becomes relati8ely
ab%ndant0 (nder s%c circ%mstances, o@e8er, te s%pply o! loanable money-capital also
increases, as @e sall later see0
5%s, te sit%ation a!ter te crisis o! 182> @as caracterised by Ka limitation o! transaction and a
great s%perab%ndance o! money0L B;ommercial 7istress, 182>-28, E8idence -o0 16620C 5e rate
o! interest @as 8ery lo@ beca%se o! te Kalmost per!ect destr%ction o! commerce and te almost
total @ant o! means o! employing moneyL Bloc. cit., p0 2+, testimony o! 6odgson, 7irector o! te
)oyal Aank o! 'i8erpoolC0 Wat nonsense tese gentlemen concocted Band 6odgson is,
moreo8er, one o! te best o! temC in order to explain tese !acts, can be seen !rom te !ollo@ing
remark:
K5e press%reL B182>C Karose !rom te real dimin%tion
o! te moneyed capital o! te co%ntry, ca%sed partly
by te necessity o! paying in gold !or imports !rom all
parts o! te @orld, and partly by te absorption o!
!loating into !ixed capital0L /10 c0, p0 3*01
6o@ te con8ersion o! !loating capital into !ixed capital red%ces te money-capital o! a co%ntry is
%nintelligible0 For, in te case o! rail@ays, e.g., in @ic capital @as mainly in8ested at tat time,
neiter gold nor paper is %sed !or 8iad%cts and rails, and te money !or te rail@ay stocks, to te
extent tat it ad been deposited solely in payment, per!ormed exactly te same !%nctions as any
oter money deposited in banks and e8en increased te loanable money-capital temporarily, as
already so@n abo8e# b%t to te extent tat it ad act%ally been spent !or constr%ction, it
circ%lated in te co%ntry as a medi%m o! p%rcase and o! payment0 3nly in so !ar as !ixed capital
336 ;apter JJJ
cannot be exported, so tat @it te impossibility o! its export te a8ailable capital sec%red !rom
ret%rns !or exported articles also drops o%t o! te pict%re I incl%ding te ret%rns in cas or b%llion
I only to tat extent co%ld te money-capital be a!!ected0 A%t at tat time Englis export articles
@ere also piled %p in %ge D%antities on te !oreign markets @ito%t being able to be sold0 &t is
tr%e, te !loating capital o! te mercants and man%!act%rers o! Mancester, etc0, @o ad a
portion o! teir normal b%siness capital tied %p in rail@ay stocks and @ere tere!ore dependent
%pon borro@ed capital !or r%nning teir b%siness, ad become !ixed, and tey, tere!ore, ad to
s%!!er te conseD%ences0 A%t it @o%ld a8e been te same, i! te capital belonging to teir
b%siness, b%t @itdra@n !rom it, ad been in8ested, say, in mines instead o! rail@ays-mining
prod%cts like iron, coal, copper being temsel8es in t%rn !loating capital0 5e act%al red%ction o!
a8ailable money-capital tro%g crop !ail%res, corn imports, and gold exports constit%ted,
nat%rally, an e8ent tat ad noting to do @it te rail@ay s@indle0
K?lmost all mercantile o%ses ad beg%n to star8e
teir b%siness more or less 000 by taking part o! teir
commercial capital !or rail@ays0L I K'oans to so great
an extent by commercial o%ses to rail@ays /loc. cit.,
p0 2<1 ind%ced tem to lean too m%c %pon000 banks by
te disco%nt o! paper, @ereby to carry on teir
commercial operationsL Bte same 6odgson, loc. cit.,
p. 6>C0 K&n Mancester tere a8e been immense
losses in conseD%ence o! te spec%lation in rail@aysL
B)0 :ardner, pre8io%sly cited in 4ol0 &, ;0 J&&&, 3, c,
and in se8eral oter places# E8idence -o0 2882, loc.
cit0C0
3ne o! te principal ca%ses o! te crisis o! 182> @as te colossal !looding o! te market and te
!ab%lo%s s@indle in te East &ndian trade @it commodities0 A%t tere @ere also oter
circ%mstances @ic bankr%pted 8ery ric !irms in tis line:
K5ey ad large means, b%t not a8ailable0 5e @ole
o! teir capital @as locked %p in estates in te
Ma%riti%s, or indigo !actories, or s%gar !actories0
6a8ing inc%rred liabilities to te extent o! V+==,===-
6==,===, tey ad no a8ailable assets to pay teir
bills, and e8ent%ally it pro8ed tat to pay teir bills
tey @ere entirely dependent %pon teir credit0L B;0
5%rner, big East &ndian mercant in 'i8erpool, -o0
>3=, loc. cit0C
$ee also :ardner B-o0 28><, loc. cit0C:
K&mmediately a!ter te ;ina treaty, so great a
prospect @as eld o%t to te co%ntry o! a great
33> ;apter JJJ
extension o! o%r commerce @it ;ina, tat tere
@ere many large mills b%ilt @it a 8ie@ to tat trade
excl%si8ely, in order to man%!act%re tat class o! clot
@ic is principally taken !or te ;ina market, and
o%r pre8io%s man%!act%res ad te addition o! all
tose0L I K28>20 6o@ as tat trade t%rned o%tQ I
Most r%ino%s, almost beyond description# & do not
belie8e, tat o! te @ole o! te sipments tat @ere
made in 1822 and 182+ to ;ina, abo8e t@o-tirds o!
te amo%nt a8e e8er been ret%rned# in conseD%ence
o! tea being te principal article o! repayment and o!
te expectation tat @as eld o%t, @e, as
man%!act%rers, !%lly calc%lated %pon a great red%ction
in te d%ty on tea0L
?nd no@, nai8ely expressed, comes te caracteristic credo o! te Englis man%!act%rer:
K3%r commerce @it no !oreign market is limited by
teir po@er to p%rcase te commodity, b%t it is
limited in tis co%ntry by o%r capability o! cons%ming
tat @ic @e recei8e in ret%rn !or o%r man%!act%res0L
B5e relati8ely poor co%ntries, @it @om England trades, are, o! co%rse, able to pay !or and
cons%me any amo%nt o! Englis prod%cts, b%t %n!ort%nately @ealty England cannot assimilate
te prod%cts sent in ret%rn0C
K28>60 & sent o%t some goods in te !irst instance, and
te goods sold at abo%t 2+ per cent loss, !rom te !%ll
con8iction tat te price, at @ic my agents co%ld
p%rcase tea, @o%ld lea8e so great a pro!it in tis
co%ntry as to make %p te de!iciency000 b%t instead o!
pro!it, & lost in some instances <+ and %p to += per
cent0L I K28>>0 7id te man%!act%rers generally
export on teir o@n acco%ntQ I ,rincipally# te
mercants, & tink, 8ery soon sa@ tat te ting @o%ld
not ans@er, and tey rater enco%raged te
man%!act%rers to consign tan take a direct interest
temsel8es0L
&n 18+>, on te oter and, te losses and !ail%res !ell mainly %pon te mercants, since te
man%!act%rers le!t tem te task o! !looding te !oreign markets Kon teir o@n acco%nt0L
338 ;apter JJJ
?n expansion o! money-capital, @ic arises o%t o! te !act tat, in 8ie@ o! te expansion o!
banking Bsee, belo@, te example o! &ps@ic, @ere in te co%rse o! a !e@ years immediately
preceding 18+> te deposits o! te capitalist !armers D%adr%pledC, @at @as !ormerly a pri8ate
oard or coin reser8e is al@ays con8erted into loanable capital !or a de!inite time, does not
indicate a gro@t in prod%cti8e capital any more tan te increasing deposits @it te 'ondon
stock banks @en te latter began to pay interest on deposits0 ?s long as te scale o! prod%ction
remains te same, tis expansion leads only to an ab%ndance o! loanable money-capital as
compared @it te prod%cti8e0 6ence te lo@ rate o! interest0
?!ter te reprod%ction process as again reaced tat state o! prosperity @ic precedes tat o!
o8er-exertion, commercial credit becomes 8ery m%c extended# tis !orms, indeed, te Kso%ndL
basis again !or a ready !lo@ o! ret%rns and extended prod%ction0 &n tis state te rate o! interest is
still lo@, alto%g it rises abo8e its minim%m0 5is is, in !act, te only time tat it can be said a
lo@ rate o! interest, and conseD%ently a relati8e ab%ndance o! loanable capital, coincides @it a
real expansion o! ind%strial capital0 5e ready !lo@ and reg%larity o! te ret%rns, linked @it
extensi8e commercial credit, ens%res te s%pply o! loan capital in spite o! te increased demand
!or it, and pre8ents te le8el o! te rate o! interest !rom rising0 3n te oter and, tose ca8aliers
@o @ork @ito%t any reser8e capital or @ito%t any capital at all and @o t%s operate
completely on a money credit basis begin to appear !or te !irst time in considerable n%mbers0 5o
tis is no@ added te great expansion o! !ixed capital in all !orms, and te opening o! ne@
enterprises on a 8ast and !ar-reacing scale0 5e interest no@ rises to its a8erage le8el0 &t reaces
its maxim%m again as soon as te ne@ crisis sets in0 ;redit s%ddenly stops ten, payments are
s%spended, te reprod%ction process is paralysed, and @it te pre8io%sly mentioned exceptions,
a s%perab%ndance o! idle ind%strial capital appears side by side @it an almost absol%te absence
o! loan capital0
3n te @ole, ten, te mo8ement o! loan capital, as expressed in te rate o! interest, is in te
opposite direction to tat o! ind%strial capital0 5e pase @erein a lo@ rate o! interest, b%t abo8e
te minim%m, coincides @it te Kimpro8ementL and gro@ing con!idence a!ter a crisis, and
partic%larly te pase @erein te rate o! interest reaces its a8erage le8el, exactly mid@ay
bet@een its minim%m and maxim%m, are te only t@o periods d%ring @ic an ab%ndance o! loan
capital is a8ailable sim%ltaneo%sly @it a great expansion o! ind%strial capital0 A%t at te
beginning o! te ind%strial cycle, a lo@ rate o! interest coincides @it a contraction, and at te end
o! te ind%strial cycle, a ig rate o! interest coincides @it a s%perab%ndance o! ind%strial
capital0 5e lo@ rate o! interest tat accompanies te Kimpro8ementL so@s tat te commercial
credit reD%ires bank credit only to a sligt extent beca%se it is still sel!-s%pporting0
5e ind%strial cycle is o! s%c a nat%re tat te same circ%it m%st periodically reprod%ce itsel!,
once te !irst imp%lse as been gi8en0
x8iii
7%ring a period o! slack, prod%ction sinks belo@ te
le8el, @ic it ad attained in te preceding cycle and !or @ic te tecnical basis as no@ been
laid0 7%ring prosperity I te middle period I it contin%es to de8elop on tis basis0 &n te period o!
o8er-prod%ction and s@indle, it strains te prod%cti8e !orces to te %tmost, %ntil it exceeds te
capitalistic limits o! te prod%ction process0
&t is clear tat tere is a sortage o! means o! payment d%ring a period o! crisis0 5e con8ertibility
o! bills o! excange replaces te metamorposis o! commodities temsel8es, and so m%c more
so exactly at s%c times te more a portion o! te !irms operates on p%re credit0 &gnorant and
mistaken bank legislation, s%c as tat o! 1822-2+, can intensi!y tis money crisis0 A%t no kind o!
bank legislation can eliminate a crisis0
&n a system o! prod%ction, @ere te entire contin%ity o! te reprod%ction process rests %pon
credit, a crisis m%st ob8io%sly occ%r I a tremendo%s r%s !or means o! payment I @en credit
s%ddenly ceases and only cas payments a8e 8alidity0 ?t !irst glance, tere!ore, te @ole crisis
seems to be merely a credit and money crisis0 ?nd in !act it is only a D%estion o! te con8ertibility
o! bills o! excange into money0 A%t te maHority o! tese bills represent act%al sales and
33* ;apter JJJ
p%rcases, @ose extension !ar beyond te needs o! society is, a!ter all, te basis o! te @ole
crisis0 ?t te same time, an enormo%s D%antity o! tese bills o! excange represents plain s@indle,
@ic no@ reaces te ligt o! day and collapses# !%rtermore, %ns%ccess!%l spec%lation @it te
capital o! oter people# !inally, commodity-capital @ic as depreciated or is completely
%nsaleable, or ret%rns tat can ne8er more be realised again0 5e entire arti!icial system o! !orced
expansion o! te reprod%ction process cannot, o! co%rse, be remedied by a8ing some bank, like
te Aank o! England, gi8e to all te s@indlers te de!icient capital by means o! its paper and
a8ing it b%y %p all te depreciated commodities at teir old nominal 8al%es0 &ncidentally,
e8eryting ere appears distorted, since in tis paper @orld, te real price and its real basis appear
no@ere, b%t only b%llion, metal coin, notes, bills o! excange, sec%rities0 ,artic%larly in centres
@ere te entire money b%siness o! te co%ntry is concentrated, like 'ondon, does tis distortion
become apparent# te entire process becomes incompreensible# it is less so in centres o!
prod%ction0
&ncidentally in connection @it te s%perab%ndance o! ind%strial capital @ic appears d%ring
crises te !ollo@ing so%ld be noted: commodity-capital is in itsel! sim%ltaneo%sly money-
capital, tat is, a de!inite amo%nt o! 8al%e expressed in te price o! te commodities0 ?s %se-8al%e
it is a de!inite D%ant%m o! obHects o! %tility, and tere is a s%rpl%s o! tese a8ailable in times o!
crises0 A%t as money-capital as s%c, as potential money-capital, it is s%bHect to contin%al
expansion and contraction0 3n te e8e o! a crisis, and d%ring it, commodity-capital in its capacity
as potential money-capital is contracted0 &t represents less money-capital !or its o@ner and is
creditors Bas @ell as sec%rity !or bills o! excange and loansC tan it did at te time @en it @as
bo%gt and @en te disco%nts and mortgages based on it @ere transacted0 &! tis is te meaning
o! te contention tat te money-capital o! a co%ntry is red%ced in times o! stringency, tis is
identical @it saying tat te prices o! commodities a8e !allen0 $%c a collapse in prices merely
balances o%t teir earlier in!lation0
5e incomes o! te %nprod%cti8e classes and o! tose @o li8e on !ixed incomes remain in te
main stationary d%ring te in!lation o! prices @ic goes and in and @it o8er-prod%ction and
o8er-spec%lation0 6ence teir cons%ming capacity diminises relati8ely, and @it it teir ability to
replace tat portion o! te total reprod%ction @ic @o%ld normally enter into teir cons%mption0
E8en @en teir demand remains nominally te same, it decreases in reality0
&t so%ld be noted in regard to imports and exports, tat, one a!ter anoter, all co%ntries become
in8ol8ed in a crisis and tat it ten becomes e8ident tat all o! tem, @it !e@ exceptions, a8e
exported and imported too m%c, so tat they all have an unfavourable balance of payments. 5e
tro%ble, tere!ore, does not act%ally lie @it te balance o! payments0 For example, England
s%!!ers !rom a drain o! gold0 &t as imported too m%c0 A%t at te same time all oter co%ntries are
o8er-s%pplied @it Englis goods0 5ey a8e t%s also imported too m%c, or a8e been made to
import too m%c0 B5ere is, indeed, a di!!erence bet@een a co%ntry @ic exports on credit and
tose @ic export little or noting on credit0 A%t te latter ten import on credit# and tis is only
ten not te case @en commodities are sent to tem on consignment0C 5e crisis may !irst break
o%t in England, te co%ntry @ic ad8ances most o! te credit and takes te least, beca%se te
balance o! payments, te balance o! payments d%e, @ic m%st be settled immediately, is
unfavourable, e8en to%g te general balance o! trade is favourable. 5is is explained partly as a
res%lt o! te credit @ic it as granted, and partly as a res%lt o! te %ge D%antity o! capital
loaned to !oreign co%ntries, so tat a large D%antity o! ret%rns !lo@ back to it in commodities, in
addition to te act%al trade ret%rns0 B6o@e8er, te crisis as at times !irst broken o%t in ?merica,
@ic takes most o! te commercial and capital credit !rom England0C 5e cras in England,
initiated and accompanied by a gold drain, settles EnglandGs balance o! payments, partly by a
bankr%ptcy o! its importers Babo%t @ic more belo@C, partly by disposing o! a portion o! its
commodity-capital at lo@ prices abroad, and partly by te sale o! !oreign sec%rities, te p%rcase
o! Englis sec%rities, etc0 -o@ comes te t%rn o! some oter co%ntry0 5e balance o! payments
32= ;apter JJJ
@as momentarily in its !a8o%r# b%t no@ te time lapse normally existing bet@een te balance o!
payments and balance o! trade as been eliminated or at least red%ced by te crisis: all payments
are no@ s%ddenly s%pposed to be made at once0 5e same ting is no@ repeated ere0 England
no@ as a ret%rn !lo@ o! gold, te oter co%ntry a gold drain0 Wat appears in one co%ntry as
excessi8e imports, appears in te oter as excessi8e exports, and 8ice 8ersa0 A%t o8er-imports and
o8er-exports a8e taken place in all co%ntries B@e are not speaking ere abo%t crop !ail%res, etc0,
b%t abo%t a general crisisC# tat is o8er-prod%ction promoted by credit and te general in!lation o!
prices tat goes @it it0
&n 18+>, te crisis broke o%t in te (nited $tates0 ? !lo@ o! gold !rom England to ?merica
!ollo@ed0 A%t as soon as te b%bble in ?merica b%rst, te crisis broke o%t in England and te gold
!lo@ed !rom ?merica to England0 5e same took place bet@een England and te continent0 5e
balance o! payments is in times o! general crisis %n!a8o%rable to e8ery nation, at least to e8ery
commercially de8eloped nation, b%t al@ays to eac co%ntry in s%ccession, as in 8olley !iring, i.e.,
as soon as eac oneGs t%rn comes !or making payments# and once te crisis as broken o%t, e.g., in
England, it compresses te series o! tese terms into a 8ery sort period0 &t ten becomes e8ident
tat all tese nations a8e sim%ltaneo%sly o8er-exported Bt%s o8er-prod%cedC and o8er-imported
Bt%s o8er-tradedC, tat prices @ere in!lated in all o! tem, and credit stretced too !ar0 ?nd te
same break-do@n takes place in all o! tem0 5e penomenon o! a gold drain ten takes place
s%ccessi8ely in all o! tem and pro8es precisely by its general caracter 1C tat gold drain is H%st a
penomenon o! a crisis, not its ca%se# <C tat te seD%ence in @ic it its te 8ario%s co%ntries
indicates only @en teir H%dgement-day as come, i.e., @en te crisis started and its latent
elements come to te !ore tere0
&t is caracteristic o! te Englis economic @riters I and te economic literat%re @ort
mentioning since 183= resol8es itsel! mainly into a literat%re on c%rrency, credit, and crises I tat
tey look %pon te export o! precio%s metals in times o! crisis, in spite o! te t%rn in te rates o!
excange, only !rom te standpoint o! England, as a p%rely national penomenon, and resol%tely
close teir eyes to te !act tat all oter E%ropean banks raise teir rate o! interest @en teir
bank raises its o@n in times o! crisis, and tat, @en te cry o! distress o8er te drain o! gold is
raised in teir co%ntry today, it is taken %p in ?merica tomorro@ and in :ermany and France te
day a!ter0
&n 182>, Kte engagements r%nning %pon tis co%ntry
ad to be metL /mostly !or corn10 K(n!ort%nately, tey
@ere met to a great extent by !ail%resL /@ealty
England sec%red relie! by bankr%ptcies in its
obligations to@ard te continent and ?merica1, Kb%t
to te extent to @ic tey @ere not met by !ail%res,
tey @ere met by te exportation o! b%llion0L B)eport
o! ;ommittee on Aank ?cts, 18+>0C
&n oter @ords, in so !ar as a crisis in England is intensi!ied by bank legislation, tis legislation is
a means o! ceating te corn-exporting co%ntries in periods o! !amine, !irst on teir corn and ten
on te money !or te corn0 ? proibition on te export o! corn d%ring s%c periods !or co%ntries
@ic are temsel8es labo%ring more or less %nder scarcities, is, tere!ore, a 8ery rational
meas%re to t@art tis plan o! te Aank o! England to Kmeet obligationsL !or corn imports Kby
bankr%ptcies0L &t is a!ter all m%c better tat te corn prod%cers and spec%lators lose a portion o!
teir pro!it !or te good o! teir o@n co%ntry tan teir capital !or te good o! England0
321 ;apter JJJ
&t !ollo@s !rom te abo8e tat commodity-capital, d%ring crises and d%ring periods o! b%siness
depression in general, loses to a large extent its capacity to represent potential money-capital0 5e
same is tr%e o! !ictitio%s capital, interest-bearing paper, in so !ar as it circ%lates on te stock
excange as money-capital0 &ts price !alls @it rising interest0 &t !alls, !%rtermore, as a res%lt o!
te general sortage o! credit, @ic compels its o@ners to d%mp it in large D%antities on te
market in order to sec%re money0 &t !alls, !inally, in te case o! stocks, partly as a res%lt o! te
decrease in re8en%es !or @ic it constit%tes dra!ts and partly as a res%lt o! te sp%rio%s caracter
o! te enterprises @ic it o!ten eno%g represents0 5is !ictitio%s money-capital is enormo%sly
red%ced in times o! crisis, and @it it te ability o! its o@ners to borro@ money on it on te
market0 6o@e8er, te red%ction o! te money eD%i8alents o! tese sec%rities on te stock
excange list as noting to do @it te act%al capital @ic tey represent, b%t 8ery m%c indeed
@it te sol8ency o! teir o@ners0
Chapter 31. Money Capital and Real Capital.
II.
We are still not !inised @it tis D%estion: to @at extent does te acc%m%lation o! capital in te
!orm o! loanable money-capital coincide @it act%al acc%m%lation, i.e., te expansion o! te
reprod%ction process0
5e trans!ormation o! money into loanable money-capital is a m%c simpler matter tan te
trans!ormation o! money into prod%cti8e capital0 A%t t@o tings so%ld be disting%ised ere:
1C te mere trans!ormation o! money into loan capital#
<C te trans!ormation o! capital or re8en%e into money, @ic is trans!ormed into loan capital0
&t is only te latter point @ic can in8ol8e a positi8e acc%m%lation o! loan capital connected
@it an act%al acc%m%lation o! ind%strial capital0
Transformation "f *one# Into Loan Capital
We a8e already seen tat a large b%ild-%p or s%rpl%s o! loan capital can occ%r, @ic is
connected @it prod%cti8e acc%m%lation only to te extent tat it is in8ersely proportional to it0
5is is te case in t@o pases o! te ind%strial cycle, namely, !irst, @en ind%strial capital in bot
its !orms o! prod%cti8e and commodity-capital is contracted, i.e., at te beginning o! te cycle
a!ter te crisis# and, secondly, @en te impro8ement begins, b%t @en commercial credit still
does not %se bank credit to a great extent0 &n te !irst case, money-capital, @ic @as !ormerly
employed in prod%ction and commerce, appears as idle loan capital# in te second case, it appears
%sed to an increasing extent, b%t at a 8ery lo@ rate o! interest, beca%se te ind%strial and
commercial capitalists no@ prescribe terms to te money-capitalist0 5e s%rpl%s o! loan capital
expresses, in te !irst case, a stagnation o! ind%strial capital, and in te second, a relati8e
independence o! commercial credit !rom banking credit I based on te !l%idity o! te ret%rns,
sort-term credit, and a preponderance o! operations @it one"s o@n capital0 5e spec%lators, @o
co%nt on te credit capital o! oter people, a8e not yet appeared on te !ield# te people @o
@ork @it teir o@n capital are still !ar remo8ed !rom approximately p%re credit operations0 &n
te !ormer pase, te s%rpl%s o! loan capital is directly opposite to expressing act%al
acc%m%lation0 &n te second pase, it coincides @it a rene@ed expansion o! te reprod%ction
process I it accompanies it, b%t is not its ca%se0 5e s%rpl%s o! loan capital is already decreasing,
i.e., it is still only relati8e compared to te demand0 &n bot cases, te expansion o! te act%al
process o! acc%m%lation is promoted by te !act tat te lo@ interest I @ic coincides in te !irst
case @it lo@ prices and in te second, @it slo@ly rising prices I increases tat portion o! te
pro!it @ic is trans!ormed into pro!it o! enterprise0 5is takes place to an e8en greater extent
@en interest rises to its a8erage le8el d%ring te eigt o! te period o! prosperity, @en it as
indeed gro@n, b%t not relati8e to pro!it0
We a8e seen, on te oter and, tat an acc%m%lation o! loan capital can take place @ito%t any
act%al acc%m%lation, i.e., by mere tecnical means s%c as an expansion and concentration o! te
banking system# and a sa8ing in te circ%lation reser8e, or in te reser8e !%nd o! pri8ate means o!
payment, @ic are ten al@ays trans!ormed into loan capital !or a sort time0 ?lto%g tis loan
capital, @ic, !or tis reason, is also called !loating capital, al@ays retains te !orm o! loan
capital only !or sort periods o! time Band so%ld indeed also be %sed !or disco%nting only !or
sort periods o! timeC, tere is a contin%al ebb and !lo@ o! it0 &! one dra@s some a@ay, anoter
323 ;apter JJJ&
adds to it0 5e mass o! loanable money-capital t%s gro@s D%ite independently o! te act%al
acc%m%lation B@e are not speaking ere at all abo%t loans !or a n%mber o! years b%t only o! sort-
term ones on bills o! excange and depositsC0
Aank ;ommittee, 18+>0 M%estion +=10 KWat do yo%
mean by "!loating capital"QL-/?ns@er o! Mr0 Weg%elin,
:o8ernor o! te Aank o! England:1 K&t is capital
applicable to loans o! money !or sort periods0000
B+=<C 5e Aank o! England notes 000 te co%ntry banks
circ%lation, and te amo%nt o! coin @ic is in te
co%ntry0L /M%estion:1 K&t does not appear !rom te
ret%rns be!ore te ;ommittee, i! by !loating capital
yo% mean te acti8e circ%lationL /o! te notes o! te
Aank o! England1, Ktat tere is any 8ery great
8ariation in te acti8e circ%lationQL /A%t tere is a
8ery great di!!erence @eter tis acti8e circ%lation is
ad8anced by te money-lender or by te reprod%cti8e
capitalist imsel!0 Weg%elin"s ans@er:1 K& incl%de in
!loating capital te reser8es o! te bankers, in @ic
tere is a considerable !l%ct%ation0L
5at is to say, tere is considerable !l%ct%ation in tat portion o! te deposits @ic te bankers
a8e not loaned o%t again, b%t @ic !ig%res as teir reser8e and !or te greater part also as te
reser8e o! te Aank o! England, @ere tey are deposited0 Finally, te same gentleman says:
!loating capital may be b%llion, tat is, bar and coin B+=3C0 &t is tr%ly @onder!%l o@ in tis credit
gibberis o! te money-market all categories o! political economy recei8e a di!!erent meaning
and a di!!erent !orm0 Floating capital is te expression tere !or circ%lating capital, @ic is, o!
co%rse, someting D%ite di!!erent, and money is capital, and b%llion is capital, and bank-notes are
circ%lation, and capital is a commodity, and debts are commodities, and !ixed capital is money
in8ested in ard-to-sell paperS
K5e Hoint-stock banks o! 'ondon 000 a8e increased
teir deposits !rom V8,8+=,>>2 in ;<=@ to
V23,1==,><2 in 18+>0000 5e e8idence gi8en to yo%r
;ommittee leads to te in!erence tat o! tis 8ast
amo%nt, a large part as been deri8ed !rom so%rces
not ereto!ore made a8ailable !or tis p%rpose# and
tat te practice o! opening acco%nts and depositing
money @it bankers as extended to n%mero%s classes
@o did not !ormerly employ teir capital BSC in tat
@ay0 &t is stated by Mr0 )od@ell, te ;airman o! te
?ssociation o! te ,ri8ate ;o%ntry AankersL
322 ;apter JJJ&
/disting%ised !rom Hoint-stock banks1, Kand delegated
by tem to gi8e e8idence to yo%r ;ommittee, tat in
te neigbo%rood o! &ps@ic tis practice as lately
increased !o%r-!old among te !armers and
sopkeepers o! tat district# tat almost e8ery !armer,
e8en tose paying only V+= per ann%m rent, no@
keeps deposits @it bankers0 5e aggregate o! tese
deposits o! co%rse !inds its @ay to te employments o!
trade, and especially gra8itates to 'ondon, te centre
o! commercial acti8ity, @ere it is employed !irst in
te disco%nt o! bills, or in oter ad8ances to te
c%stomers o! te 'ondon bankers0 5at large portion,
o@e8er, !or @ic te bankers temsel8es a8e no
immediate demand passes into te ands o! te bill-
brokers, @o gi8e to te banker in ret%rn commercial
bills already disco%nted by tem !or persons in
'ondon and in di!!erent parts o! te co%ntry, as a
sec%rity !or te s%m ad8anced by te banker0L BAank
;ommittee, 18+8, p0 40C
Ay making ad8ances to te bill-broker on bills o! excange @ic tis broker as already
disco%nted once, te banker does, in !act, redisco%nt tem# b%t in reality, 8ery many o! tese bills
a8e already been redisco%nted by te bill-broker, and @it te same money tat te banker %ses
to redisco%nt te bills o! te bill-broker, te latter redisco%nts ne@ bills0 Wat tis leads to is
so@n by te !ollo@ing:
KExtensi8e !ictitio%s credits a8e been created by
means o! accommodation bills, and open credits, great
!acilities !or @ic a8e been a!!orded by te practice
o! Hoint-stock co%ntry banks disco%nting s%c bills,
and redisco%nting tem @it te bill-brokers in te
'ondon market, %pon te credit o! te bank alone,
@ito%t re!erence to te D%ality o! te bills oter@iseL
Bloc. cit., p0 JJ&C0
;oncerning tis redisco%nting and te assistance @ic tis p%rely tecnical increase o! loanable
money-capital gi8es to credit s@indles, te !ollo@ing extract !rom te 0conomist is o! interest:
KFor some years past capitalL /namely, loanable
money-capital1 Kas acc%m%lated in some districts o!
te co%ntry more rapidly tan it co%ld be %sed, @ile,
32+ ;apter JJJ&
in oters, te means o! employing capital a8e
increased more rapidly tan te capital itsel!0 Wile
te bankers in te p%rely agric%lt%ral districts
tro%go%t te kingdom !o%nd no s%!!icient means o!
pro!itably and sa!ely employing teir deposits in teir
o@n districts, tose in te large mercantile to@ns, and
in te man%!act%ring and mining districts, a8e !o%nd
a larger demand !or capital tan teir o@n means
co%ld s%pply0 5e e!!ect o! tis relati8e state o!
di!!erent districts as led, o! late years, to te
establisment and rapid extension o! a ne@ class o!
o%ses in te distrib%tion o! capital, @o, to%g
%s%ally called bill-brokers, are in reality bankers %pon
an immense scale0 5e b%siness o! tese o%ses as
been to recei8e, !or s%c periods, and at s%c rates o!
interest as @ere agreed %pon, te s%rpl%s-capital o!
bankers in tose districts @ere it co%ld not be
employed, as @ell as te temporary %nemployed
moneys o! p%blic companies and extensi8e mercantile
establisments, and ad8ance tem at iger rates o!
interest to banker in tose districts @ere capital @as
more in demand, generally by redisco%nting te bills
taken !rom teir c%stomers 000 and in tis @ay
'ombard $treet as become te great centre in @ic
te trans!er o! spare capital as been made !rom one
part o! te co%ntry, @ere it co%ld not be pro!itably
employed, to anoter, @ere a demand existed !or it,
as @ell as bet@een indi8id%als similarly
circ%mstanced0 ?t !irst tese transactions @ere
con!ined almost excl%si8ely to borro@ing and lending
on banking sec%rities0 A%t as te capital o! te co%ntry
rapidly acc%m%lated, and became more economised
by te establisment o! banks, te !%nds at te
disposal o! tese "disco%nt o%ses" became so large
tat tey @ere ind%ced to make ad8ances !irst on dock
@arrants o! mercandise Bstorage bills on
326 ;apter JJJ&
commodities in docksC, and next on bills o! lading,
representing prod%ce not e8en arri8ed in tis co%ntry,
to%g sometimes, i! not generally, sec%red by bills
dra@n by te mercant %pon is broker0 5is practice
rapidly canged te @ole caracter o! Englis
commerce0 5e !acilities t%s a!!orded in 'ombard
$treet ga8e extensi8e po@ers to te brokers in
Mincing 'ane, @o on teir part 000 o!!ered te !%ll
ad8antage o! tem to te importing mercant# @o so
!ar took ad8antage o! tem, tat, @ereas <+ years
ago, te !act tat a mercant recei8ed ad8ances on is
bills o! lading, or e8en is dock @arrants, @o%ld a8e
been !atal to is credit, te practice as become so
common o! late years tat it may be said to be no@
te general r%le, and not te rare exception, as it @as
<+ years ago0 -ay, so m%c !%rter as tis system
been carried, tat large s%ms a8e been raised in
'ombard $treet on bills dra@n against te
forthcoming crops o! distant colonies0 5e
conseD%ence o! s%c !acilities being t%s granted to
te importing mercants led tem to extend teir
transactions abroad, and to in8est teir !loating capital
@it @ic teir b%siness as iterto been
cond%cted, in te most obHectionable o! all !ixed
sec%rities-!oreign plantations I o8er @ic tey co%ld
exercise little or no control0 ?nd t%s @e see te direct
cange o! credit tro%g @ic te capital o! te
co%ntry, collected in o%r r%ral districts, and in small
amo%nts in te sape o! deposits in co%ntry banks,
and centres in 'ombard $treet !or employment, as
been, !irst, made a8ailable !or te extending
operations in o%r mining and man%!act%ring districts,
by te redisco%nt o! bills to banks in tose localities#
next, !or granting greater !acilities !or te importation
o! !oreign prod%ce by ad8ances %pon dock @arrants
and bills o! lading, and t%s liberating te "legitimate"
32> ;apter JJJ&
mercantile capital o! o%ses engaged in !oreign and
colonial trade, and ind%cing to its most obHectionable
ad8ances on !oreign plantations0L
B0conomist,-o8ember <=, 182>, p0 13320C
5is is o@ credits are KnicelyL de8o%red0 5e r%ral depositor !ancies tat e deposits only @it
is banker, and !ancies !%rtermore tat @en is banker lends to oters, it is done to pri8ate
persons @om e kno@s0 6e as not te sligtest s%spicion tat tis banker places is deposit at
te disposal o! some 'ondon bill-broker, o8er @ose operations neiter o! tem a8e te sligtest
control0
We a8e already seen o@ large p%blic enterprises, s%c as rail@ays, may momentarily increase
loan capital, o@ing to te circ%mstance tat te deposited amo%nts al@ays remain at te disposal
o! te bankers !or a certain lengt o! time %ntil tey are really %sed0
&ncidentally, te mass o! loan capital is D%ite di!!erent !rom te D%antity o! circ%lation0 Ay te
D%antity o! circ%lation @e mean ere te s%m o! all te bank-notes and coin, incl%ding bars o!
precio%s metals, existing and circ%lating in a co%ntry0 ? portion o! tis D%antity constit%tes te
reser8e o! te banks @ic contin%o%sly 8ary in magnit%de0
K3n -o8ember 1<, 18+>L /te date o! te s%spension
o! te Aank ?ct o! 18221, Kte entire reser8e o! te
Aank o! England @as only V+8=,>+1 Bincl%ding
'ondon and all its brancesC# teir deposits at te
same time amo%nting to V<<,+==,===# o! @ic near
six and a al! million belonged to 'ondon bankers0 K
BAank ?cts, 18+8, p0 '4&&0C
5e 8ariations in te interest rate Baside !rom tose occ%rring o8er longer periods or te 8ariation
in te interest rate among 8ario%s co%ntries# te !ormer are dependent %pon 8ariations in te
general rate o! pro!it, te latter on di!!erences in te rates o! pro!it and in te de8elopment o!
creditC depend %pon te s%pply o! loan capital Ball oter circ%mstances, state o! con!idence, etc0
being eD%alC, tat is, o! capital loaned in te !orm o! money, coin and notes# in contradistinction
to ind%strial capital, @ic, as s%c I in commodity-!orm I is loaned by means o! commercial
credit among te agents o! reprod%ction temsel8es0
6o@e8er, te mass o! tis loanable money-capital is di!!erent !rom, and independent o!, te mass
o! circ%lating money0
For example, i! V<= @ere loaned !i8e times per day, a money-capital o! V1== @o%ld be loaned,
and tis @o%ld imply at te same time tat tis V<= @o%ld a8e ser8ed, moreo8er, at least !o%r
times as a means o! p%rcase or payment# !or, i! no p%rcase and payment inter8ened I so tat it
@o%ld not a8e represented at least !o%r times te con8erted !orm o! capital Bcommodities,
incl%ding labo%r-po@erC I it @o%ld not constit%te a capital o! V1==, b%t only !i8e claims o! V<=
eac0
&n co%ntries @it a de8eloped credit, @e can ass%me tat all money-capital a8ailable !or lending
exists in te !orm o! deposits @it banks and money-lenders0 5is is at least tr%e !or b%siness as a
@ole0 Moreo8er, in times o! !lo%rising b%siness, be!ore te real spec%lation gets %nder@ay I
@en credit is easy and con!idence is gro@ing I most o! te !%nctions o! circ%lation are settled by
a simple trans!er o! credit, @ito%t te elp o! coin or paper money0
328 ;apter JJJ&
5e mere possibility o! large s%ms o! deposits existing @en a relati8ely small D%ant%m o! a
medi%m o! circ%lation is a8ailable, depends solely on:
1C te n%mber o! p%rcases and payments @ic te same coin per!orms#
<C te n%mber o! ret%rn exc%rsions, @ereby it goes back to te banks as deposits, so tat its
repeated !%nction as a means o! p%rcase and payment is promoted tro%g its rene@ed
trans!ormation into deposits0 For example, a small dealer deposits @eekly @it is banker V1== in
money# te banker pays o%t a portion o! te deposit o! a man%!act%rer @it tis# te latter pays it
to is @orkers# and te @orkers %se it to pay te small dealer, @o deposits it in te bank again0
5e V1== deposited by tis small dealer a8e ser8ed, tere!ore, !irst, to pay te man%!act%rer a
deposit o! is# secondly, to pay te @orkers# tirdly, to pay te dealer imsel!# !o%rtly, to deposit
anoter portion o! te money-capital o! te same small dealer# t%s at te end o! t@enty @eeks, i!
e imsel! did not a8e to dra@ against tis money, e @o%ld a8e deposited V<,=== in te bank
by means o! te same V1==0
5o @at extent tis money-capital is idle, is so@n only by te ebb and !lo@ in te reser8e !%nd
o! te banks0 5ere!ore, Mr0 Weg%elin, :o8ernor o! te Aank o! England in 18+>, concl%des tat
te gold o! te Aank o! England is te KonlyL reser8e capital:
K1<+80 ,ractically, & tink, te rate o! disco%nt is
go8erned by te amo%nt o! %nemployed capital @ic
tere is in te co%ntry0 5e amo%nt o! %nemployed
capital is represented by te reser8e o! te Aank o!
England, @ic is practically a reser8e o! b%llion0
Wen, tere!ore, te b%llion is dra@n %pon, it
diminises te amo%nt o! %nemployed capital in te
co%ntry, and conseD%ently raises te 8al%e o! tat
@ic remains0L I /-e@marc1 K13620 5e reser8e o!
b%llion in te Aank o! England is, in tr%t, te central
reser8e, or oard o! treas%re, %pon @ic te @ole
trade o! te co%ntry is carried on000 ?nd it is %pon tat
oard or reser8oir tat te action o! te !oreign
excanges al@ays !alls0L B)eport on Aank ?cts, 18+>
/,,0 1=8, 11*10C
5e statistics o! exports and imports !%rnis a meas%re o! te acc%m%lation o! real, i.e.,
prod%cti8e and commodity-capital0 5ese al@ays so@ tat, d%ring te ten-year cyclical periods
o! de8elopment o! Aritis ind%stry B181+ to 18>=C, te maxim%m o! te last prosperity before te
crisis al@ays reappears as te minim%m o! te !ollo@ing prosperity, @ere%pon it rises to a ne@
and !ar iger peak0
5e act%al or declared 8al%e o! te exported prod%cts !rom :reat Aritain and &reland in te
prosperity year o! 18<2 @as V2=,3*6,3==0 Wit te crisis o! 18<+, te amo%nt o! exports ten !alls
belo@ tis s%m and !l%ct%ates bet@een 3+ and 3* million ann%ally0 Wit te ret%rn o! prosperity
in 1832, it rises abo8e te !ormer maxim%m to S=;,?=A,;A;, and reaces in 1836 te ne@
maxim%m o! V+3,368,+>10 Aeginning @it 183>, it !alls again to 2< million, so tat te ne@
32* ;apter JJJ&
minim%m is already iger tan te old maxim%m, and ten !l%ct%ates bet@een += and +3
million0 5e ret%rn o! prosperity li!ts te amo%nt o! exports in 1822 to V+8,+==,===, @ereby te
peak o! 1836 is again already !ar exceeded0 &n 182+, it reaces V6=,111,=8<# it ten !alls to
someting o8er +> million in 1826, reaces in 182> almost +* million, in 1828 almost +3 million,
rises in 182* to 63,+==,===, in 18+3 to nearly ** million, in 18+2 to *> million, in 18++ to
*2,+==,===, in 18+6 almost 116 million and reaces a peak o! 1<< million in 18+>0 &t !alls in 18+8
to 116 million, rises already in 18+* to 13= million, in 186= to nearly 136 million, in 1861 only
1<+ million Bte ne@ lo@ is ere again iger tan te !ormer peakC, in 1863 to 126,+==,===0
3! co%rse, te same ting co%ld be demonstrated in te case o! imports, @ic so@s te
expansion o! te market# ere it is only a matter o! te scale o! prod%ction0 /3! co%rse, tis olds
tr%e o! England only !or te time o! its act%al ind%strial monopoly# b%t it applies in general to te
@ole complex o! co%ntries @it modern large-scale ind%stries, as long as te @orld-market is
still expanding0 I '. 001
6. Transformation "f Capital "r )evenue Into
*one# That Is Transformed Into Loan
Capital
We @ill consider ere te acc%m%lation o! money-capital, in so !ar as it is not an expression eiter
o! a stoppage in te !lo@ o! commercial credit or o! an economy I @eter it be an economy in
te act%al circ%lating medi%m or in te reser8e capital o! te agents engaged in reprod%ction0
?side !rom tese t@o cases, an acc%m%lation o! money-capital can arise tro%g an %n%s%al
in!lo@ o! gold, as in 18+< and 18+3 as a res%lt o! te ne@ ?%stralian and ;ali!ornian gold mines0
5is gold @as deposited in te Aank o! England0 5e depositors recei8ed notes !or it, @ic tey
did not directly redeposit @it bankers0 Ay tis means te ;irc%lating medi%m @as %n%s%ally
increased0 B5estimony o! Weg%elin, Aank ;ommittee, 18+>, -o0 13<*0C 5e Aank stro8e to %tilise
tese deposits by lo@ering its disco%nt to <T0 5e mass o! gold acc%m%lated in te Aank rose
d%ring six monts o! 18+3 to <<-<3 million0
5e acc%m%lation o! all money-lending capitalists nat%rally al@ays takes place directly in money-
!orm, @ereas @e a8e seen tat te act%al acc%m%lation o! ind%strial capitalists is accomplised,
as a r%le, by an increase in te elements o! reprod%cti8e capital itsel!0 6ence, te de8elopment o!
te credit system and te enormo%s concentration o! te money-lending b%siness in te ands o!
large banks m%st, by temsel8es alone, accelerate te acc%m%lation o! loanable capital, as a !orm
distinct !rom act%al acc%m%lation0 5is rapid de8elopment o! loan capital is, tere!ore, a res%lt o!
act%al acc%m%lation, !or it is a conseD%ence o! te de8elopment o! te reprod%ction process, and
te pro!it @ic !orms te so%rce o! acc%m%lation !or tese money-capitalists is only a ded%ction
!rom te s%rpl%s-8al%e @ic te reprod%cti8e ones !ilc Band it is at te same time te
appropriation o! a portion o! te interest !rom te sa8ings of othersC0 'oan capital acc%m%lates at
te expense o! bot te ind%strial and commercial capitalists0 We a8e seen tat in te
%n!a8o%rable pases o! te ind%strial cycle te rate o! interest may rise so ig tat it temporarily
cons%mes te @ole pro!it o! some lines o! b%siness @ic are partic%larly andicapped0 ?t te
same time, prices o! go8ernment and oter sec%rities !all0 &t is at s%c times tat te money-
capitalists b%y tis depreciated paper in %ge D%antities @ic in te later pases soon regains its
!ormer le8el and rises abo8e it0 &t is ten sold again and a portion o! te money-capital o! te
p%blic is t%s appropriated0 5at portion @ic is not sold yields a iger interest beca%se it @as
bo%gt belo@ par0 A%t te money-capitalists con8ert all pro!its made, end recon8erted by tem
into capital, !irst into loanable money-capital0 5e acc%m%lation o! te latter I as distinct !rom te
act%al acc%m%lation, alto%g its o!!soot I t%s takes place, e8en @en @e consider only te
money-capitalists, bankers, etc0, by temsel8es, as an acc%m%lation o! tis partic%lar class o!
3+= ;apter JJJ&
capitalists0 ?nd it m%st gro@ @it e8ery expansion o! te credit system @ic accompanies te
act%al expansion o! te reprod%ction process0
&! te interest rate is lo@, tis depreciation o! te money-capital !alls principally %pon te
depositors, not %pon te banks0 Ae!ore te de8elopment o! stock banks, ` o! all te deposits in
England lay in te banks @ito%t yielding interest0 Wile interest is no@ paid on tem, it amo%nts
to at least 1T less tan te c%rrent rate o! interest0
?s !or te money acc%m%lation o! te oter classes o! capitalists, @e disregard tat portion o! it
@ic is in8ested in interest-bearing paper and acc%m%lates in tis !orm0 We consider only tat
portion @ic is tro@n %pon te market as loanable money-capital0
&n te !irst place, @e a8e ere tat portion o! te pro!it @ic is not spent as re8en%e, b%t is set
aside !or acc%m%lation I !or @ic, o@e8er, te ind%strial capitalists a8e no %se in teir o@n
b%siness at te moment0 5is pro!it exists directly in commodity-capital, a part o! @ose 8al%e it
constit%tes, and along @it @ic it is realised in money0 -o@, i! it is not recon8erted into te
prod%ction elements o! commodity-capital B@e lea8e o%t o! consideration !or te present te
mercant, @om @e sall disc%ss separatelyC, it m%st remain !or a lengt o! time in te !orm o!
money0 5is amo%nt increases @it te amo%nt o! capital itsel!, e8en @en te rate o! pro!it
declines0 5at portion @ic is to be spent as re8en%e is grad%ally cons%med, b%t, in te
meantime, as deposits, it constit%tes loan capital @it te banker0 5%s, e8en te gro@t o! tat
portion o! pro!it @ic is spent as re8en%e expresses itsel! as a grad%al and contin%ally repeated
acc%m%lation o! loan capital0 5e same is tr%e o! te oter portion, @ic is intended !or
acc%m%lation0 5ere!ore, @it te de8elopment o! te credit system and its organisation, e8en an
increase in re8en%e, i.e., te cons%mption o! te ind%strial and commercial capitalists, expresses
itsel! as an acc%m%lation o! loan capital0 ?nd tis olds tr%e !or all re8en%es so !ar as tey are
cons%med grad%ally, in oter @ords, !or gro%nd-rent, @ages in teir iger !orm, incomes o!
%nprod%cti8e classes, etc0 ?ll o! tem ass%me !or a certain time te !orm o! money re8en%e and
are, tere!ore, con8ertible into deposits and t%s into loan capital0 ?ll re8en%e I @eter it be
intended !or cons%mption or acc%m%lation I as long as it exists in some !orm o! money, is a part
o! te 8al%e o! commodity-capital trans!ormed into money, and is, !or tis reason, an expression
and res%lt o! act%al acc%m%lation, b%t is not prod%cti8e capital itsel!0 Wen a spinner as
excanged is yarn !or cotton I tat portion @ic constit%tes re8en%e o@e8er !or money, te
real existence o! is ind%strial capital is te yarn, @ic as passed into te ands o! te @ea8er
or, peraps, o! some pri8ate cons%mer, and te yarn is, in !act, te existence I @eter it is !or
reprod%ction or cons%mption I o! te capital-8al%e as @ell as te s%rpl%s-8al%e contained in it0
5e magnit%de o! te s%rpl%s-8al%e trans!ormed into money depends %pon te magnit%de o! te
s%rpl%s-8al%e contained in te yarn0 A%t as soon as it as been trans!ormed into money, tis
money is only te 8al%e existence o! tis s%rpl%s-8al%e0 ?nd as s%c it becomes a moment o! loan
capital0 For tis p%rpose, noting more is reD%ired tan tat it be trans!ormed into a deposit, i! it
as not already been loaned o%t by its o@ner0 A%t in order to be retrans!ormed into prod%cti8e
capital, it m%st, on te oter and, already a8e reaced a certain minim%m limit0
Chapter 32. Money Capital and Real Capital.
III.
5e mass o! money to be trans!ormed back into capital in tis manner is a res%lt o! te enormo%s
reprod%ction process, b%t considered by itsel!, as loanable money-capital, it is not itsel! a mass o!
reprod%cti8e capital0
5e most important point o! o%r presentation so !ar is tat te expansion o! te part o! te
re8en%e intended !or cons%mption Blea8ing o%t o! consideration te @orker, beca%se is re8en%e
is eD%al to te 8ariable capitalC so@s itsel! at !irst as an acc%m%lation o! money-capital0 ? !actor,
tere!ore, enters into te acc%m%lation o! money-capital tat is essentially di!!erent !rom te
act%al acc%m%lation o! ind%strial capital# !or te portion o! te ann%al prod%ct @ic is intended
!or cons%mption does not by any means become capital0 ? portion o! it replaces capital, i.e., te
constant capital o! te prod%cers o! means o! cons%mption, b%t to te extent tat it is act%ally
trans!ormed into capital, it exists in te nat%ral !orm o! te re8en%e o! te prod%cers o! tis
constant capital0 5e same money, @ic represents te re8en%e and ser8es merely !or te
promotion o! cons%mption, is reg%larly trans!ormed into loanable money-capital !or a period o!
time0 &n so !ar as tis money represents @ages, it is at te same time te money-!orm o! te
8ariable capital# and in so !ar as it replaces te constant capital o! te prod%cers o! means o!
cons%mption, it is te money-!orm temporarily ass%med by teir constant capital and ser8es to
p%rcase te components o! teir constant capital to be replaced in kind0 -eiter in te one nor in
te oter !orm does it express in itsel! acc%m%lation, alto%g its D%antity increases @it te
gro@t o! te reprod%ction process0 A%t it per!orms temporarily te !%nction o! loanable money,
i.e., o! money-capital0 &n tis respect, tere!ore, te acc%m%lation o! money-capital m%st al@ays
re!lect a greater acc%m%lation o! capital tan act%ally exists, o@ing to te !act tat te extension
o! indi8id%al cons%mption, beca%se it is promoted by means o! money, appears as an
acc%m%lation o! money-capital, since it !%rnises te money-!orm !or act%al acc%m%lation, i.e.,
!or money @ic permits ne@ in8estments o! capital0
5%s, te acc%m%lation o! loanable money-capital expresses in part only te !act tat all money
into @ic ind%strial capital is trans!ormed in te co%rse o! its circ%it ass%mes te !orm not o!
money advanced by te reprod%cti8e capitalists, b%t o! money borrowed by tem# so tat indeed
te ad8ance o! money tat m%st take place in te reprod%ction process appears as an ad8ance o!
borro@ed money0 &n !act, on te basis o! commercial credit, one person lends to anoter te
money reD%ired !or te reprod%ction process0 A%t tis no@ ass%mes te !ollo@ing !orm: te
banker, @o recei8es te money as a loan !rom one gro%p o! te reprod%cti8e capitalists, lends it
to anoter gro%p o! reprod%cti8e capitalists, so tat te banker appears in te role o! a s%preme
bene!actor# and at te same time, te control o8er tis capital !alls completely into te ands o!
te banker in is capacity as middleman0
? !e@ special !orms o! acc%m%lation o! money-capital still remain to be mentioned0 For example,
capital is released by a !all in te price o! te elements o! prod%ction, ra@ materials, etc0 &! te
ind%strial capitalist cannot expand is reprod%ction process immediately, a portion o! is money-
capital is expelled !rom te circ%it as s%per!l%o%s and is trans!ormed into loanable money-capital0
$econdly, o@e8er, capital in te !orm o! money is released especially by te mercant, @ene8er
interr%ptions in is b%siness take place0 &! te mercant as completed a series o! transactions and
cannot begin a ne@ series beca%se o! s%c interr%ptions %ntil later, te money realised represents
!or im only a oard, s%rpl%s-capital0 A%t at te same time, it represents a direct acc%m%lation o!
3+< ;apter JJJ&&
loanable money-capital0 &n te !irst case, te acc%m%lation o! money-capital expresses a
repetition o! te reprod%ction process %nder more !a8o%rable conditions, an act%al release o! a
portion o! !ormerly tied-%p capital# in oter @ords, an opport%nity !or expanding te reprod%ction
process @it te same amo%nt o! money0 A%t in te oter case, it expresses merely an interr%ption
in te !lo@ o! transactions0 6o@e8er, in bot cases it is con8erted into loanable money-capital,
represents its acc%m%lation, in!l%ences eD%ally te money-market and te rate o! interest I
alto%g it expresses a promotion o! te act%al acc%m%lation process in one case and its
obstr%ction in te oter0 Finally, acc%m%lation o! money-capital is in!l%enced by te n%mber o!
people @o a8e !eatered teir nests and a8e @itdra@n !rom reprod%ction0 5eir n%mber
increases as more pro!its are made in te co%rse o! te ind%strial cycle0 &n tis case, te
acc%m%lation o! loanable money-capital expresses, on te one and, an act%al acc%m%lation Bin
accordance @it its relati8e extentC, and, on te oter and, only te extent o! te trans!ormation
o! te ind%strial capitalists into mere money-capitalists0
?s !or te oter portion o! pro!it, @ic is not intended to be cons%med as re8en%e, it is
con8erted into money-capital only @en it is not immediately able to !ind a place !or in8estment
in te expansion o! b%siness in te prod%cti8e spere in @ic it as been made0 5is may be d%e
to t@o ca%ses0 Eiter beca%se tis spere o! prod%ction is sat%rated @it capital, or beca%se
acc%m%lation m%st !irst reac a certain 8ol%me be!ore it can ser8e as capital, depending on te
in8estment magnit%des o! ne@ capital reD%ired in tis partic%lar spere0 6ence it is con8erted !or
a @ile into loanable money-capital and ser8es in te expansion o! prod%ction in oter speres0
?ss%ming all oter conditions being eD%al, te D%antity o! pro!its intended !or trans!ormation
back into capital @ill depend on te D%antity o! pro!its made and t%s on te extension o! te
reprod%ction process itsel!0 A%t i! tis ne@ acc%m%lation meets @it di!!ic%lties in its
employment, tro%g a lack o! speres !or in8estment, i.e., d%e to a s%rpl%s in te brances o!
prod%ction and an o8er-s%pply o! loan capital, tis pletora o! loanable money-capital merely
so@s te limitations o! capitalist prod%ction0 5e s%bseD%ent credit s@indle pro8es tat no real
obstacle stands in te @ay o! te employment o! tis s%rpl%s-capital0 6o@e8er, an obstacle is
indeed immanent in its la@s o! expansion, i.e., in te limits in @ic capital can realise itsel! as
capital0 ? pletora o! money-capital as s%c does not necessarily indicate o8er-prod%ction, not
e8en a sortage o! speres o! in8estment !or capital0
5e acc%m%lation o! loan capital consists simply in te !act tat money is precipitated as loanable
money0 5is process is 8ery di!!erent !rom an act%al trans!ormation into capital# it is merely te
acc%m%lation o! money in a !orm in @ic it can be trans!ormed into capital0 A%t tis
acc%m%lation can re!lect, as @e a8e so@n, e8ents @ic are greatly di!!erent !rom act%al
acc%m%lation0 ?s long as act%al acc%m%lation is contin%ally expanding, tis extended
acc%m%lation o! money-capital may be partly its res%lt, partly te res%lt o! circ%mstances @ic
accompany it b%t are D%ite di!!erent !rom it, and, !inally, e8en partly te res%lt o! impediments to
act%al acc%m%lation0 &! !or no oter reason tan tat acc%m%lation o! loan capital is in!lated by
s%c circ%mstances, @ic are independent o! act%al acc%m%lation b%t ne8erteless accompany it,
tere m%st be a contin%o%s pletora o! money-capital in de!inite pases o! te cycle and tis
pletora m%st de8elop @it te expansion o! credit0 ?nd sim%ltaneo%sly @it it, te necessity o!
dri8ing te prod%ction process beyond its capitalistic limits m%st also de8elop: o8er-trade, o8er-
prod%ction, and excessi8e credit0 ?t te same time, tis m%st al@ays take place in !orms tat call
!ort a reaction0
?s !ar as acc%m%lation o! money-capital !rom gro%nd-rent, @ages, etc0, is concerned, it is not
necessary to disc%ss tat matter ere0 3nly one aspect so%ld be empasised and tat is tat te
b%siness o! act%al sa8ing and abstinence Bby oardersC, to te extent tat it !%rnises elements o!
acc%m%lation, is le!t by te di8ision o! labo%r, @ic comes @it te progress o! capitalist
prod%ction, to tose @o recei8e te minim%m o! s%c elements, and @o !reD%ently eno%g lose
e8en teir sa8ings, as do te labo%rers @en banks !ail0 3n te one and, te capital o! te
3+3 ;apter JJJ&&
ind%strial capitalist is not Ksa8edL by imsel!, b%t e as command o! te sa8ings o! oters in
proportion to te magnit%de o! is capital# on te oter and, te money-capitalist makes o! te
sa8ings o! oters is o@n capital, and o! te credit, @ic te reprod%cti8e capitalists gi8e to one
anoter and @ic te p%blic gi8es to tem, a pri8ate so%rce !or enricing imsel!0 5e last
ill%sion o! te capitalist system, tat capital is te !r%it o! oneGs o@n labo%r and sa8ings, is
tereby destroyed0 -ot only does pro!it consist in te appropriation o! oter peopleGs labo%r, b%t
te capital, @it @ic tis labo%r o! oters is set in motion and exploited, consists o! oter
peopleGs property, @ic te money-capitalist places at te disposal o! te ind%strial capitalists,
and !or @ic e in t%rn exploits te latter0
? !e@ remarks remain to be made abo%t credit capital0
6o@ o!ten te same piece o! money can !ig%re as loan capital, @olly depends, as @e a8e
already pre8io%sly so@n, on:
1C o@ o!ten it realises commodity-8al%es in sale or payment, t%s trans!ers capital, and
!%rtermore o@ o!ten it realises re8en%e0 6o@ o!ten it gets into oter ands as realised 8al%e,
eiter o! capital or o! re8en%e, ob8io%sly depends, tere!ore, on te extent and magnit%de o! te
act%al transactions#
<C tis depends on te economy o! payments and te de8elopment and organisation o! te credit
system#
3C !inally, te concatenation and 8elocity o! action o! credits, so tat @en a deposit is made at
one point it immediately starts o!! as a loan at anoter0
E8en ass%ming tat te !orm in @ic loan capital exists is excl%si8ely tat o! real money, gold or
sil8er I te commodity @ose s%bstance ser8es as a meas%re o! 8al%e I a large portion o! tis
money-capital is al@ays necessarily p%rely !ictitio%s, tat is, a title to 8al%e I H%st as paper money0
&n so !ar as money !%nctions in te circ%it o! capital, it constit%tes indeed, !or a moment, money-
capital# b%t it does not trans!orm itsel! into loanable money-capital# it is rater excanged !or te
elements o! prod%cti8e capital, or paid o%t as a medi%m o! circ%lation in te realisation o!
re8en%e, and cannot, tere!ore, trans!orm itsel! into loan capital !or its o@ner0 A%t in so !ar as it is
trans!ormed into loan capital, and te same money repeatedly represents loan capital, it is e8ident
tat it exists only at one point in te !orm o! metallic money# at all oter points it exists only in
te !orm o! claims to capital0 Wit te ass%mption made, te acc%m%lation o! tese claims arises
!rom act%al acc%m%lation, tat is, !rom te trans!ormation o! te 8al%e o! commodity-capital, etc0,
into money# b%t ne8erteless te acc%m%lation o! tese claims or titles as s%c di!!ers !rom te
act%al acc%m%lation !rom @ic it arises, as @ell as !rom te !%t%re acc%m%lation Bte ne@
prod%ction processC, @ic is promoted by te lending o! tis money0
&rima facie loan capital al@ays exists in te !orm o! money,
xix
later as a claim to money, since te
money in @ic it originally exists is no@ in te ands o! te borro@er in act%al money-!orm0 For
te lender it as been trans!ormed into a claim to money, into a title o! o@nersip0 5e same mass
o! act%al money can, tere!ore, represent 8ery di!!erent masses o! money-capital0 Mere money,
@eter it represents realised capital or realised re8en%e, becomes loan capital tro%g te simple
act o! lending, tro%g its trans!ormation into a deposit, i! @e consider te general !orm in a
de8eloped credit system0 5e deposit is money-capital !or te depositor0 A%t in te ands o! te
banker it may be only potential money-capital, @ic lies idle in is sa!e instead o! in its
o@nerGs0
xx

Wit te gro@t o! material @ealt te class o! money-capitalists gro@s# on te one and, te
n%mber and te @ealt o! retiring capitalists, rentiers, increases# and on te oter and, te
de8elopment o! te credit system is promoted, tereby increasing te n%mber o! bankers, money-
lenders, !inanciers, etc0 Wit te de8elopment o! te a8ailable money-capital, te D%antity o!
interest-bearing paper, go8ernment sec%rities, stocks, etc0, also gro@s as @e a8e pre8io%sly
so@n0 6o@e8er, at te same time te demand !or a8ailable money-capital also gro@s, te
3+2 ;apter JJJ&&
Hobbers, @o spec%late @it tis paper, playing a prominent role on te money-market0 &! all te
p%rcases and sales o! tis paper @ere only an expression o! act%al in8estments o! capital, it
@o%ld be correct to say tat tey co%ld a8e no in!l%ence on te demand !or loan capital, since
@en ? sells is paper, e dra@s exactly as m%c money as A p%ts into te paper0 A%t e8en i! te
paper itsel! exists to%g not te capital Bat least not as money-capitalC originally represented by
it, it al@ays creates pro tanto a ne@ demand !or s%c money-capital0 A%t at any rate it is ten
money-capital, @ic @as pre8io%sly at te disposal o! A b%t is no@ at te disposal o! ?0
A0 ?0 18+>0 -o0 28860 K7o yo% consider tat it is a
correct description o! te ca%ses @ic determined te
rate o! disco%nt, to say tat it is !ixed by te D%antity
o! capital on te market, @ic is applicable to te
disco%nt o! mercantile bills, as disting%ised !rom
oter classes o! sec%ritiesQL I /;apman:1 K-o, &
tink tat te D%estion o! interest is a!!ected by all
con8ertible sec%rities o! a c%rrent caracter# it @o%ld
be @rong to limit it simply to te disco%nt o! bills,
beca%se it @o%ld be abs%rd to say tat @en tere is a
great demand !or money %pon /te deposit o!1
consols, or e8en %pon ExceD%er bills, as as r%led
8ery m%c o! late, at a rate m%c iger tan te
commercial rate, o%r commercial @orld is not a!!ected
by it# it is 8ery materially a!!ected by it0L I K28*=0
Wen so%nd and c%rrent sec%rities, s%c as bankers
ackno@ledge to be so, are on te market, and people
@ant to borro@ money %pon tem, it certainly as its
e!!ect %pon commercial bills# !or instance, & can
ardly expect a man to let me a8e money at +T %pon
commercial bills, i! e can lend is money at te same
moment at 6T %pon consols, or @ate8er it may be# it
a!!ects %s in te same manner# a man can ardly
expect me to disco%nt bills at +ZT, i! & can lend my
money at 6T0L I K28*<0 We do not talk o! in8estors
@o b%y teir V<,===, or V+,===, or V2=,===, as
a!!ecting te money-market materially0 &! yo% ask me
as to te rate o! interest %pon /a deposit o!1 consols, &
all%de to people, @o deal in %ndreds o! to%sands
o! po%nds, @o are @at are called Hobbers, @o take
3++ ;apter JJJ&&
large portions o! loans, or make p%rcases on te
market, and a8e to old tat stock till te p%blic take
it o!! teir ands at a pro!it# tese men, tere!ore,
@ant money0L
Wit te de8elopment o! te credit system# great concentrated money-markets are created, s%c
as 'ondon, @ic are at te same time te main seats o! trade in tis paper0 5e bankers place
%ge D%antities o! te p%blicGs money-capital at te disposal o! tis %nsa8o%ry cro@d o! dealers,
and t%s tis brood o! gamblers m%ltiplies0
KMoney %pon te $tock Excange is, generally
speaking, ceaper tan it is else@ere,L says Pames
Morris te inc%mbent o! te :o8ernorGs cair o! te
Aank o! England in 1828 be!ore te $ecret ;ommittee
o! 'ords B;0 70 1828, printed 18+>, -o0 <1*C0
&n te disc%ssion on interest-bearing capital, @e a8e already so@n tat te a8erage interest o8er
a long period o! years, oter conditions remaining eD%al, is determined by te a8erage rate o!
pro!it# not pro!it o! enterprise, @ic is noting more tan pro!it min%s interest0 /,resent edition:
;0 JJ&&0 I 0d01
&t as also been mentioned, and @ill be !%rter analysed in anoter place, tat also !or te
8ariations in commercial interest, tat is, interest calc%lated by te money-lenders !or disco%nts
and loans @itin te commercial @orld, a pase is reaced, in te co%rse o! te ind%strial cycle, in
@ic te rate o! interest exceeds its minim%m and reaces its mean le8el B@ic it exceeds laterC
and tat tis mo8ement is a res%lt o! a rise in pro!its0
&n te meantime, t@o tings are to be noted ere0
'irst: Wen te rate o! interest stays %p !or a long time B@e are speaking ere o! te rate o!
interest in a gi8en co%ntry like England, @ere te a8erage rate o! interest is gi8en o8er a lengty
period o! time, and also so@s itsel! in te interest paid on long-term loans I @at co%ld be called
pri8ate interestC, it isprima facie proo! tat te rate o! pro!it is ig d%ring tis period, b%t it does
not pro8e necessarily tat te rate o! pro!it o! enterprise is ig0 5is latter distinction is more or
less remo8ed !or capitalists, @o operate mainly @it teir o@n capital# tey realise te ig rate
o! pro!it, since tey pay te interest to temsel8es0 5e possibility o! a ig rate o! interest o!
long d%ration is present @en te rate o! pro!it is ig# tis does not re!er, o@e8er, to te pase
o! act%al sD%eeEe0 A%t it is possible tat tis ig rate o! pro!it may lea8e only a lo@ rate o! pro!it
o! enterprise, a!ter te ig rate o! interest as been ded%cted0 5e rate o! pro!it o! enterprise may
srink, @ile te ig rate o! pro!it contin%es0 5is is possible beca%se te enterprises m%st be
contin%ed, once tey a8e been started0 7%ring tis pase, operations are carried on to a large
extent @it p%re credit capital Bcapital o! oter peopleC# and te ig rate o! pro!it may be partly
spec%lati8e and prospecti8e0 ? ig rate o! interest can be paid @it a ig rate o! pro!it b%t
decreasing pro!it o! enterprise0 &t can be paid Band tis is done in part d%ring times o!
spec%lationC, not o%t o! te pro!it, b%t o%t o! te borro@ed capital itsel!, and tis can contin%e !or
a @ile0
Secondly: 5e statement tat te demand !or money-capital, and tere!ore te rate o! interest,
gro@s, beca%se te rate o! pro!it is ig, is not identical @it te statement tat te demand !or
ind%strial capital gro@s and tere!ore te rate o! interest is ig0
&n times o! crisis, te demand !or loan capital, and tere!ore te rate o! interest, reaces its
maxim%m# te rate o! pro!it, and @it it te demand !or ind%strial capital, as to all intents and
3+6 ;apter JJJ&&
p%rposes disappeared0 7%ring s%c times, e8eryone borro@s only !or te p%rpose o! paying, in
order to settle pre8io%sly contracted obligations0 3n te oter and, in times o! rene@ed acti8ity
a!ter a crisis, loan capital is demanded !or te p%rpose o! b%ying and !or te p%rpose o!
trans!orming money-capital into prod%cti8e or commercial capital0 ?nd ten it is demanded eiter
by te ind%strial capitalist or te mercant0 5e ind%strial capitalist in8ests it in means o!
prod%ction and in labo%r-po@er0
5e rising demand !or labo%r-po@er can ne8er by itsel! be a ca%se !or a rising rate o! interest, in
so !ar as te latter is determined by te rate o! pro!it0 6iger @ages are ne8er a ca%se !or iger
pro!its, alto%g tey may be one o! te conseD%ences o! iger pro!its d%ring some partic%lar
pases o! te ind%strial cycle0
5e demand !or labo%r-po@er can increase beca%se te exploitation o! labo%r takes place %nder
especially !a8o%rable circ%mstances, b%t te rising demand !or labo%r-po@er, and t%s !or
8ariable capital, does not in itsel! increase te pro!it# it, on te contrary, lo@ers it pro tanto. A%t
te demand !or 8ariable capital can ne8erteless increase at te same time, t%s also te demand
!or money-capital I @ic can raise te rate o! interest0 5e market-price o! labo%r-po@er ten
rises abo8e its a8erage, more tan te a8erage n%mber o! labo%rers are employed, and te rate o!
interest rises at te same time beca%se %nder s%c circ%mstances te demand !or money-capital
rises0 5e rising demand !or labo%r-po@er raises te price o! tis commodity, as e8ery oter,
increases its price# b%t not te pro!it, @ic depends mainly %pon te relati8e ceapness o! tis
commodity in partic%lar0 A%t it raises at te same time I %nder te ass%med conditions I te rate
o! interest, beca%se it increases te demand !or money-capital0 &! te money-capitalist, instead o!
lending te money, so%ld trans!orm imsel! into an ind%strial capitalist, te !act tat e as to
pay more !or labo%r-po@er @o%ld not increase is pro!it b%t @o%ld rater decrease it
correspondingly0 5e state o! b%siness may be s%c tat is pro!it may ne8erteless rise, b%t it
@o%ld ne8er be so beca%se e pays more !or labo%r0 5e latter circ%mstance, in so !ar as it
increases te demand !or money-capital, is, o@e8er, s%!!icient to raise te rate o! interest0 &!
@ages so%ld rise !or some reason d%ring an oter@ise %n!a8o%rable state o! b%siness, te rise in
@ages @o%ld lo@er te rate o! pro!it, b%t raise te rate o! interest to te extent tat it increased te
demand !or money-capital0
'ea8ing labo%r aside, te ting called Kdemand !or capitalL by 38erstone consists only in a
demand !or commodities0 5e demand !or commodities raises teir price, eiter beca%se it rises
abo8e a8erage, or beca%se te s%pply o! commodities !alls belo@ a8erage0 &! te ind%strial
capitalist or mercant m%st no@ pay, e.g., V1+= !or te same amo%nt o! commodities !or @ic e
%sed to pay V1==, e @o%ld no@ a8e to borro@ V1+= instead o! te !ormer V1==, and i! te rate
o! interest @ere +T, e @o%ld no@ a8e to pay an interest o! V>Z as compared @it V+ !ormerly0
5e amo%nt o! interest to be paid by im @o%ld rise beca%se e no@ as to borro@ more capital0
5e @ole endea8o%r o! Mr0 38erstone consists in representing te interests o! loan capital and
ind%strial capital as being identical, @ereas is Aank ?ct is precisely calc%lated to exploit tis
8ery di!!erence o! interests to te ad8antage o! money-capital0
&t is possible tat te demand !or commodities, in case teir s%pply as !allen belo@ a8erage,
does not absorb any more money-capital tan !ormerly0 5e same s%m, or peraps a smaller one,
as to be paid !or teir total 8al%e, b%t a smaller D%antity o! %se-8al%es is recei8ed !or te same
s%m0 &n tis case, te demand !or loanable capital @ill be %ncanged and tere!ore rate o! interest
@ill not rise, alto%g te demand !or commodities @o%ld a8e risen as compared to teir s%pply
and conseD%ently te price o! commodities @o%ld a8e become iger0 5e rate o! interest cannot
be a!!ected, %nless te total demand !or loan capital increases, and tis is not te case %nder te
abo8e ass%mptions0
5e s%pply o! an article can also !all belo@ a8erage, as it does @en crop !ail%res in corn, cotton,
etc0, occ%r# and te demand !or loan capital can increase beca%se spec%lation in tese
3+> ;apter JJJ&&
commodities co%nts on !%rter rise in prices and te easiest @ay to make tem rise is to
temporarily @itdra@ a portion o! te s%pply !rom te market0 A%t in order to pay !or te
p%rcased commodities @ito%t selling tem, money is sec%red by means o! te commercial Kbill
o! excange operations0L &n tis case, te demand !or loan capital increases, and te rate o!
interest can rise as a res%lt o! tis attempt to arti!icially pre8ent te s%pply o! tis commodity
!rom reacing te market0 5e iger rate o! interest ten re!lects an arti!icial red%ction in te
s%pply o! commodity-capital0 3n te oter and, te demand !or an article can gro@ beca%se its
s%pply as increased and te article sells belo@ its a8erage price0
&n tis case, te demand !or loan capital can remain te same, or e8en !all, beca%se more
commodities can be ad !or te same s%m o! money0 $pec%lati8e stock-piling co%ld also occ%r,
eiter !or te p%rpose o! taking ad8antage o! te most !a8o%rable moment !or prod%ction
p%rposes, or in expectation o! a !%t%re rise in prices0 &n tis case, te demand !or loan capital
co%ld gro@, and te rise in te rate o! interest @o%ld ten be a re!lection o! capital in8estment in
s%rpl%s stock-piling o! elements o! prod%cti8e capital0 We are only considering ere te demand
!or loan capital as it is in!l%enced by te demand !or, and s%pply o!, commodity-capital0 We a8e
already disc%ssed o@ te 8arying state o! te reprod%ction process in te pases o! te ind%strial
cycle in!l%ences te s%pply o! loan capital0 5e tri8ial proposition tat te market rate o! interest
is determined by te s%pply and demand o! BloanC capital is sre@dly H%mbled %p by 38erstone
@it is o@n post%late, namely, tat loan capital is identical @it capital in general# and in tis
@ay e tries to trans!orm te %s%rer into te only capitalist and is capital into te only capital0
&n times o! stringency, te demand !or loan capital is a demand !or means o! payment and noting
else# it is by no means a demand !or money as a means o! p%rcase0 ?t te same time, te rate o!
interest may rise 8ery ig, regardless @eter real capital, i.e., prod%cti8e and commodity
capital, exists in ab%ndance or is scarce0 5e demand !or means o! payment is a mere demand !or
con8ertibility into money, so !ar as mercants and prod%cers a8e good sec%rities to o!!er# it is a
demand !or money1capital @ene8er tere is no collateral, so tat an ad8ance o! means o!
payment gi8es tem not only te form of money b%t also te e3uivalent tey lack, @ate8er its
!orm, @it @ic to make payment0 5is is te point @ere bot sides o! te contro8ersy on te
pre8alent teory o! crises are at te same time rigt and @rong0 5ose @o say tat tere is
merely a lack o! means o! payment, eiter a8e only te o@ners o! bona fide sec%rities in mind,
or tey are !ools @o belie8e tat it is te d%ty and po@er o! banks to trans!orm all bankr%pt
s@indlers into sol8ent and respectable capitalists by means o! pieces o! paper0 5ose @o say tat
tere is merely a lack o! capital, are eiter H%st D%ibbling abo%t @ords, since precisely at s%c
times tere is a mass o! inconvertible capital as a res%lt o! o8er-imports and o8er-prod%ction, or
tey are re!erring only to s%c ca8aliers o! credit @o are no@, indeed, placed in te position
@ere tey can no longer obtain oter peopleGs capital !or teir operations and no@ demand tat
te bank so%ld not only elp tem to pay !or te lost capital, b%t also enable tem to contin%e
@it teir s@indles0
&t is a basic principle o! capitalist prod%ction tat money, as an independent !orm o! 8al%e, stands
in opposition to commodities, or tat excange-8al%e m%st ass%me an independent !orm in
money# and tis is only possible @en a de!inite commodity becomes te material @ose 8al%e
becomes a meas%re o! all oter commodities, so tat it t%s becomes te general commodity, te
commodity par ecellence I as disting%ised !rom all oter commodities0 5is m%st mani!est
itsel! in t@o respects, partic%larly among capitalistically de8eloped nations, @ic to a large
extent replace money, on te one and, by credit operations, and on te oter by credit-money0 &n
times o! a sD%eeEe, @en credit contracts or ceases entirely, money s%ddenly stands as te only
means o! payment and tr%e existence o! 8al%e in absol%te opposition to all oter commodities0
6ence te %ni8ersal depreciation o! commodities, te di!!ic%lty or e8en impossibility o!
trans!orming tem into money, i.e., into teir o@n p%rely !antastic !orm0 $econdly, o@e8er,
credit-money itsel! is only money to te extent tat it absol%tely takes te place o! act%al money
3+8 ;apter JJJ&&
to te amo%nt o! its nominal 8al%e0 Wit a drain on gold its con8ertibility, i.e., its identity @it
act%al gold becomes problematic0 6ence coerci8e meas%res, raising te rate o! interest, etc0, !or
te p%rpose o! sa!eg%arding te conditions o! tis con8ertibility0 5is can be carried more or less
to extremes by mistaken legislation, based on !alse teories o! money and en!orced %pon te
nation by te interests o! te money-dealers, te 38erstones and teir ilk0 5e basis, o@e8er, is
gi8en @it te basis o! te mode o! prod%ction itsel!0 ? depreciation o! credit-money Bnot to
mention, incidentally, a p%rely imaginary loss o! its caracter as moneyC @o%ld %nsettle all
existing relations0 5ere!ore, te 8al%e o! commodities is sacri!iced !or te p%rpose o!
sa!eg%arding te !antastic and independent existence o! tis 8al%e in money0 ?s money-8al%e, it is
sec%re only as long as money is sec%re0 For a !e@ millions in money, many millions in
commodities m%st tere!ore be sacri!iced0 5is is ine8itable %nder capitalist prod%ction and
constit%tes one o! its bea%ties0 &n !ormer modes o! prod%ction, tis does not occ%r beca%se, on te
narro@ basis %pon @ic tey stand, neiter credit nor credit-money can de8elop greatly0 ?s long
as te social caracter o! labo%r appears as te money1eistence o! commodities, and t%s as a
thing external to act%al prod%ction, money crises I independent o! or as an intensi!ication o!
act%al crises I are ine8itable0 3n te oter and, it is clear tat as long as te credit o! a bank is
not saken, it @ill alle8iate te panic in s%c cases by increasing credit-money and intensi!y it by
contracting te latter0 5e entire istory o! modern ind%stry so@s tat metal @o%ld indeed be
reD%ired only !or te balancing o! international commerce, @ene8er its eD%ilibri%m is
momentarily dist%rbed, i! only domestic prod%ction @ere organised0 5at te domestic market
does not need any metal e8en no@ is so@n by te s%spension o! te cas payments o! te so-
called national banks, @ic resort to tis expedient in all extreme cases as te sole relie!0
&n te case o! t@o indi8id%als, it @o%ld be ridic%lo%s to say tat in teir transactions @it one
anoter bot a8e an %n!a8o%rable balance o! payments0 &! tey are reciprocally creditor and
debtor o! one anoter, it is e8ident tat @en teir claims do not balance, one m%st be te creditor
and te oter te debtor !or te balance0 Wit nations tis is by no means te case0 ?nd tat tis is
not te case is ackno@ledged by all economists @en tey admit tat te balance o! payments can
be !a8o%rable or %n!a8o%rable !or a nation, to%g its trade balance m%st %ltimately be settled0
5e balance o! payments di!!ers !rom te balance o! trade in tat it is a balance o! trade @ic
m%st be settled at a de!inite time0 Wat te crises no@ accomplis is to narro@ te di!!erence
bet@een te balance o! payments and te balance o! trade to a sort inter8al# and te speci!ic
conditions @ic de8elop in te nation s%!!ering !rom a crisis and, tere!ore, a8ing its payments
become d%e I tese conditions already lead to s%c a contraction o! te time o! settlement0 First,
sipping a@ay precio%s metals# ten selling consigned commodities at lo@ prices# exporting
commodities to dispose o! tem or to obtain money ad8ances on tem at ome# increasing te
rate o! interest, recalling credit, depreciating sec%rities, disposing o! !oreign sec%rities, attracting
!oreign capital !or in8estment in tese depreciated sec%rities, and !inally bankr%ptcy, @ic settles
a mass o! claims0 ?t te same time, metal is still o!ten sent to te co%ntry @ere a crisis as
broken o%t, beca%se te dra!ts dra@n on it are insec%re and payment in specie is most tr%st@orty0
F%rtermore, in regard to ?sia, all capitalist nations are %s%ally sim%ltaneo%sly I directly or
indirectly I its debtors0 ?s soon as tese 8ario%s circ%mstances exert teir !%ll e!!ect %pon te
oter in8ol8ed nation, it like@ise begins to export gold and sil8er, in sort, its payments become
d%e and te same penomena are repeated0
&n commercial credit, te interest I as te di!!erence bet@een credit price and cas price I enters
into te price o! commodities only in so !ar as te bills o! excange a8e a longer tan ordinary
r%nning time0 3ter@ise it does not0 ?nd tis is explained by te !act tat e8eryone takes credit
@it one and and gi8es it @it te oter0 /5is does not agree @it my experience0 I '.001 A%t in
so !ar as disco%nt in tis !orm enters ere, it is not reg%lated by tis commercial credit, b%t by te
money-market0
3+* ;apter JJJ&&
&! s%pply and demand o! money-capital, @ic determine te rate o! interest, @ere identical @it
s%pply and demand o! act%al capital, as 38erstone maintains, te interest @o%ld be
sim%ltaneo%sly lo@ and ig, depending on @eter 8ario%s commodities or 8ario%s pases Bra@
material, semi-!inised prod%ct, !inised prod%ctC o! te same commodity @ere being considered0
&n 1822, te rate o! interest o! te Aank o! England !l%ct%ated bet@een 2T B!rom Pan%ary to
$eptemberC and <Z and 3T B!rom -o8ember to te end o! te yearC0 &n 182+, it @as <Z, <`, and
3T !rom Pan%ary to 3ctober, and bet@een 3 and +T d%ring te remaining monts0 5e a8erage
price o! !air 3rleans cotton @as 6[d0 in 1822 and 2 >N8d0 in 182+0 3n Marc 3, 1822, te cotton
s%pply in 'i8erpool @as 6<>,=2< bales, and on Marc 3, 182+, it @as >>3,8== bales0 5o H%dge by
te lo@ price o! cotton, te rate o! interest so%ld a8e been lo@ in 182+, and it @as indeed !or
te greater part o! tis time0 A%t to H%dge by te yarn, te rate o! interest so%ld a8e been ig,
!or te prices @ere relati8ely ig and te pro!its absol%tely ig0 From cotton at 2d0 per po%nd,
yarn co%ld be sp%n, in 182+ @it a spinning cost o! 2d0 Bgood sec%nda m%le t@ist -o0 2=C, or a
total cost o! 8d0 to te spinner, @ic e co%ld sell in $eptember and 3ctober 182+ at 1=Z or
11Zd0 per po%nd0 B$ee te testimony o! Wylie belo@0C
5e entire matter can be resol8ed as !ollo@s:
$%pply and demand o! loan capital @o%ld be identical @it s%pply and demand o! capital
generally Balto%g tis last statement is abs%rd# !or te ind%strial or commercial capitalist a
commodity is a !orm o! is capital, yet e ne8er asks !or capital as s%c, b%t only !or te
partic%lar commodity as s%c, e b%ys and pays !or it as a commodity, e.g., corn or cotton,
regardless o! te role tat it as to play in te circ%it o! is capitalC, i! tere @ere no money-
lenders, and i! in teir stead te lending capitalists @ere in possession o! macinery, ra@
materials, etc0, @ic tey @o%ld lend or ire o%t, as o%ses are rented o%t no@, to te ind%strial
capitalists, @o are temsel8es o@ners o! some o! tese obHects0 (nder s%c circ%mstances, te
s%pply o! loan capital @o%ld be identical @it te s%pply o! elements o! prod%ction !or te
ind%strial capitalist and commodities !or te mercant0 A%t it is clear tat te di8ision o! pro!it
bet@een te lender and borro@er @o%ld ten, to begin @it, completely depend on te relation o!
te capital @ic is lent to tat @ic is te property o! te one @o employs it0
?ccording to Mr0 Weg%elin BA0 ?0 18+>C, te rate o! interest is determined by Kte amo%nt o!
%nemployed capitalL B<+<C# it is Kb%t an indication o! a large amo%nt o! capital seeking
employmentL B<>1C# later tis %nemployed capital becomes K!loating capitalL B28+C and by tis e
means Kte Aank o! England notes and oter kinds o! circ%lation in te co%ntry, !or instance, te
co%ntry banks circ%lation and te amo%nt o! coin @ic is in te co%ntry0 & incl%de in !loating
capital te reser8es o! te bankersL B+=<, +=3C, and later also gold b%llion B+=3C0 5%s te same
Mr0 Weg%elin says tat te Aank o! England exerts great in!l%ence %pon te rate o! interest in
times, @en K@eL /te Aank o! England1 Kare olders o! te greater portion o! te %nemployed
capitalL B11*8C, @ile, according to te abo8e testimony o! Mr0 38erstone, te Aank o! England
Kis no place !or capital0L Mr0 Weg%elin !%rter says:
K& tink te rate o! disco%nt is go8erned by te
amo%nt o! %nemployed capital @ic tere is in te
co%ntry0 5e amo%nt o! %nemployed capital is
represented by te reser8e o! te Aank o! England,
@ic is practically a reser8e o! b%llion0 Wen,
tere!ore, te b%llion is dra@n %pon, it diminises te
amo%nt o! %nemployed capital in te co%ntry and
36= ;apter JJJ&&
conseD%ently raises te 8al%e o! tat @ic remainsL
B1<+8C0
P0 $t%art Mill says B<1=<C:
K5e Aank is obliged to depend !or te sol8ency o! its
banking department %pon @at it can do to replenis
te reser8e in tat department# and tere!ore as soon
as it !inds tat tere is any drain in progress, it is
obliged to look to te sa!ety o! its reser8e, and to
commence contracting its disco%nts or selling
sec%rities0L
5e reser8e, in so !ar as only te banking department is considered, is a reser8e !or te deposits
only0 ?ccording to te 38erstones, te banking department is s%pposed to act only as a banker,
@ito%t regard to te Ka%tomaticL iss%e o! notes0 A%t in times o! act%al stringency te Aank,
independently o! te reser8e o! te banking department @ic consists only o! notes, keeps a
sarp eye on te b%llion reser8e, and m%st do so i! it does not @is to !ail0 For, to te extent tat
te b%llion reser8e d@indles, so te reser8e o! bank-notes also d@indles, and no one so%ld be
better in!ormed o! tis tan Mr0 38erstone, @o precisely by is Aank ?ct o! 1822 as so
sagacio%sly arranged tis0
Chapter 33. The Medium of Circulation in the
Credit System
K5e great reg%lator o! te 8elocity o! te c%rrency is
credit0 5is explains @y a se8ere press%re %pon te
money-market is generally coincident @it a !%ll
circ%lation0L B4he Currency 4heory 9eviewed, p0 6+0C
5is is to be taken in a do%ble sense0 3n te one and, all metods @ic sa8e on medi%m o!
circ%lation are based %pon credit0 3n te oter and, o@e8er, take, !or example, a +==-po%nd
note0 ? gi8es it to A on a certain day in payment !or a bill o! excange# A deposits it on te same
day @it is banker# te latter disco%nts a bill o! excange @it it on te 8ery same day !or ;# ;
pays it to is bank, te bank gi8es it to te bill-broker as an ad8ance, etc0 5e 8elocity @it @ic
te note circ%lates ere, to ser8e !or p%rcases and payments, is e!!ected by te 8elocity @it
@ic it repeatedly ret%rns to someone in te !orm o! a deposit and passes o8er to someone else
again in te !orm o! a loan0 5e p%re economy in medi%m o! circ%lation appears most igly
de8eloped in te clearing o%se I in te simple excange o! bills o! excange tat are d%e I and
in te preponderant !%nction o! money as a means o! payment !or merely settling balances0 A%t
te 8ery existence o! tese bills o! excange depends in t%rn on credit, @ic te ind%strialists
and mercants m%t%ally gi8e one anoter0 &! tis credit declines, so does te n%mber o! bills,
partic%larly long-term ones, and conseD%ently also te e!!ecti8eness o! tis metod o! balancing
acco%nts0 ?nd tis economy, @ic consists in eliminating money !rom transactions and rests
entirely %pon te !%nction o! money as a means o! payment, @ic in t%rn is based %pon credit,
can only be o! t@o kinds Baside !rom te more or less de8eloped tecniD%e in te concentration o!
tese paymentsC: m%t%al claims, represented by bills o! excange or ceD%es, are balanced o%t
eiter by te same banker, @o merely transcribes te claim !rom te acco%nt o! one to tat o!
anoter, or by te 8ario%s bankers among temsel8es0
xxi
5e concentration o! 8 to 2= million bills
o! excange in te ands o! one bill-broker, s%c as te !irm o! 38erend, :%rney g ;o0, @as one
o! te principal means o! expanding te scale o! s%c balancing locally0 5e e!!ecti8eness o! te
medi%m o! circ%lation is increased tro%g tis economy in so !ar as a smaller D%antity o! it is
reD%ired simply to balance acco%nts0 3n te oter and te 8elocity o! te money !lo@ing as
medi%m o! circ%lation Bby @ic it is also economisedC depends entirely %pon te !lo@ o!
p%rcases and sales, and on te cain o! payments, in so !ar as tey occ%r s%ccessi8ely in money0
A%t credit e!!ects and tereby increases te 8elocity o! circ%lation0 ? single piece o! money, !or
instance, can e!!ect only !i8e mo8es, and remains longer in te ands o! eac indi8id%al as mere
medi%m o! circ%lation @ito%t credit mediating I @en ?, its original o@ner, b%ys !rom A, A
!rom ;, ; !rom 7, 7 !rom E, and E !rom F, tat is, @en its transition !rom one and to anoter
is d%e only to act%al p%rcases and sales0 A%t @en A deposits te money recei8ed in payment
!rom ? @it is banker and te latter %ses it in disco%nting bills o! excange !or ;, ; in t%rn b%ys
!rom 7, 7 deposits it @it is banker and te latter lends it to E, @o b%ys !rom F, ten e8en its
8elocity as mere medi%m o! circ%lation Bmeans o! p%rcaseC is e!!ected by se8eral credit
operations: A"s depositing @it is banker and te latter"s disco%nting !or ;, 7"s depositing @it
is banker, and te latter"s disco%nting !or E# in oter @ords tro%g !o%r credit operations0
Wito%t tese credit operations, te same piece o! money @o%ld not a8e per!ormed !i8e
p%rcases s%ccessi8ely in te gi8en period o! time0 5e !act tat it canged bands @ito%t
36< ;apter JJJ&&&
mediation o! act%al sales and p%rcases, tro%g depositing and disco%nting, as ere accelerated
its cange o! ands in te series o! act%al transactions0
We a8e seen pre8io%sly tat one and te same bank-note can constit%te deposits in se8eral
banks0 $imilarly, it can also constit%te 8ario%s deposits in te same bank0 5e banker disco%nts,
@it te note @ic ? as deposited, A"s bill o! excange, A pays ;, and ; deposits te same note
in te same bank tat iss%ed it0
We a8e already demonstrated in te disc%ssion o! simple money circ%lation B4ol &, ;0 &&&, <C
tat te mass o! act%al circ%lating money, ass%ming te 8elocity o! circ%lation and economy o!
payments as gi8en, is determined by te prices o! commodities and te D%antity o! transactions0
5e same la@ go8erns te circ%lation o! notes0
&n te !ollo@ing table, te ann%al a8erage n%mber o! notes o! te Aank o! England, in so !ar as
tey @ere in te ands o! te p%blic, are recorded, namely, te +- and 1=-po%nd notes, te <=- to
1==-po%nd notes, and te larger denominations bet@een <== and 1,=== po%nds sterling# also te
percentages o! te total circ%lation tat eac one o! tese gro%pings constit%tes0 5e amo%nts are
in to%sands, i.e., te last tree !ig%res are omitted0
.ear V+-1=
-otes
T V<=-1==
-otes
T V<==-
1,===
-otes
T 5otal
1822 *,<63 2+0> +,>3+ <803 +,<+3 <60= <=,<21
182+ *,6*8 260* 6,=8< <*03 2,*2< <308 <=,><<
1826 *,*18 280* +,>>8 <80+ 2,+*= <<06 <=,<86
182> *,+*1 +=01 +,2*8 <80> 2,=66 <10< 1*,1++
1828 8,>3< 2803 +,=26 <>0* 2,3=> <308 18,=8+
182* 8,6*< 2>0< +,<32 <80+ 2,2>> <203 18,2=3
18+= *,162 2>0< +,+8> <808 2,626 <20= 1*,3*8
18+1 *,36< 2801 +,++2 <80+ 2,++> <302 1*,2>3
18+< *,83* 2+0= 6,161 <80< +,8+6 <608 <1,8+6
18+3 1=,6** 2>03 6,3*3 <80< +,+21 <20+ <<,6+3
18+2 1=,+6+ +10= +,*1= <80+ 2,<32 <=0+ <=,>=*
18++ 1=,6<8 +306 +,>=6 <80* 3,2+* 1>0+ 1*,>*3
18+6 1=,68= +202 +,62+ <80> 3,3<3 160* 1*,628
18+> 1=,6+* +20> +,+6> <806 3,<21 160> 1*,26>
BA0 ?0 18+8, p0 JJ4&0C 5e total s%m o! circ%lating bank-notes, tere!ore, positi8ely decreased
!rom 1822 to 18+>, alto%g commercial b%siness, as indicated by exports and imports, ad more
tan do%bled0 5e smaller bank-notes o! V+ and V1= increased, as te table so@s, !rom
V*,<63,=== in 1822 to V1=,6+*,=== in 18+>0 ?nd tis took place sim%ltaneo%sly @it te
partic%larly ea8y increase in gold circ%lation at tat time0 3n te oter and, tere @as a
decrease in te notes o! iger denominations BV<== to V1,===C !rom V+,8+6,=== in 18+< to
V3,<21,=== in 18+>, i.e., a decrease o! more tan V<Z million0 5is is explained as !ollo@s:
363 ;apter JJJ&&&
K3n te 8t P%ne 18+2, te pri8ate bankers o! 'ondon
admitted te Hoint-stock banks to te arrangements o!
te clearing o%se, and sortly a!ter@ards te !inal
clearing @as adH%sted in te Aank o! England0 5e
daily clearances are no@ e!!ected by trans!ers in te
acco%nts @ic te se8eral banks keep in tat
establisment0 &n conseD%ence o! te adoption o! tis
system, te large notes @ic te bankers !ormerly
employed !or te p%rpose o! adH%sting teir acco%nts
are no longer necessary0L BA0 ?0 18+8, p0 40C
5o @at small minim%m te %se o! money in @olesale trade as been red%ced, can be ded%ced
!rom te table reprinted in Aook & B;0 &&&, FootnoteC, @ic @as presented to te Aank
;ommittee by Morrison, 7illon g ;o0, one o! te largest o! tose 'ondon !irms !rom @ic a
small dealer can b%y is entire assortment o! commodities0
?ccording to te testimony o! W0 -e@marc be!ore te Aank ;ommittee 18+>, -o0 1>21, oter
circ%mstances also contrib%ted to economy in te circ%lating medi%m: penny postage, rail@ays,
telegrapy, in sort, te impro8ed means o! comm%nication# t%s England can no@ carry on !i8e
to six times more b%siness @it abo%t te same circ%lation o! bank-notes0 5is is also essentially
d%e to te @itdra@al !rom circ%lation o! notes o! iger denomination tan V1=0 6ere
-e@marc sees a nat%ral explanation !or te penomenon tat in $cotland and &reland, @ere
one-po%nd notes also circ%late, note circ%lation as risen by abo%t 31T B1>2>C0 5e total
circ%lation o! bank-notes in te (nited Kingdom, incl%ding one-po%nd notes, is said to be V3*
million B1>2*C0 5e gold circ%lation, V>= million B1>+=C0 &n $cotland, te circ%lation o! notes @as
V3,1<=,=== in 1832# V3,=<=,=== in 1822# and V2,=+=,=== in 18+2 B1>+<C0
From tese !ig%res alone, it is e8ident tat banks iss%ing notes can by no means increase te
n%mber o! circ%lating notes at @ill, as long as tese notes are at all times excangeable !or
money0 /&ncon8ertible paper money is not considered ere at all# incon8ertible bank-notes can
become a %ni8ersal medi%m o! circ%lation only @ere tey are act%ally backed by state credit, as
is te case in )%ssia at present0 5ey ten !all %nder te la@s o! incon8ertible paper money iss%ed
by te state, @ic a8e already been de8eloped in Aook & B;0 &&&, <, cC K;oin and $ymbols o!
4al%e0L I '.001
5e D%antity o! circ%lating notes is reg%lated by te t%rno8er reD%irements, and e8ery s%per!l%o%s
note @ends its @ay back immediately to te iss%er0 $ince in England only te notes o! te Aank o!
England circ%late %ni8ersally as legal means o! payment, @e can disregard at tis point te
insigni!icant, and merely local, note circ%lation o! te co%ntry banks0
Ae!ore te Aank ;ommittee 18+8, Mr0 -ea8e, :o8ernor o! te Aank o! England, testi!ies:
K-o0 *2>0 BM%estion:C Wate8er meas%res yo% resort
to, te amo%nt o! notes @it te p%blic, yo% say,
remains te same# tat is some@ere abo%t
V<=,===,===Q I &n ordinary times, te %ses o! te
p%blic seem to @ant abo%t V<=,===,===0 5ere are
special periodical moments @en, tro%g te year,
362 ;apter JJJ&&&
tey rise to anoter V1,===,=== or V1,+==,===0 & stated
tat, i! te p%blic @anted more, tey co%ld al@ays
take it !rom te Aank o! England0L I K*280 .o% stated
tat d%ring te panic te p%blic @o%ld not allo@ yo%
to diminis te amo%nt o! notes# & @ant yo% to
acco%nt !or tat0 I &n moments o! panic, te p%blic
a8e, as & belie8e, te !%ll po@er o! elping
temsel8es as to notes# and o! co%rse, as long as te
Aank as a liability, tey may %se tat liability to take
te notes !rom te Aank0L I K*2*0 5en tere seems to
be reD%ired, at all times, some@ere abo%t
V<=,===,=== o! legal tenderQ I V<=,===,=== o! notes
@it te p%blic# it 8aries0 &t is V18,+==,===,
V1*,===,===, V<=,===,===, and so on# b%t taking te
a8erage, yo% may call it !rom V1*,===,=== to
V<=,===,===0L
5estimony o! 5omas 5ooke be!ore te ;ommittee o! 'ords on ;ommercial 7istress B;0 70
1828N+>C, -o0 3=*2:
K5e Aank as no po@er o! its o@n 8olition to extend
te amo%nt o! its circ%lation in te ands o! te
p%blic# b%t it as te po@er o! red%cing te amo%nt o!
te notes in te ands o! te p%blic, not o@e8er
@ito%t a 8ery 8iolent operation0L
P0 ;0 Wrigt, a banker !or 3= years in -ottingam, a8ing explained at lengt te impossibility
!or a co%ntry bank to be able to keep more notes in circ%lation tan te p%blic needs and @ants,
says abo%t notes o! te Aank o! England B;0 70 1828N+>C, -o0 <822:
K& am not a@are tat tere is any ceckL B!or note
iss%eC K%pon te Aank o! England, b%t any excess o!
circ%lation @ill go into te deposits and t%s ass%me a
di!!erent name0L
5e same olds tr%e !or $cotland, @ere almost noting b%t paper circ%lates, beca%se tere as
@ell as in &reland one-po%nd notes are also in %se and Kte $cotc ate gold0L Kennedy, 7irector
o! a $cottis bank, declares tat banks co%ld not e8en contract teir circ%lation o! notes and
Kconcei8es tat so long as tere are internal
transactions reD%iring notes or gold to per!orm tem,
bankers m%st, eiter tro%g te demands o! teir
depositors or in one sape or anoter, !%rnis as m%c
36+ ;apter JJJ&&&
c%rrency as tose transactions reD%ire0000 5e $cottis
banks can restrict teir transactions, b%t tey cannot
control teir c%rrency0L BDbid., -os0 3226, 32280C
$imilarly, ?nderson, 7irector o! te (nion Aank o! $cotland, states Bibid., -o0 3+>8C:
K5e system o! excanges bet@een yo%rsel8es K
/among te $cottis banks1 Kpre8ents any o8er-iss%e
on te part o! any one bankQ I .es# tere is a more
po@er!%l pre8enti8e tan te system o! excangesL
/@ic as really noting to do @it tis, b%t does
indeed g%arantee te ability o! te notes o! eac bank
to circ%late tro%go%t $cotland1, Kte %ni8ersal
practice in $cotland o! keeping a bank acco%nt#
e8erybody @o as any money at all as a bank
acco%nt and p%ts in e8ery day te money @ic e
does not immediately @ant, so tat at te close o! te
b%siness o! te day tere is no money scarcely o%t o!
te banks except @at people a8e in teir pockets0L
5e same applies to &reland, as indicated in te testimony o! te :o8ernor o! te Aank o! &reland,
Mac7onnell, and te 7irector o! te ,ro8incial Aank o! &reland, M%rray, be!ore te same
;ommittee0
-ote circ%lation is H%st as independent o! te state o! te gold reser8e in te 8a%lts o! te bank
@ic g%arantees te con8ertibility o! tese notes, as it is o! te @ill o! te Aank o! England0
K3n $eptember 18, 1826, te circ%lation o! te Aank
o! England @as V<=,*==,=== and te b%llion in te
Aank V16,<>3,===# and on ?pril +, 182>, te notes in
circ%lation @ere V<=,81+,=== and te b%llion
V1=,<26,===0000 &t is e8ident tat six million o! gold
@ere exported, @ito%t any contraction o! te
c%rrency o! te co%ntry0L BP0 :0 Kinnear, 4he Crisis
and the Currency, 'ondon, 182>, p0 +0C
3! co%rse, tis applies only %nder present conditions pre8ailing in England, and e8en ere only in
so !ar as legislation does not decree a di!!erent relationsip bet@een te note iss%e and metal
reser8e0
6ence only te reD%irements o! b%siness itsel! exert an in!l%ence on te D%antity o! circ%lating
money-notes and gold0 5o be noted ere, in te !irst instance, are te periodic !l%ct%ations, @ic
repeat temsel8es ann%ally regardless o! te general condition o! b%siness, so tat !or te past <=
years
366 ;apter JJJ&&&
Kte circ%lation is ig in one mont, and it is lo@ in
anoter mont, and in a certain oter mont occ%rs a
medi%m point0L B-e@marc, A0 ?0 18+>, -o0 16+=0C
5%s, in ?%g%st o! e8ery year a !e@ millions, generally in gold, pass !rom te Aank o! England
into domestic circ%lation to pay te ar8est expenses# since @ages are te principal payments to
be made ere, bank-notes are less ser8iceable in England !or tis p%rpose0 Ay te close o! te
year tis money as streamed back to te Aank0 &n $cotland, tere are almost noting b%t one-
po%nd notes instead o! so8ereigns# ere, ten, te note circ%lation is expanded in te
corresponding sit%ation, namely, t@ice a year I in May and -o8ember I !rom 3 million to 2
million# a!ter a !ortnigt te ret%rn !lo@ begins, and is almost completed in one mont0
B?nderson, ;0 70 1828N+>, -os0 3+*+-36==0C
5e note circ%lation o! te Aank o! England also experiences a momentary !l%ct%ation e8ery
tree monts beca%se o! te D%arter1y payment o! Kdi8idends,L tat is, interest on te national
debt, @ereby bank-notes are !irst @itdra@n !rom circ%lation and ten again released to te
p%blic# b%t tey !lo@ back 8ery soon again0 Weg%elin BA0 ?0 18+>, -o0 38C states tat tis
!l%ct%ation in te note circ%lation amo%nts to <Z0 Mr0 ;apman o! te notorio%s !irm o! 38erend,
:%rney g ;o0, o@e8er, estimates te amo%nt o! dist%rbance t%s created in te money-market as
being m%c iger0
KWen yo% abstract !rom te circ%lation V6,===,===
or V>,===,=== o! re8en%e in anticipation o! di8idends,
somebody m%st be te medi%m o! s%pplying tat in
te intermediate times0L BA0 ?0 18+>, -o0 +1*60C
Far more signi!icant and end%ring are te !l%ct%ations in D%antity o! circ%lating medi%m
corresponding to te 8ario%s pases o! te ind%strial cycle0 'et %s listen to anoter associe o! tat
!irm on tis D%estion, te esteemed M%aker $am%el :%rney B;0 70 1828N+>, -o0 <62+C:
K?t te end o! 3ctober B182>C te amo%nt o! bank-
notes in te ands o! te p%blic @as V<=,8==,===0 ?t
tat period tere @as great di!!ic%lty in getting
possession o! bank-notes in te money-market0 5is
arose !rom te alarm o! not being able to get tem in
conseD%ence o! te restriction o! te ?ct o! 18220 ?t
present /Marc 18281 te amo%nt o! bank-notes in te
ands o! te p%blic is 000 V1>,>==,===, b%t tere being
no@ no commercial alarm @atsoe8er, it is m%c
beyond @at is reD%ired0 5ere is no banking o%se or
money-dealer in 'ondon, b%t @at as a larger
amo%nt o! bank-notes tan tey can %se0L I K<6+=0
5e amo%nt o! bank-notes 000 o%t o! te c%stody o! te
Aank o! England a!!ords a totally ins%!!icient
exponent o! te acti8e state o! te circ%lation, @ito%t
36> ;apter JJJ&&&
taking into consideration like@ise 000 te state o! te
commercial @orld and te state o! credit0L I K<6+10
5e !eeling o! s%rpl%s tat @e a8e %nder te present
amo%nt o! circ%lation in te ands o! te p%blic arises
in a large degree !rom o%r present state o! great
stagnation0 &n a state o! ig prices and excitement o!
transaction V1>,>==,=== @o%ld gi8e %s a !eeling o!
restriction0L
/?s long as te state o! b%siness is s%c tat ret%rns o! loans made come in reg%larly and credit
t%s remains %nsaken, te expansion and contraction o! circ%lation depend simply %pon te
reD%irements o! ind%strialists and mercants0 $ince gold, at least in England, does not come into
D%estion in te @olesale trade and te circ%lation o! gold, aside !rom seasonal !l%ct%ations, may
be regarded as rater constant o8er a long period o! time, te note circ%lation o! te Aank o!
England constit%tes a s%!!iciently acc%rate meas%re o! tese canges0 &n te period o! stagnation
!ollo@ing a crisis, circ%lation is smallest# @it te rene@ed demand, a greater need !or circ%lating
medi%m de8elops, @ic increases @it rising prosperity# te D%antity o! circ%lating medi%m
reaces its apex in te period o! o8er-tension and o8er-spec%lation I te crisis precipito%sly
breaks o%t and o8ernigt bank-notes @ic yesterday @ere still so plenti!%l disappear !rom te
market and @it tem te disco%nters o! bills, lenders o! money on sec%rities, and b%yers o!
commodities0 5e Aank o! England is called %pon !or elp I b%t e8en its po@ers are soon
exa%sted, !or te Aank ?ct o! 1822 compels it to contract its note circ%lation at te 8ery moment
@en te @ole @orld cries o%t !or notes# @en o@ners o! commodities cannot sell, yet are called
%pon to pay and are prepared !or any sacri!ice, i! only tey can sec%re bank-notes0
K7%ring an alarm,L says te earlier mentioned banker
Wrigt Bloc. cit., -o0 <*3=C, Kte co%ntry reD%ires
t@ice as m%c circ%lation as in ordinary times,
beca%se te circ%lation is oarded by bankers and
oters0L
3nce te crisis as broken o%t, it becomes !rom ten on only a D%estion o! means o! payment0
A%t since e8ery one is dependent %pon someone else !or te receipt o! tese means o! payment,
and no one kno@s @eter te next one @ill be able to meet is payments @en d%e, a reg%lar
stampede ens%es !or tose means o! payment a8ailable on te market, tat is, !or bank-notes0
E8eryone oards as many o! tem as e can lay and on, and t%s te notes disappear !rom
circ%lation on te 8ery day @en tey are most needed0 $am%el :%rney B;0 70 1828N+>, -o0
1116C estimates te amo%nt o! bank notes bro%gt %nder lock and key in 3ctober 182>, at a time
o! s%c alarm, to a8e reaced V2 to V+ million0 I '.0.C
&n tis connection, te cross-examination o! ;apman, :%rney"s associate @o as been
pre8io%sly mentioned, be!ore te Aank ;ommittee o! 18+> is especially interesting0 & present ere
its principal contents in context, alto%g certain points are to%ced %pon @ic @e sall not
examine %ntil later0
Mr0 ;apman as te !ollo@ing to say:
K2*630 & a8e also no esitation in saying tat & do not
tink it is a proper condition o! tings tat te money-
368 ;apter JJJ&&&
market so%ld be %nder te po@er o! any indi8id%al
capitalist Bs%c as does exist in 'ondonC, to create a
tremendo%s scarcity and press%re, @en @e a8e a
8ery lo@ state o! circ%lation o%t0 5at is possible 000
tere is more tan one capitalist, @o can @itdra@
!rom te circ%lating medi%m V1,===,=== or
V<,===,=== o! notes, i! tey a8e an obHect to attain by
it0L I 2*6+0 /&n te :erman 18*2 edition tis reads:
2**+0 I0d. 1 ? big spec%lator can sell V1,===,=== or
V<,===,=== o! consols and t%s take te money o%t o!
te market0 $ometing similar to tis as appened
D%ite recently, Kit creates a 8ery 8iolent press%re0L
2*6>0 5e notes are ten indeed %nprod%cti8e0
KA%t tat is noting, i! it e!!ects is great obHect# is
great obHect is to knock do@n te !%nds, to create a
scarcity, and e as it per!ectly in is po@er to do so0L
?n ill%stration: 3ne morning tere @as a great demand !or money in te $tock Excange# nobody
kne@ its ca%se# somebody asked ;apman to lend im V+=,=== at >T0 ;apman @as astonised,
!or is rate o! interest @as m%c lo@er# e accepted0 $oon a!ter tat te man ret%rned, borro@ed
anoter V+=,=== at >ZT, ten V1==,=== at 8T, and @anted still more at 8ZT0 5en e8en
;apman became %neasy0 'ater it t%rned o%t tat a considerable s%m o! money ad been s%ddenly
@itdra@n !rom te market0 A%t, says ;apman,
K& did lend a large s%m at 8T# & @as a!raid to go
beyond# & did not kno@ @at @as coming0L
&t m%st ne8er be !orgotten tat, alto%g V1* to V<= million in notes are almost constantly
s%pposed to be in te ands o! te p%blic, ne8erteless, te portion o! tese notes @ic act%ally
circ%lates, and, on te oter and, te portion @ic is eld idle by te banks as a reser8e,
contin%ally and signi!icantly 8ary @it respect to eac oter0 &! tis reser8e is large, and tere!ore
te act%al circ%lation small, it means, !rom te point o! 8ie@ o! te money-market, tat te
circ%lation is !%ll, money is plenti!%l# i! te reser8e is small, and tere!ore te act%al circ%lation
!%ll, in te lang%age o! te money-market te circ%lation is lo@, money is scarce I in oter @ords,
te portion representing idle loan capital is small0 ? real expansion or contraction o! te
circ%lation, tat is independent o! te pases o! te ind%strial cycle I @it te amo%nt needed by
te p%blic, o@e8er, remaining te same I occ%rs only !or tecnical reasons, !or instance, on te
dates @en taxes or te interest on te national debt are d%e0 Wen taxes are paid, more notes and
gold tan %s%al !lo@ into te Aank o! England and, in e!!ect, contract te circ%lation @ito%t
regard to its needs0 5e re8erse takes place @en te di8idends on te national debt are paid o%t0
&n te !ormer case, loans are made !rom te Aank in order to obtain circ%lating medi%m0 &n te
latter case, te rate o! interest !alls in pri8ate banks beca%se o! te momentary gro@t o! teir
reser8es0 5is as noting to do @it te absol%te D%antity o! circ%lating medi%m# it does,
o@e8er, concern te banking !irm @ic sets tis circ%lating medi%m in motion and !or @ic
tis process consists in te alienation o! loan capital and !or @ic it pockets te pro!its tereby0
36* ;apter JJJ&&&
&n te one case, tere is merely a temporary displacement o! circ%lating medi%m, @ic te Aank
o! England balances by sort-term loans at lo@ interest sortly be!ore te D%arterly taxes and also
be!ore te D%arterly di8idends on te national debt become d%e# te iss%e o! tese s%pern%merary
notes !irst !ills %p te gap ca%sed by te payment o! taxes, @ile teir ret%rn payment to te Aank
soon terea!ter brings back te excess o! notes obtained by te p%blic tro%g te payment o!
di8idends0
&n te oter case, lo@ or !%ll circ%lation is al@ays simply a matter o! di!!erent distrib%tion o! te
same D%antity o! circ%lating medi%m into acti8e circ%lation and deposits, i.e., an instr%ment o!
loans0
3n te oter and, i!, !or example, te n%mber o! notes iss%ed is increased on te basis o! a !lo@
o! gold into te Aank o! England, tese notes assist in disco%nting bills o%tside o! te Aank and
ret%rn to it tro%g te repayment o! loans, so tat te absol%te D%antity o! circ%lating notes is
only momentarily increased0
&! te circ%lation is !%ll beca%se o! b%siness expansion B@ic may take place e8en to%g prices
are relati8ely lo@C, ten te rate o! interest can be relati8ely ig beca%se o! te demand !or loan
capital as a res%lt o! rising pro!its and increased ne@ in8estments0 &! it is lo@, beca%se o! b%siness
contraction, or peraps beca%se credit is 8ery plenti!%l, te rate o! interest can be lo@ e8en to%g
prices are ig0 B$ee 6%bbard0 ,resent edition: ;0 JJJ&&&0 I 0dC
5e absol%te amo%nt o! circ%lation as a determining in!l%ence on te rate o! interest only in
times o! stringency0 5e demand !or !%ll circ%lation can eiter re!lect merely a demand !or a
oarding medi%m Bdisregarding te red%ced 8elocity o! te money circ%lation and te contin%o%s
con8ersion o! te same identical pieces o! money into loan capitalC o@ing to lack o! credit, as @as
te case in 182> @en te s%spension o! te Aank ?ct did not ca%se any expansion o! te
circ%lation, b%t s%!!iced to dra@ !ort te oarded notes and to cannel tem into circ%lation# or it
may be tat more means o! circ%lation are act%ally reD%ired %nder te circ%mstances, as @as te
case in 18+> @en te circ%lation act%ally expanded !or some time a!ter te s%spension o! te
Aank ?ct0
3ter@ise, te absol%te D%antity o! circ%lation as no in!l%ence @ate8er %pon te rate o!
interest, since I ass%ming te economy and 8elocity o! c%rrency to be constant I it is determined
in te !irst place by commodity-prices and te D%antity o! transactions B@ereby one o! tese
generally ne%tralises te e!!ect o! te oterC, and !inally by te state o! credit, @ereas it by no
means exerts te re8erse e!!ect %pon te latter# and, secondly, since commodity-prices and
interest do not necessarily stand in any direct correlation to eac oter0
7%ring te li!e o! te Aank )estriction ?ct B1>*>-181*C a s%rpl%s o! c%rrency existed and te rate
o! interest @as al@ays m%c iger tan a!ter te res%mption o! cas payments0 'ater, it !ell
rapidly @it te restriction o! te note iss%e and rising bill D%otations0 &n 18<<, 18<3, and 183<,
te general circ%lation @as lo@, and so @as te rate o! interest0 &n 18<2, 18<+, and 1836, te
circ%lation @as !%ll and te rate o! interest rose0 &n te s%mmer o! 183= te circ%lation @as !%ll
and te rate o! interest lo@0 $ince te gold disco8eries, money circ%lation tro%go%t E%rope as
expanded, and te rate o! interest risen0 5ere!ore, te rate o! interest does not depend %pon te
D%antity o! circ%lating money0
5e di!!erence bet@een te iss%e o! circ%lating medi%m and te lending o! capital is best
demonstrated in te act%al reprod%ction process0 We a8e seen B4ol0 &&, ,art &&&C in @at manner
te di!!erent component parts o! prod%ction are excanged !or one anoter0 For example, 8ariable
capital consists materially o! te means o! s%bsistence o! te labo%rers, a portion o! teir o@n
prod%ct0 A%t tis is paid o%t to tem piecemeal in money0 5e capitalist as to ad8ance tis, and it
is 8ery greatly dependent on te credit system organisation @eter e can pay o%t te ne@
8ariable capital te !ollo@ing @eek @it te old money @ic e paid o%t in te pre8io%s @eek0
5e same olds !or excange among 8ario%s component parts o! te total social capital, !or
3>= ;apter JJJ&&&
instance, bet@een means o! cons%mption and means o! prod%ction o! means o! cons%mption0 5e
money !or teir circ%lation, as @e a8e seen, m%st be ad8anced by one or bot o! te excanging
parties0 &t remains tere%pon in circ%lation, b%t ret%rns a!ter te excange as been completed to
te one @o ad8anced it, since it ad been ad8anced by im o8er and abo8e is act%ally
employed ind%strial capital B4ol0 &&, ;0 JJC0 (nder a de8eloped system o! credit, @it te
money concentrated in te ands o! bankers, it is tey, at least nominally, @o ad8ance it0 5is
ad8ance re!ers only to money in circ%lation0 &t is an ad8ance o! circ%lation, not an ad8ance o!
capitals @ic it circ%lates0
;apman: K+=6<0 5ere may be times, @en te notes
in te ands o! te p%blic, to%g tey may be large,
are not to be ad0 Money also exists d%ring a panic#
b%t e8eryone takes good care not to con8ert it into
loanable capital, i.e., loanable money# e8eryone olds
on to it !or te p%rpose o! meeting real payment
needs0
K+=**0 5e co%ntry bankers in r%ral districts send %p
teir %nemployed balances to yo%rsel8es and oter
o%sesQ I .es0L I K+1==0 3n te oter and, te
'ancasire and .orksire districts reD%ire disco%nts
!rom yo% !or te %se o! teir tradesQ I .es0L I K+1=10
5en by tat means te s%rpl%s money o! one part o!
te co%ntry is made a8ailable !or te demands o!
anoter part o! te co%ntryQ I ,recisely so0L
;apman states tat te c%stom o! banks to in8est teir s%rpl%s money-capital !or sort periods in
consols and treas%ry notes as decreased considerably o! late, e8er since it as become c%stomary
to lend tis money at call, i.e., payable on demand0 6e personally considers te p%rcase o! s%c
paper !or is b%siness 8ery impractical0 6e, tere!ore, in8ests is money in reliable bills o!
excange, some o! @ic become d%e e8ery day, so tat e al@ays kno@s o@ m%c ready
money e can co%nt on !rom day to day0 /+1=1 to +1=+01
E8en te gro@t o! exports expresses itsel! more or less !or e8ery co%ntry, b%t partic%larly !or te
co%ntry granting credit, as an increasing demand on te domestic money-market, @ic is not
!elt, o@e8er, %ntil a period o! stringency0 Wen exports increase, Aritis man%!act%rers %s%ally
dra@ long-term bills o! excange on te export mercants against consignments o! Aritis goods
B+1<6C0
K+1<>0 &s it not !reD%ently te case tat an
%nderstanding exists tat tose bills are to be redra@n
!rom time to timeQ I /;apman:1 5at is a ting
@ic tey keep !rom %s# @e so%ld not admit any
bill o! tat sort0 000 & dare say it is done, b%t & cannot
speak to a ting o! te kind0L /5e innocent
3>1 ;apter JJJ&&&
;apman01 K+1<*0 &! tere is a large increase o! te
exports o! te co%ntry, as tere @as last year, o! V<=
million, @ill not tat nat%rally lead to a great demand
!or capital !or te disco%nt o! bills representing tose
exportsQ I -o do%bt0L I K+13=0 &nasm%c as tis
co%ntry gi8es credit, as a general r%le, to !oreign
co%ntries !or all exports, it @o%ld be an absorption o!
a corresponding increase o! capital !or te time beingQ
I 5is co%ntry gi8es an immense credit# b%t ten it
takes credit !or its ra@ material0 We are dra@n %pon
!rom ?merica al@ays at 6= days, and !rom oter parts
at *= days0 3n te oter and @e gi8e credit# i! @e
send goods to :ermany, @e gi8e t@o or tree
monts0L
Wilson inD%ires o! ;apman B+131C, @eter bills o! excange on England are not dra@n
sim%ltaneo%sly @it te loading o! tese imported ra@ materials and colonial goods and @eter
tese bills o! excange do not arri8e sim%ltaneo%sly @it te bills o! lading0 ;apman belie8es
so, b%t does not pro!ess to kno@ anyting abo%t s%c KcommercialL transactions and s%ggests tat
experts in tis !ield be D%estioned0 I &n exporting to ?merica, remarks ;apman, Kte goods are
symbolised in transitL +133# tis gibberis is s%pposed to mean tat te Englis export mercant
dra@s against is commodities bills o! excange @it a !o%r-mont term on one o! te big
?merican banking o%ses in 'ondon and tis !irm recei8es collateral !rom ?merica0
K+1360 ?s a general r%le, are not te more remote
transactions cond%cted by te mercant, @o @aits
!or is capital %ntil te goods are soldQ I 5ere may
be o%ses o! great pri8ate @ealt, @o can a!!ord to
lay o%t teir o@n capital and not take any ad8ance
%pon te goods# b%t te most part are con8erted into
ad8ances by te acceptances o! some @ell-kno@n
establised o%ses0L I K+13>0 5ose o%ses are
resident in 000 'ondon, or 'i8erpool, or else@ere0L I
K+1380 5ere!ore, it makes no di!!erence, @eter te
man%!act%rer lays o%t is money, or @eter e gets a
mercant in 'ondon or 'i8erpool to ad8ance it# it is
still an ad8ance in tis co%ntryQ I ,recisely0 5e
man%!act%rer in !e@ cases as anyting to do @it itL
/b%t in 182> in almost e8ery case10 K? man dealing in
man%!act%red goods, !or instance, at Mancester, @ill
3>< ;apter JJJ&&&
b%y is goods and sip tem tro%g a o%se o!
respectability in 'ondon# @en te 'ondon o%se is
satis!ied tat tey are all packed according to te
%nderstanding, e dra@s %pon tis 'ondon o%se !or
six monts against tese goods to &ndia or ;ina, or
@ere8er tey are going# ten te banking @orld
comes in and disco%nts tat bill !or im# so tat, by
te time e as to pay !or tose goods, e as te
money all ready by te disco%nt o! tat bill0L I K+13*0
?lto%g e as te money, te banker is laying o%t
o! is moneyQ I 5e ban-er has the billP the ban-er
has bought the billP e %ses is banking capital in tat
!orm, namely, in disco%nting commercial bills0L
/6ence e8en ;apman does not regard te disco%nting o! bills as an ad8ance o! money, b%t as a
p%rcase o! commodities0 I '.001
K+12=0 $till tat !orms part o! te demand %pon te
money-market in 'ondonQ I -o do%bt# it is a
s%bstantial occ%pation o! te money-market and o! te
Aank o! England0 5e Aank o! England are as glad to
get tese bills as @e are, beca%se tey kno@ tem to
be good property0L I K+1210 &n tat @ay, as te export
trade increases, te demand %pon te money-market
increases alsoQ I ?s te prosperity o! te co%ntry
increases, @eL /te ;apmans1 Kpartake o! it0L I
K+12<0 5en @en tese 8ario%s !ields !or te
employment o! capital increase s%ddenly, o! co%rse,
te nat%ral conseD%ence is tat te rate o! interest is
igerQ I -o do%bt abo%t it0L
&n +123 ;apman cannot KD%ite %nderstand, tat
%nder o%r large exports @e a8e ad s%c occasion !or
b%llion0L
&n +122 te esteemed Wilson asks:
KMay it not be tat @e gi8e larger credits %pon o%r
exports tan @e take credits %pon o%r importsQ I &
rater do%bt tat point mysel!0 &! a man accepts
against is Mancester goods sent to &ndia, yo%
3>3 ;apter JJJ&&&
cannot accept !or less tan ten monts0 We a8e ad
to pay ?merica !or er cotton Btat is per!ectly tr%eC
some time be!ore &ndia pays %s# b%t still it is rater
re!ined in its operation0L I K+12+0 &! @e a8e ad an
increase, as @e ad last year, o! V<= million in o%r
exports o! man%!act%res @e m%st a8e ad a 8ery
large increase o! imports o! ra@ material pre8io%sly to
tatL /and in tis @ay o8er-exports are already
identi!ied @it o8er-imports, and o8er-prod%ction
@it o8er-trading1, Kin order to make %p tat
increased D%antity o! goodsQ I -o do%bt0L I K+1260
We so%ld a8e to pay a 8ery considerable balance,
tat is to say, te balance, no do%bt, @o%ld r%n against
%s d%ring tat time, b%t in te long r%n, @it
?merica 000 te excanges are in o%r !a8o%r, and @e
a8e been recei8ing !or some time past large s%pplies
o! b%llion !rom ?merica0L
+1280 Wilson asks te arc-%s%rer ;apman, @eter e does not regard is ig rate o! interest
as a sign o! great prosperity and a ig rate o! pro!it0 ;apman, e8idently s%rprised at te nah8etF
o! tis sycopant, a!!irms tis, o! co%rse, b%t as eno%g integrity to add te !ollo@ing:
K5ere are some, @o cannot elp temsel8es# tey
a8e engagements to meet, and tey m%st !%l!il tem,
@eter it is pro!itable or not# b%t, !or a contin%anceL
/o! te ig rate o! interest1, Kit @o%ld indicate
prosperity0L
Aot !orget tat a ig rate o! interest can also indicate, as it did in 18+>, tat te co%ntry is
%ndermined by te ro8ing ca8aliers o! credit @o can a!!ord to pay a ig interest beca%se tey
pay it o%t o! oter people"s pockets B@ereby, o@e8er, tey elp to determine te rate o! interest
!or allC, and mean@ile tey li8e in grand style on anticipated pro!its0 $im%ltaneo%sly, precisely
tis can incidentally pro8ide a 8ery pro!itable b%siness !or man%!act%rers and oters0 )et%rns
become @olly decepti8e as a res%lt o! te loan system0 5is also explains te !ollo@ing, @ic
so%ld reD%ire no explanation so !ar as te Aank o! England is concerned, since it disco%nts at a
lo@er rate tan oters @en te interest rate is ig0
K+1+60 & so%ld say,L says ;apman, Ktat o%r
disco%nts, taking te present moment, @en @e a8e
ad !or so long a ig rate o! interest, are at teir
maxim%m0L
/;apman made tis statement on P%ly <1, 18+>, a co%ple o! monts be!ore te cras01
3>2 ;apter JJJ&&&
K+1+>0 &n 18+<L /@en te interest rate @as lo@1
Ktey @ere not nearly so large0L
For b%siness @as indeed a great deal so%nder ten0
K+1+*0 &! tere @as a great !lood o! money in te
market 000 and te bank-rate lo@, @e so%ld get a
decrease o! bills 000 &n 18+< tere @as a totally
di!!erent pase o! tings0 5e exports and imports o!
te co%ntry @ere as noting ten compared to te
present0L I K+1610 (nder tis ig rate o! disco%nt o%r
disco%nts are as large as tey @ere in 18+20L /Wen
te rate o! interest @as bet@een + and +ZT01
? 8ery am%sing part o! ;apman"s testimony re8eals o@ tese people really regard p%blic
money as teir o@n and ass%me !or temsel8es te rigt to constant con8ertibility o! te bills o!
excange disco%nted by tem0 5e D%estions and replies so@ great nah8etF0 &t becomes te
obligation o! legislation to make tose bills @ic are accepted by large !irms con8ertible at all
time# to ens%re tat te Aank o! England so%ld %nder all circ%mstances contin%e to redisco%nt
tem !or bill-brokers0 ?nd yet tree o! s%c bill-brokers @ent bankr%pt in 18+>, o@ing abo%t 8
million and teir o@n in!initesimally small capital compared @it tese debts0
K+1>>0 7o yo% mean by tat tat yo% tink tat teyL
/tat is bills accepted by Aarings or 'oyds1 Ko%gt to
be disco%ntable on comp%lsion, in te same @ay tat
a Aank o! England note is no@ excangeable against
gold by comp%lsionQ I & tink it @o%ld be a 8ery
lamentable ting, tat tey so%ld not be
disco%ntable# a most extraordinary position, tat a
man so%ld stop payment, @o ad te acceptances o!
$mit, ,ayne g ;o0, or Pones, 'oyd g ;o0 in is
ands, beca%se e co%ld not get tem disco%nted0L I
K+1>80 &s not te engagement o! Messrs0 Aaring an
engagement to pay a certain s%m o! money @en te
bill is d%eQ I 5at is per!ectly tr%e# b%t Messrs0
Aaring, @en tey contract tat engagement, and
e8ery oter mercant @o contracts an engagement,
ne8er dream tat tey are going to pay it in
so8ereigns# tey expect tat tey are going to pay it at
te ;learing 6o%se0L I K+18=0 7o yo% tink tat tere
so%ld be any macinery contri8ed by @ic te
3>+ ;apter JJJ&&&
p%blic @o%ld a8e a rigt to claim money be!ore tat
bill @as d%e by calling %pon somebody to disco%nt itQ
I -o, not !rom te acceptor# b%t i! yo% mean by tat
tat @e are not to a8e te possibility o! getting
commercial bills disco%nted, @e m%st alter te @ole
constit%tion o! tings0L I K+18<0 5en yo% tink tat
itL /commercial bill1 Ko%gt to be con8ertible into
money, exactly in te same @ay tat a Aank o!
England note o%gt to be con8ertible into goldQ I
Most decidedly so, %nder certain circ%mstances0L I
K+1820 5en yo% tink tat te pro8isions o! te
c%rrency so%ld be so saped tat a bill o! excange
o! %ndo%bted caracter o%gt at all times to be as
readily excangeable against money as a bank-noteQ I
& do0L I K+18+0 .o% do not mean to say tat eiter te
Aank o! England or any indi8id%al so%ld, by la@, be
compelled to excange itQ I & mean to say tis, tat in
!raming a bill !or te c%rrency, @e so%ld make
pro8ision to pre8ent te possibility o! an
incon8ertibility o! te bills o! excange o! te co%ntry
arising, ass%ming tem to be %ndo%btedly solid and
legitimate0L
5is is te con8ertibility o! te commercial bill as compared @it te con8ertibility o! bank-
notes0
K+1*=0 5e money-dealers o! te co%ntry only, in
point o! !act, represent te p%blic0L
?s did Mr0 ;apman later be!ore te co%rt o! assiEes in te 7a8idson case0 $ee te Great City
'rauds. /$0 'aing, $ew Series of the Great City 'rauds of Cole, Davison, and Cordon, 'ondon0 I
0d01
K+1*60 7%ring te D%artersL /@en te di8idends are
paid1 Kit is 000 absol%tely necessary tat @e so%ld go
to te Aank o! England0 Wen yo% abstract !rom te
circ%lation V6,===,=== or V>,===,=== o! re8en%e in
anticipation o! te di8idends, somebody m%st be te
medi%m o! s%pplying tat in te intermediate time0L
/&n tis case it is ten a D%estion o! a s%pply o! money, not o! capital or loan capital01
3>6 ;apter JJJ&&&
K+16*0 E8erybody acD%ainted @it o%r commercial
circle m%st kno@ tat @en @e are in s%c a state tat
@e !ind it impossible to sell ExceD%er bills, @en
&ndia bonds are per!ectly %seless, @en yo% cannot
disco%nt te !irst commercial bills, tere m%st be great
anxiety on te part o! tose @ose b%siness renders
tem liable to pay te circ%lating medi%m o! te realm
on demand, @ic is te case @it all bankers0 5en
te e!!ect o! tat is to make e8ery man do%ble is
reser8e0 P%st see @at te res%lt o! tat is tro%go%t
te co%ntry, tat e8ery co%ntry banker, o! @om tere
are abo%t +==, as to send %p to is 'ondon
correspondent to remit im V+,=== in bank-notes0
5aking s%c a limited s%m as tat as te a8erage,
@ic is D%ite abs%rd, yo% come to V<,+==,=== taken
o%t o! te circ%lation0 6o@ is tat to be s%ppliedQL
3n te oter and, te pri8ate capitalists, etc0, @o a8e money do not let go o! it at any interest,
!or tey say a!ter te manner o! ;apman,
K+1*+0 We @o%ld rater a8e no interest at all, tan
a8e a do%bt abo%t o%r getting te money in case @e
reD%ire it0L
K+1>30 3%r system is tis: 5at @e a8e V3==,===,===
o! liabilities @ic may be called !or at a single
moment to be paid in te coin o! te realm, and tat
coin o! te realm, i! te @ole o! it is s%bstit%ted,
amo%nts to V<3,===,===, or @ate8er it may be# is not
tat a state @ic may tro@ %s into con8%lsions at
any momentQL
6ence te s%dden cange o! te credit system into a monetary system d%ring crises0
?side !rom te domestic panic d%ring crises, one can speak o! te D%antity o! money only in so
!ar as it concerns b%llion, %ni8ersal money0 ?nd tis is precisely @at ;apman excl%des# e
speaks only o! <3 million in ban-1notes.
5e same ;apman:
K+<180 5e primary ca%se o! te derangement o! te
money-marketL /in ?pril and later in 3ctober 182>1
Kno do%bt @as in te D%antity o! money @ic @as
3>> ;apter JJJ&&&
reD%ired to reg%late o%r excanges, in conseD%ence o!
te extraordinary importations o! te year0L
&n te !irst place, tis reser8e o! @orld-market money ad ten been red%ced to its minim%m0
$econdly, it ser8ed at te same time as sec%rity !or te con8ertibility o! credit-money, bank-notes0
&t combined in tis manner t@o D%ite di!!erent !%nctions, bot o! @ic, o@e8er, stem !rom te
nat%re o! money, since real money is al@ays @orld-market money, and credit-money al@ays rests
%pon @orld-market money0
&n 182>, @ito%t te s%spension o! te Aank ?ct o! 1822,
Kte clearing o%ses co%ld not a8e been settled0L
B+<<10C
5at ;apman ad an inkling o! te imminent crisis, a!ter all:
K+<360 5ere are certain conditions o! te money-
market Band te present is not 8ery !ar !rom itC, @ere
money is exceedingly di!!ic%lt, and reco%rse m%st e
ad to te Aank0L
K+<3*0 Wit re!erence to te s%ms @ic @e took
!rom te Aank on te Friday, $at%rday and Monday,
te 1*t, <=t, and <<nd o! 3ctober, 182>, @e so%ld
only a8e been too tank!%l to a8e got te bills back
on te Wednesday !ollo@ing# te money re!lo@ed to
%s directly te panic @as o8er0L
3n 5%esday, 3ctober <3, te Aank ?ct @as s%spended and te crisis @as t%s broken0
;apman belie8es B+<>2C tat te bills o! excange r%nning sim%ltaneo%sly on 'ondon amo%nt to
V1== or V1<= million0 5is does not incl%de local bills made on pro8incial !irms0
K+<8>0 Wereas in 3ctober 18+6, te amo%nt o! te
notes in te ands o! te p%blic ran %p to V<1,1++,===,
tere @as an extraordinary di!!ic%lty in obtaining
money# not@itstanding tat te p%blic eld so m%c,
@e co%ld not to%c it0L
5is @as d%e to te !ear ca%sed by te sD%eeEe in @ic te Eastern Aank !o%nd itsel! !or a period
o! time BMarc 18+6C0
+<*=-*<0 ?s soon as te panic is o8er,
Kall bankers deri8ing teir pro!it !rom interest begin
to employ te money immediately0L
+3=<0 ;apman does not explain te %neasiness tat exists @en te bank reser8e decreases as
being d%e to appreension concerning deposits, b%t rater tat all tose @o s%ddenly may be
compelled to pay large s%ms o! money are @ell a@are tey may be dri8en to seek teir last re!%ge
in te bank @en tere is a stringency in te money-market# and
3>8 ;apter JJJ&&&
Ki! te banks a8e a 8ery small reser8e, tey are not
glad to recei8e %s# b%t on te contrary0L
&t is pretty, incidentally, to obser8e o@ te reser8e as a real magnit%de d@indles a@ay0 Aankers
old a minim%m !or c%rrent b%siness needs eiter in teir o@n ands or te Aank o! England0
Aill-brokers old te Kloose bank money o! te co%ntryL @ito%t any reser8e0 ?nd te Aank o!
England as noting to o!!set its liabilities !or deposits b%t te reser8es o! bankers and oters,
togeter @it some p%blic deposits, etc0, @ic it permits to drop to a 8ery lo@ le8el, !or instance,
to V< million0 ?side !rom tese V< million in paper, ten, tis @ole s@indle as absol%tely no
oter reser8e b%t te b%llion reser8e in times o! stringency Band tis red%ces te reser8e, beca%se
te notes @ic come in to replace o%tgoing b%llion m%st be cancelledC, and t%s e8ery red%ction
o! tis reser8e by drain on gold increases te crisis0
K+3=60 &! tere so%ld not be c%rrency to settle te
transactions at te clearing o%se, te only next
alternati8e @ic & can see is to meet togeter, and to
make o%r payments in !irst-class bills, bills %pon te
5reas%ry, and Messrs0 $mit, ,ayne, and so !ort0L I
K+3=>0 5en, i! te go8ernment !ailed to s%pply yo%
@it a circ%lating medi%m, yo% @o%ld create one !or
yo%rsel8esQ I Wat can @e doQ 5e p%blic come in,
and take te circ%lating medi%m o%t o! o%r ands# it
does not exist0L I K+3=80 .o% @o%ld only ten do in
'ondon @at tey do in Mancester e8ery day o! te
@eekQ I .es0L
,artic%larly cle8er is ;apman"s reply to a D%estion posed by ;ayley Ba Airmingam man o! te
?tt@ood scoolC regarding 38erstone"s conception o! capital:
K+31+0 &t as been stated be!ore tis ;ommittee, tat
in a press%re like tat o! 182>, men are not looking
!or money, b%t are looking !or capital# @at is yo%r
opinion in tat respectQ I & do not %nderstand it# @e
only deal in money# & do not %nderstand @at yo%
mean by it0L I K+3160 &! yo% mean terebyL
/commercial capital1 Kte D%antity o! money @ic a
man as o! is o@n in is b%siness, i! yo% call tat
capital, it !orms, in most cases, a 8ery small
proportion o! te money @ic e @ields in is a!!airs
tro%g te credit @ic is gi8en im by te p%blicL I
tro%g te mediation o! te ;apmans0
3>* ;apter JJJ&&&
K+33*0 &s it te @ant o! property tat makes %s gi8e %p
o%r specie paymentsQ I -ot at all0000 &t is not tat @e
@ant property, b%t it is tat @e are mo8ing %nder a
igly arti!icial system# and i! @e a8e an immense
s%perinc%mbent demand %pon o%r c%rrency,
circ%mstances may arise to pre8ent o%r obtaining tat
c%rrency0 &s te @ole commercial ind%stry o! te
co%ntry to be paralysedQ $all @e s%t %p all te
a8en%es o! employmentQL I K+3380 &! te D%estion
so%ld arise @eter @e so%ld maintain specie
payments, or @eter @e so%ld maintain te ind%stry
o! te co%ntry, & a8e no esitation in saying @ic &
so%ld drop0L
;oncerning te oarding o! bank-notes K@it a 8ie@ to aggra8ate te press%re and to take
ad8antage o! te conseD%encesL e says tat tis can 8ery easily occ%r0 5ree large banks @o%ld
be s%!!icient0
K+3830 M%st it not be @itin yo%r kno@ledge, as a
man con8ersant @it te great transactions o! tis
metropolis, tat capitalists do a8ail temsel8es o!
tese crises to make enormo%s pro!it o%t o! te r%in o!
te people @o !all 8ictims to temQ I 5ere can be
no do%bt abo%t it0L
?nd @e may @ell belie8e Mr0 ;apman on tis score, alto%g e !inally broke is o@n neck,
commercially speaking, in an attempt at making Kenormo%s pro!it o%t o! te r%in o! 8ictims0L For
@ile is associate :%rney says: E8ery cange in b%siness is ad8antageo%s !or one @o is @ell
in!ormed, ;apman says:
K5e one section o! te comm%nity kno@s noting o!
te oter# one is te man%!act%rer, !or instance# @o
exports to te continent, or imports is ra@
commodity# e kno@s noting o! te man @o deals
in b%llion0L B+=260C
?nd t%s it appened tat one !ine day :%rney and ;apman temsel8es K@ere not @ell
in!ormedL and @ent into ill-!amed bankr%ptcy0
We a8e pre8io%sly seen tat note iss%e does not in all cases signi!y an ad8ance o! capital0 5e
!ollo@ing testimony by 5ooke be!ore te ;0 70 ;ommittee o! 'ords, 1828, indicates merely tat
an ad8ance o! capital, e8en i! accomplised by te bank tro%g an iss%e o! ne@ notes, does not
%nD%ali!iedly signi!y an increase in te n%mber o! circ%lating notes:
38= ;apter JJJ&&&
K3=**0 7o yo% tink tat te Aank o! England !or
instance migt enlarge its ad8ances greatly, and yet
lead to no additional iss%e o! notesQ I 5ere are !acts
in ab%ndance to pro8e it# one o! te most striking
instances @as in 183+, @en te Aank made %se o! te
West &ndia deposits and o! te loan !rom te East
&ndia ;ompany in extended ad8ances to te p%blic0 ?t
tat time te amo%nt o! notes in te ands o! te
p%blic @as act%ally rater diminised0 ?nd someting
like te same discrepancy is obser8able in 1826 at te
time o! te payment o! te rail@ay deposits into te
Aank# te sec%rities /in disco%nt and deposits1 @ere
increased to abo%t tirty million, @ile tere @as no
perceptible e!!ect %pon te amo%nt o! notes in te
ands o! te p%blic0L
?side !rom bank-notes, @olesale trade as anoter medi%m o! circ%lation, @ic is !ar more
important to it, namely, bills o! excange0 Mr0 ;apman so@ed %s o@ essential it is !or te
reg%lar !lo@ o! b%siness tat good ills o! excange be accepted in payment e8ery@ere and
%nder all conditions0
TGilt nicht mehr der 4ausves Jontof, was soll gelten,
%eter, %eterR/ /K&! te 5a%s8es-Ponto!"s noting, Wat
is le!tQ 3 8ile detractorSL I 6eine, Disputation. I Ed01
6o@ are tese t@o media o! circ%lation related to one anoterQ
:ilbart @rites on tis score:
K5e red%ction o! te amo%nt o! te note circ%lation
%ni!ormly increases te amo%nt o! te bill circ%lation0
5ese bills are o! t@o classes I commercial bills and
bankers" bills 000 @en money becomes scarce, te
money-lenders say, "dra@ %pon %s and @e @ill accept"0
?nd @en a co%ntry banker disco%nts a bill !or is
c%stomer, instead o! gi8ing im te cas, e @ill gi8e
im is o@n dra!t at t@enty-one days %pon is
'ondon agent0 5ese bills ser8e te p%rpose o! a
c%rrency0L BP0 W0 :ilbart, +n Dn3uiry into the Causes
of the &ressure, etc., p0 310C
5is is corroborated in some@at modi!ied !orm by -e@marc, A0 ?0 18+>, -o0 12<6:
381 ;apter JJJ&&&
K5ere is no connection bet@een te 8ariations in te
amo%nt o! bill circ%lation and te 8ariations in te
bank-note circ%lation 000 te only pretty %ni!orm res%lt
is 000tat @ene8er tere is any press%re %pon te
money-market, as indicated by a rise in te rate o!
disco%nt, ten te 8ol%me o! te bill circ%lation is
8ery m%c increased, and 8ice 8ersa0L
6o@e8er, te bills o! excange dra@n at s%c times are by no means only te sort-term bank-
bills mentioned by :ilbart0 3n te contrary, tey are largely bills o! accommodation, @ic
represent no real transaction at all, or simply transactions made !or te sole p%rpose o! dra@ing
bills o! excange on tem# @e a8e presented s%!!icient ill%strations o! bot0 6ence te
0conomist BWilsonC says in comparing te sec%rity o! s%c bills @it tat o! bank-notes:
K-otes payable on demand can ne8er be kept o%t in
excess, beca%se te excess @o%ld al@ays ret%rn to te
bank !or payment, @ile bills at t@o monts may be
iss%ed in great excess, tere being no means o!
cecking te iss%e till tey a8e arri8ed at mat%rity,
@en tey may a8e been replaced by oters0 For a
people to admit te sa!ety o! te circ%lation o! bills
payable only on a distant day, and to obHect to te
sa!ety o! a circ%lation o! paper payable on demand, is,
to %s, per!ectly %nacco%ntable0L )0conomist, May <<,
182>, p0 +>+0C
5e D%antity o! circ%lating bills o! excange, tere!ore, like tat o! bank-notes, is determined
solely by te reD%irements o! commerce# in ordinary times, tere circ%lated in te !i!ties in te
(nited Kingdom, in addition to 3* million in bank-notes, abo%t 3== million in bills o! excange I
o! @ic 1==-1<= million @ere made o%t on 'ondon alone0 5e 8ol%me o! circ%lating bills o!
excange as no in!l%ence on note circ%lation and is in!l%enced by te latter only in times o!
money tigtness, @en te D%antity o! ills increases and teir D%ality deteriorates0 Finally, in a
period o! crisis, te circ%lation o! bills collapses completely# nobody can make %se o! a promise
to pay since e8eryone @ill accept only cas payment# only te bank-note retains, at least t%s !ar
in England, its ability to circ%late, beca%se te nation @it its total @ealt backs %p te Aank o!
England0
We a8e seen tat e8en Mr0 ;apman, @o a!ter all @as imsel! a magnate on te money-market
in 18+>, complains bitterly tat tere @ere se8eral large money-capitalists in 'ondon strong
eno%g to disr%pt te @ole money-market at any gi8en moment and tereby bleed @ite te
smaller money-dealers0 5ere @ere se8eral s%c money sarks, e said, @o co%ld considerably
intensi!y a stringency by selling one or t@o million"s @ort o! consols and tereby @itdra@ing
an eD%al amo%nt o! bank-notes Band sim%ltaneo%sly a8ailable loan capitalC !rom te market0 5e
Hoint action o! tree large banks @o%ld s%!!ice to trans!orm a stringency into a panic by a similar
manoe%8re0
38< ;apter JJJ&&&
5e largest capital po@er in 'ondon is, o! co%rse, te Aank o! England, @ic, o@e8er, is
pre8ented by its stat%s as a semi-go8ernment instit%tion !rom so@ing its domination in s%c a
br%tal manner0 -e8erteless it also kno@s eno%g abo%t @ays and means o! !eatering its nest,
partic%larly since te Aank ?ct o! 18220
5e Aank o! England as a capital o! V12,++3,===, and in addition as at its disposal abo%t V3
million Kbalance,L tat is, %ndistrib%ted pro!its, as @ell as all money collected by te go8ernment
!or taxes, etc0, @ic m%st be deposited @it te Aank %ntil it is needed0 &! @e add to tis te s%m
o! oter deposits, abo%t V3= million in ordinary times, and te bank-notes iss%ed @ito%t reser8e
backing, @e sall !ind tat -e@marc made a rater conser8ati8e estimate in stating BA0 ?0 18+>,
-o0 288*C:
K& satis!ied mysel! tat te amo%nt o! !%nds constantly
employed in te /'ondon1 money-market may be
described as someting like V2<=,===,===# and o! tat
V1<=,===,=== a 8ery considerable proportion,
someting like 1+ or <= per cent, is @ielded by te
Aank o! England0L
&n so !ar as te Aank iss%es notes @ic are not co8ered by te b%llion reser8e in its 8a%lts, it
creates symbols o! 8al%e tat constit%te !or it not only circ%lating medi%m, b%t also additional I
e8en i! !ictitio%s I capital to te nominal amo%nt o! tese %nbacked notes0 ?nd tis additional
capital yields additional pro!it0 I &n A0 ?0 18+>, Wilson D%estions -e@marc:
K1+630 5e circ%lation o! a banker, so !ar as it is kept
o%t %pon te a8erage, is an addition to te e!!ecti8e
capital o! tat banker, is it notQ I ;ertainly0L I K1+620
5en @ate8er pro!it e deri8es !rom tat circ%lation
is a pro!it deri8ed !rom credit, and not !rom a capital
@ic e act%ally possessesQ I ;ertainly0L
5e same is tr%e, o! co%rse, !or pri8ate banks iss%ing notes0 &n is replies -os0 1866 to 1868,
-e@marc considers t@o-tirds o! all bank-notes iss%ed by tem Bte last tird as to be co8ered
by b%llion reser8e in tese banksC as Kte creation o! so m%c capitalL, beca%se tis amo%nt o!
coin is sa8ed0 5e pro!it o! te banker as a res%lt o! tis may not be larger tan tat o! oter
capitalists0 5e !act remains tat e dra@s te pro!it o%t o! tis national sa8ing o! coin0 5e !act
tat a national sa8ing becomes a pri8ate pro!it does not sock te bo%rgeois economist in te
least, since pro!it is generally te appropriation o! national labo%r0 &s tere anyting more abs%rd,
!or instance, tan te Aank o! England B1>*> to 181>C I @ose notes a8e credit only tanks to
te state I taking payment !rom te state, i.e., !rom te p%blic, in te !orm o! interest on
go8ernment loans, !or te po@er granted it by te state to trans!orm tese same notes !rom paper
into money and ten to lend it back to te stateQ
5e banks, incidentally, a8e still oter means o! creating capital0 ?gain according to -e@marc,
te co%ntry banks, as mentioned abo8e, are acc%stomed to send teir s%per!l%o%s !%nds Btat is,
Aank o! England notesC to 'ondon bill-brokers, in ret%rn !or disco%nted bills o! excange0 Wit
tese bills o! excange, te bank ser8es its c%stomers, since it !ollo@s a r%le not to reiss%e bills o!
excange recei8ed !rom its local c%stomers, in order to pre8ent teir b%siness transactions !rom
becoming kno@n in teir o@n neigbo%rood0 5ese bills recei8ed !rom 'ondon not only ser8e
te p%rpose o! being iss%ed to c%stomers @o a8e to make direct payments in 'ondon, in te
383 ;apter JJJ&&&
e8ent tey do not pre!er to get te bank"s o@n dra!t on 'ondon# tey also ser8e to settle payments
locally, since te banker"s endorsement sec%res local credit !or tem0 5%s, in 'ancasire, !or
instance, all te local banks" o@n notes and a large portion o! Aank o! England notes a8e been
p%sed o%t o! circ%lation by s%c bills0 BDbid.,1+68 to 1+>20C
5%s @e see ere o@ banks create credit and capital by 1C iss%ing teir o@n notes, <C @riting o%t
dra!ts on 'ondon r%nning %p to <1 days, b%t paid in cas to tem immediately on iss%e and 3C
paying o%t disco%nted bills o! excange, @ic are endo@ed @it credit primarily and essentially
by endorsement tro%g te bank I at least as !ar as concerns te local district0
5e po@er o! te Aank o! England is re8ealed by its reg%lation o! te market rate o! interest0 &n
times o! normal acti8ity, it may appen tat te Aank cannot pre8ent a moderate drain o! gold
!rom its b%llion reser8e by raising te disco%nt rate
xxii
beca%se te demand !or means o! payment
is satis!ied by pri8ate banks, stock banks and bill-brokers, @o a8e gained considerably in
capital po@er d%ring te last tirty years0 &n s%c case, te Aank o! England m%st a8e reco%rse
to oter means0 A%t te statement made by banker :lyn Bo! :lyn, Mills, ;%rrie g ;o0C be!ore te
;0 70 1828N+> still olds good !or critical periods:
K1>=*0 (nder circ%mstances o! great press%re %pon
te co%ntry te Aank o! England commands te rate
o! interest0L I K1>2=0 &n times o! extraordinary
press%re 000 @ene8er te disco%nts o! te pri8ate
bankers or brokers become comparati8ely limited,
tey !all %pon te Aank o! England, and ten it is tat
te Aank o! England as te po@er o! commanding
te market rate0L
-e8erteless, te Aank o! England, being a p%blic instit%tion %nder go8ernment protection and
enHoying corresponding pri8ileges, cannot exploit its po@er as r%tlessly as does pri8ate b%siness0
For tis reason 6%bbard remarks be!ore te Aanking ;ommittee BA0 ?0 18+>C:
K<8220 /M%estion:1 &s not it te case tat @en te rate
o! disco%nt is igest, te Aank is te ceapest place
to go, and tat @en it is te lo@est, te bill-brokers
are te ceapest partiesQ I /6%bbard:1 5at @ill
al@ays be te case, beca%se te Aank o! England
ne8er goes D%ite so lo@ as its competitors, and @en
te rate is igest, it is ne8er D%ite as ig0L
A%t it is a serio%s e8ent in b%siness li!e ne8erteless @en, in time o! stringency, te Aank o!
England p%ts on te scre@, as te saying goes, tat is, @en it raises still iger te interest rate
@ic is already abo8e a8erage0
K?s soon as te Aank p%ts on te scre@, all p%rcases
!or !oreign exportation immediately cease 000 te
exporters @ait %ntil prices a8e reaced te lo@est
point o! depression# and ten, and not till ten, tey
make teir p%rcases0 A%t @en tis point as arri8ed,
382 ;apter JJJ&&&
te excanges a8e been recti!ied I gold ceases to be
exported be!ore te lo@est point o! depression as
arri8ed0 ,%rcases o! goods !or exportation may a8e
te e!!ect o! bringing back some o! te gold @ic as
been sent abroad, b%t tey come too late to pre8ent
te drain0L BP0 W0 :ilbart, +n Dn3uiry into the Causes
of the &ressure on the Money1Mar-et, 'ondon, 182=,
p0 3+0C K?noter e!!ect o! reg%lating te c%rrency by
te !oreign excanges is tat it leads in seasons o!
press%re to an enormo%s rate o! interest0L B,oc. cit., p0
2=0C K5e cost o! recti!ying te excanges !alls %pon
te prod%cti8e ind%stry o! te co%ntry, @ile d%ring
te process te pro!its o! te Aank o! England are
act%ally a%gmented in conseD%ence o! carrying on er
b%siness @it a less amo%nt o! treas%re0L B,oc. cit., p0
+<0C
A%t, says !riend $am%el :%rney,
K5e great !l%ct%ations in te rate o! interest are
ad8antageo%s to bankers and dealers in money I all
!l%ct%ations in trade are ad8antageo%s to te kno@ing
man0L
?nd e8en to%g te :%rneys skim o!! te cream by r%tlessly exploiting te precario%s state o!
b%siness, @ereas te Aank o! England cannot do so @it te same liberty, ne8erteless it also
makes a 8ery pretty pro!it I not to mention te personal pro!its !alling into te laps o! its
directors, as a res%lt o! teir exceptional opport%nity !or ascertaining te general state o! b%siness0
?ccording to data s%bmitted to te 'ords" ;ommittee o! 181> @en cas payments @ere res%med,
tese pro!its accr%ing to te Aank o! England !or te entire period !rom 1>*> to 181> @ere as
!ollo@s:
Aon%ses and increased
di8idends
>,2+1,136
-e@ stock di8ided among
proprietors
>,<>6,+==
&ncreased 8al%e o! capital 12,++3,===
5otal <*,<8=,636
5is, on a capital o! V11,62<,2== o8er a period o! 1* years0 B70 6ardcastle, Gan-s and Gan-ers,
<nd ed0, 'ondon, 1823, p0 1<=0C &! @e estimate te total gain o! te Aank o! &reland, @ic also
s%spended cas payments in 1>*>, by te same metod, @e obtain te !ollo@ing res%lt:
7i8idends as by ret%rns 2,>36,=8+
38+ ;apter JJJ&&&
d%e 18<1
7eclared bon%s 1,<<+,===
&ncreased assets 1,<12,8==
&ncreased 8al%e o! capital 2,18+,===
5otal 11,36=,88+
5is, on a capital o! V3 million0 BDbid., pp0 363-620C
5alk abo%t centralisationS 5e credit system, @ic as its !oc%s in te so-called national banks
and te big money-lenders and %s%rers s%rro%nding tem, constit%tes enormo%s centralisation,
and gi8es to tis class o! parasites te !ab%lo%s po@er, not only to periodically despoil ind%strial
capitalists, b%t also to inter!ere in act%al prod%ction in a most dangero%s manner I and tis gang
kno@s noting abo%t prod%ction and as noting to do @it it0 5e ?cts o! 1822 and 182+ are
proo! o! te gro@ing po@er o! tese bandits, @o are a%gmented by !inanciers and stock-Hobbers0
$o%ld anyone still do%bt tat tese esteemed bandits exploit te national and @orld prod%ction
solely in te interests o! prod%ction and te exploited temsel8es, e @ill s%rely learn better !rom
te !ollo@ing omily on te ig moral @ort o! bankers:
KAanking establisments are 000 moral and religio%s
&nstit%tions0000 6o@ o!ten as te !ear o! being seen by
te @atc!%l and repro8ing eye o! is banker deterred
te yo%ng tradesman !rom Hoining te company o!
rioto%s and extra8agant !riendsQ 000 Wat as been is
anxiety to stand @ell in te estimation o! is
bankerQ 000 6as not te !ro@n o! is banker been o!
more in!l%ence @it im tan te Heers and
disco%ragements o! is !riendsQ 6as e not trembled
to be s%pposed g%ilty o! deceit or te sligtest
misstatement, lest it so%ld gi8e rise to s%spicion, and
is accommodation be in conseD%ence restricted or
discontin%edQ 000 ?nd as not tat !riendly ad8ice been
o! more 8al%e to im tan tat o! priestQL B:0 M0 Aell,
a $cottis bank director, in 4he &hilosophy of Joint
Stoc- Gan-ing, 'ondon, 182=, pp0 26, 2>0C
Chapter 34. The Currency Principle and the
English Bank Legislation of 1844
/&n a !ormer @ork, )icardo"s teory on te 8al%e o! money as related to commodity-prices as
been analysed# @e can, tere!ore, con!ine o%rsel8es ere to te indispensable0 ?ccording to
)icardo, te 8al%e o! metallic money is determined by te labo%r-time incorporated in it, b%t only
as long as te D%antity o! money stands in correct relationsip to te amo%nt and price o!
commodities to be excanged0 &! te D%antity o! money rises abo8e tis ratio, its 8al%e !alls and
commodity-prices rise# i! it !ails belo@ te correct ratio, its 8al%e rises and commodity-prices !all
I ass%ming all oter conditions eD%al0 &n te !irst case, te co%ntry in @ic tis excess gold
exists @ill export te gold @ose 8al%e as depreciated and import commodities# in te second
case, gold @ill !lo@ to tose co%ntries in @ic it is assessed abo8e its 8al%e, @ile te %nder-
assessed commodities !lo@ !rom tese co%ntries to oter markets, @ere tey command normal
prices0 $ince %nder tese circ%mstances Kgold itsel! may become, eiter as coin or b%llion, a
token o! metallic 8al%e o! greater or smaller magnit%de tan its o@n 8al%e, it is sel!-e8ident tat
con8ertible bank-notes in circ%lation m%st sare te same !ate0 ?lto%g bank-notes are
con8ertible, and tere!ore teir real 8al%e corresponds to teir nominal 8al%e, te aggregate
c%rrency consisting o! metal and o! con8ertible notes may appreciate or depreciate in accordance
@it its aggregate D%antity, !or reasons already stated, rising abo8e or !alling belo@ te le8el
determined by te excange-8al%e o! circ%lating commodities and te metallic 8al%e o! gold0000
5is depreciation, not o! paper as compared @it gold, b%t o! gold and paper taken togeter, or o!
te aggregate c%rrency o! a co%ntry, is one o! )icardo"s principal disco8eries @ic 'ord
38erstone and ;o0 pressed into teir ser8ice and made a !%ndamental principle o! $ir )obert
,eel"s bank legislation o! 1822 and 182+0L B%ur Hriti- der &olitischen U-onomie, p01++0C
We need not ere repeat a demonstration o! te incorrectness o! tis )icardian teory @ic is
gi8en in te cited @ork0 We are merely interested in te @ay )icardo"s teses @ere elaborated by
tat scool o! bank teorists @o dictated ,eel"s abo8e-mentioned Aank ?cts0
K5e commercial crises o! te 1*t cent%ry, especially te great crises o! 18<+ and 1836, did not
res%lt in any ne@ de8elopments in te )icardian teory o! money, b%t tey did !%rnis ne@
applications !or it0 5ese @ere no longer isolated economic penomena, s%c as te depreciation
o! precio%s metals in te 16t and 1>t cent%ries according to 6%me, or te depreciation o! paper
money in te 18t and early 1*t cent%ries according to )icardo# tese @ere instead te 8iolent
storms in te @orld-market @erein te con!lict o! all elements o! te capitalist prod%ction
process discarges itsel!, and @ose origin and c%re @ere so%gt in te most s%per!icial and
abstract spere o! tis process, te spere o! money circ%lation0 5e act%al teoretical ass%mption
!rom @ic te scool o! economic @eater propets proceeds, is act%ally red%ced to te dogma
tat )icardo disco8ered te la@s go8erning te p%rely metallic c%rrency0 5e only ting
remaining !or tem to do @as to s%bordinate credit and bank-note circ%lation to tese la@s0
K5e most general and palpable penomenon in commercial crises is te s%dden general decline
in prices !ollo@ing a prolonged o8erall rise0 5e general decline in commodity-prices may be
expressed as a rise in te relati8e 8al%e o! money @it respect to all commodities, and te general
price rise as a decline in te relati8e 8al%e o! money0 &n eiter expression te penomenon is
described b%t not explained0000 5e di!!erent @ording lea8es te problem as little canged as
@o%ld its translation !rom :erman into Englis0 )icardo"s teory o! money @as tere!ore
exceedingly opport%ne, beca%se it lends to a ta%tology te semblance o! a statement o! ca%sal
38> ;apter JJJ&4
relationsip0 Wence comes te periodic general !all in commodity-pricesQ From te periodic rise
o! te relati8e 8al%e o! money0 Wence te general periodic rise in pricesQ From te periodic
decline in te relati8e 8al%e o! money0 &t migt a8e been stated @it eD%al tr%t tat te periodic
rise and !all o! prices is d%e to teir periodic rise and !all0 0003nce te ta%tology is admitted as a
ca%sal relationsip, te rest !ollo@s easily0 ? rise in commodity-prices is ca%sed by a decline in
te 8al%e o! money and a decline in te 8al%e o! money is ca%sed, as @e kno@ !rom )icardo, by
an o8er-s%pply o! c%rrency, i.e., a rise in te 8ol%me o! c%rrency o8er te le8el determined by its
o@n intrinsic 8al%e and te intrinsic 8al%e o! commodities0 $imilarly, a general decline in
commodity-prices is explained by a rise in te 8al%e o! money abo8e its intrinsic 8al%e in
conseD%ence o! %nder-s%pply o! c%rrency0 5%s, prices rise and !all periodically, beca%se tere is
periodically too m%c or too little money in circ%lation0 $o%ld a price rise appen to coincide
@it contracted money circ%lation, and a !all in prices @it expanded circ%lation, it may be
asserted despite tis tat te D%antity o! money in circ%lation as, to%g not absol%tely, yet
relati8ely increased or declined in conseD%ence o! a contraction or expansion o! te 8ol%me o!
commodities in te market, e8en i! tis cannot be statistically pro8ed0 We a8e seen tat
according to )icardo tese general price !l%ct%ations m%st take place e8en @it a p%rely metallic
c%rrency, b%t tat tey alternati8ely balance one anoter# t%s, e.g., an %nder-s%pply o! c%rrency
ca%ses a !all in prices, te export o! commodities abroad, b%t tis export ca%ses an import o! gold
!rom abroad, @ic in t%rn brings abo%t a price rise# te opposite mo8ement taking place in te
case o! an o8er-s%pply o! c%rrency, @en commodities are imported and gold is exported0 A%t,
since despite tese general price !l%ct%ations @ic are in per!ect accord @it )icardo"s metallic
c%rrency, teir t%rb%lent and 8iolent !orm, teir crisis !orm, belongs to te period o! de8eloped
credit system, it is crystal clear tat te iss%e o! bank-notes is not exactly reg%lated by te la@s o!
metallic c%rrency0 Metallic c%rrency as its remedy in te import and export o! precio%s metal,
@ic immediately enters circ%lation as coin and t%s, by its in!lo@ or o%t!lo@, ca%ses
commodity-prices to !all or rise0 5e same e!!ect on prices m%st no@ be exerted arti!icially by
banks tro%g imitating te la@s o! metallic c%rrency0 &! gold is coming in !rom abroad it pro8es
tat c%rrency is in %nder-s%pply, tat te 8al%e o! money is too ig and commodity-prices too
lo@, and, conseD%ently, tat bank-notes m%st be p%t into circ%lation in proportion to te ne@ly
imported gold0 3n te oter and, notes m%st be @itdra@n !rom circ%lation in proportion to te
gold exported !rom te co%ntry0 5e iss%e o! bank-notes, in oter @ords, m%st be reg%lated by te
import and export o! precio%s metal or by te rate o! excange0 )icardo"s !alse ass%mption tat
gold is only coin, and, tere!ore, all imported gold s@ells te c%rrency, ca%sing prices to rise,
@ile all exported gold red%ces te c%rrency, leading to a !all in prices I tis teoretical
ass%mption is ere t%rned into the practical eperiment of putting an amount of coin in
circulation e3ual in every case to the amount of gold available0 'ord 38erstone Bbanker o! Pones
'oydC, ;olonel 5orrens, -orman, ;lay, ?rb%tnot and a ost o! oter @riters, kno@n in England
as ad8ocates o! te ";%rrency ,rinciple", a8e not only preaced tis doctrine, b%t s%cceeded in
1822 and 182+ @it te aid o! $ir )obert ,eel"s Aank ?cts in making it te basis o! Englis and
$cottis bank legislation0 &ts ignominio%s !ail%re, bot teoretical as @ell as practical, !ollo@ing
%pon experiments on te broadest national scale, can be treated only in connection @it te
teory o! credit0L B,oc. cit., pp0 16+-680C
5e critiD%e o! tis scool @as !%rnised by 5omas 5ooke, Pames Wilson Bin te 0conomist o!
1822 to 182>C and Pon F%llarton0 A%t @e a8e seen on se8eral occasions, partic%larly in ;apter
JJ4&&& o! tis book, o@ incompletely tey, too, sa@ tro%g te nat%re o! gold, and o@
%nclear tey @ere abo%t te relationsip o! money and capital0 We D%ote ere merely a !e@
instances in connection @it te transactions o! te ;ommittee o! te 'o@er 6o%se o! 18+>
concerning ,eel"s Aank ?cts BA0 ;0 18+>C0 I '.0.1
P0 :0 6%bbard, !ormer :o8ernor o! te Aank o! England, testi!ies:
388 ;apter JJJ&4
K<2==0 5e e!!ect o! te export o! b%llion 000 as no
re!erence @ate8er to te prices o! commodities0 &t
as an e!!ect, and a 8ery important one, %pon te price
o! interest-bearing sec%rities, beca%se, as te rate o!
interest 8aries, te 8al%e o! commodities @ic
embodied tat interest is necessarily po@er!%lly
a!!ected0L
6e presents t@o tables co8ering te years 1832 to 1823, and 182+ to 18+3, @ic so@ tat te
price 8ariations o! !i!teen maHor commercial articles @ere D%ite independent o! te export and
import o! gold and te interest rate0 3n te oter and, tey so@ a close connection bet@een te
export and import o! gold, @ic is, indeed, te Krepresentati8e o! o%r %nin8ested capital,L and
te interest rate0
K/<2=<1 &n 182>, a 8ery large amo%nt o! ?merican
sec%rities @ere retrans!erred to ?merica, and )%ssian
sec%rities to )%ssia, and oter continental sec%rities
@ere trans!erred to tose places !rom @ic @e dre@
o%r s%pplies o! grain0L
5e !i!teen maHor articles on @ic te !ollo@ing tables o! 6%bbard are based incl%de cotton,
cotton yarn, cotton !abrics, @ool, @oollen clot, !lax, linen, indigo, pig-iron, tin, copper, tallo@,
s%gar, co!!ee, and silk0
I. 18/4!184/
Date Gullion
9eserve of
Gan- S
Mar-et
9ate of
Discount
V
&rice
increase
&rice
Decrease Nnchanged
1832,
Marc
1
*,1=2,=== <`T - - -
183+,
Marc
1
6,<>2,=== 3`T > > 1
1836,
Marc
1
>,*18,=== 3[T 11 3 1
183>,
Marc
1
2,=>>,=== +T + * 1
1838,
Marc
1
1=,2>1,=== <`T 2 11 -
183*, <,682,=== 6T 8 + <
38* ;apter JJJ&4
$ept0 1
182=,
P%ne 1
2,+>1,=== 2`T + * 1
182=,
7ec0 1
3,62<,=== +`T > 6 <
1821,
7ec0 1
2,8>3,=== +T 3 < -
182<,
7ec0 1
1=,6=3,=== <ZT < 13 -
1823,
P%ne 1
11,+66,=== <[T 1 12 -
,rice canges on 1+ maHor items
II. 1844!185/
7ate A%llion
)eser8e o!
Aank V
Market
)ate o!
7isco%nt
,rice
&ncrease
,rice
7ecrease (ncanged
1822,
Marc
1
16,16<,=== <[T - - -
182+,
7ec 1
13,<3>,=== 2ZT 11 2 -
1826,
$ept0 1
16,366,=== 3T > 8 -
182>,
$ept0 1
*,12=,=== 6T 6 6 3
18+=,
Marc
1
1>,1<6,=== <ZT + * 1
18+1,
P%ne 1
13,>=+,=== 3T < 11 <
18+<,
$ept0 1
<1,8+3,=== 1`T * + 1
18+3,
7ec0 1
1+,=*3,=== +T 12 - 1
,rice canges on 1+ maHor items
6%bbard comments in tis regard:
K?s in te 1= years 1832-23, so in 1822-+3,
mo8ements in te b%llion o! te Aank @ere in8ariably
accompanied by a decrease or increase in te loanable
3*= ;apter JJJ&4
8al%e o! money ad8anced on disco%nt# and te
8ariations in te prices o! commodities in tis co%ntry
exibit an entire independence o! te amo%nt o!
circ%lation as so@n in te !l%ct%ations in b%llion at
te Aank o! EnglandL BAank ?cts )eport, 18+>, &&, pp0
<*=, <*1C0
$ince te demand and s%pply o! commodities reg%late teir market-prices, it becomes e8ident
ere o@ @rong 38erstone is in identi!ying te demand !or loanable money-capital Bor rater te
de8iations o! s%pply tere!romC, as expressed by te disco%nt rate, @it te demand !or act%al
Kcapital0L 5e contention tat commodity-prices are reg%lated by !l%ct%ations in te D%antity o!
c%rrency is no@ concealed by te prase tat disco%nt rate !l%ct%ations express !l%ct%ations in te
demand !or act%al material capital, as distinct !rom money-capital0 We a8e seen tat be!ore te
same ;ommittee bot -orman and 38erstone act%ally contended tis, and tat te latter
especially @as compelled to resort to 8ery lame s%bter!%ges, %ntil e @as !inally cornered B;ap0
JJ4&C0 &t is indeed an old %mb%g tat canges in te existing D%antity o! gold in a partic%lar
co%ntry m%st raise or lo@er commodity-prices @itin tis co%ntry by increasing or decreasing te
D%antity o! te medi%m o! circ%lation0 &! gold is exported, ten, according to tis ;%rrency
5eory, commodity-prices m%st rise in te co%ntry importing tis gold, and tereby te 8al%e o!
exports !rom te gold-exporting co%ntry on te gold-importing co%ntry"s market# on te oter
and, te 8al%e o! te gold-importing co%ntry"s exports @o%ld !all on te gold-exporting co%ntry"s
market @ile it @o%ld rise on te domestic market, i.e., te co%ntry recei8ing te gold0 A%t, in
!act, a decrease in te D%antity o! gold raises only te interest rate, @ereas an increase in te
D%antity o! gold lo@ers te interest rate# and i! not !or te !act tat te !l%ct%ations in te interest
rate enter into te determination o! cost-prices, or in te determination o! demand and s%pply,
commodity prices @o%ld be @olly %na!!ected by tem0
&n te same report, -0 ?lexander, ead o! a large !irm doing b%siness @it &ndia, expresses te
!ollo@ing 8ie@s on te ea8y drain o! sil8er to &ndia and ;ina in te mid-!i!ties0 5is @as partly
d%e to te ;inese ;i8il War, @ic cecked te sale o! Englis !abrics in ;ina, and partly d%e
to te disease among silk@orms in E%rope, @ic sarply red%ced silk@orm breeding in &taly and
France:
K233>0 &s te drain !or ;ina or !or &ndiaQ I .o% send
te sil8er to &ndia, and yo% b%y opi%m @it a great
deal o! it, all o! @ic goes on to ;ina to lay do@n
!%nds !or te p%rcase o! te silk# and te state o! te
markets in &ndiaL Bin spite o! te acc%m%lation o!
sil8er tereC Kmakes it a more pro!itable in8estment
!or te mercant to lay do@n sil8er tan to send
piece-goods or Englis man%!act%res0L I K23380 &n
order to obtain te sil8er, as tere not been a great
drain !rom FranceQ I .es, 8ery large0L I K23220
&nstead o! bringing in silk !rom France and &taly, @e
3*1 ;apter JJJ&4
are sending it tere in large D%antities, bot !rom
Aengal and !rom ;ina0L
&n oter @ords, sil8er, te money metal o! tat continent, @as sent to ?sia instead o!
commodities, not beca%se commodity-prices ad risen in te co%ntry @ic prod%ced tem
BEnglandC, b%t beca%se prices ad !allen, as a res%lt o! o8er-imports in te co%ntry @ic
imported tem# and tis despite te !act tat te sil8er @as recei8ed by England !rom France and
ad to be paid !or partly in gold0 ?ccording to te ;%rrency 5eory, prices so%ld a8e !allen in
England and risen in &ndia and ;ina as a res%lt o! s%c imports0
?noter ill%stration0 Ae!ore te 'ords" ;ommittee B;0 70 1828N+>C, Wylie, one o! te !irst
'i8erpool mercants, testi!ies as !ollo@s:
K1**20 ?t te close o! 182+ tere @as no trade tat
@as more rem%nerating, and in @ic tere @ere s%c
large pro!its /tan cotton spinning10 5e stock o!
cotton @as large and good, %se!%l cotton co%ld be
bo%gt at 2d0 per po%nd, and !rom s%c cotton good
sec%nda m%le t@ist -o0 2= @as made at an expense
not exceeding a like amo%nt, say at a cost o! 8d0 per
po%nd in all to te spinner0 5is yarn @as largely sold
and contracted !or in $eptember and 3ctober 182+ at
1=Z and 11Zd0 per po%nd, and in some instances te
spinners realised a pro!it eD%al to te !irst cost o! te
cotton0L I K1**60 5e trade contin%ed to be
rem%nerati8e %ntil te beginning o! 18260L I K<===0
3n Marc 3, 1822, te stock o! cotton /6<>,=2< bales1
@as more tan do%ble @at it is tis day /on Marc 3,
1828, @en it @as 3=1,=>= bales1 and yet te price
ten @as 1[d0 per po%nd dearer0L /6[d0 as against
+d01 I ?t te same time yarn, good sec%nda m%le t@ist
-o0 2=, ad !allen !rom 11Z-1<d0 to *Zd0 per lb0 in
3ctober, and to >`d0 at te end o! 7ecember 182>#
yarn @as sold at te p%rcase price o! te cotton !rom
@ic it ad been sp%n Bibid., -os0 <=<1 and <=<<C0
5is so@s te sel!-interest o! 38erstone"s sagacity according to @ic money so%ld be KdearL
beca%se capital is Kscarce0L 3n Marc 3, 1822, te bank interest rate stood at 3T# in 3ctober and
-o8ember o! 182> it rose to 8 and *T, and @as still 2T on Marc 3, 18280 5e prices o! cotton
@ere depressed !ar belo@ te price @ic corresponded to te state o! s%pply by te complete
stoppage o! sales and te panic @it its ens%ing ig rate o! interest0 ?s a res%lt, tere @as an
enormo%s decrease in imports in 1828, on te one and, and, on te oter, a decrease in
prod%ction in ?merica# ence a ne@ rise in cotton prices in 182*0 ?ccording to 38erstone, te
commodities @ere too dear beca%se tere @as too m%c money in te co%ntry0
3*< ;apter JJJ&4
K<==<0 5e late decline in te condition o! te cotton
man%!actories is not to be ascribed to te @ant o! te
ra@ material, as te price seems to a8e been lo@er,
to%g te stock o! te ra@ material is 8ery m%c
diminised0L
6o@ nicely 38erstone con!%ses prices, or te 8al%e o! commodities, @it te 8al%e o! money, tat
is, te interest rate0 &n is reply to M%estion <=<6, Wylie s%ms %p is general H%dgement o! te
;%rrency 5eory, based on @ic ;ard@ell and $ir ;arles Wood, in May 182>,
Kasserted te necessity o! carrying o%t te Aank ?ct o!
1822 in its !%ll and entire integrity0L I K5ese
principles seemed to me to be o! a nat%re tat @o%ld
gi8e an arti!icial ig 8al%e to money and an arti!icial
and r%ino%sly lo@ 8al%e to all commodities and
prod%ce0L
6e says, !%rtermore, concerning te e!!ects o! tis Aank ?ct on b%siness in general:
K?s bills at !o%r monts, @ic is te reg%lar co%rse
o! dra!ts, !rom man%!act%ring to@ns on mercants
and bankers !or te p%rcase o! goods going to te
(nited $tates, co%ld not be disco%nted except at great
sacri!ices, te exec%tion o! orders @as cecked to a
great extent, %ntil a!ter te :o8ernment 'etter o!
3ctober <+ Bs%spension o! te Aank ?ctC, @en tose
!o%r monts" bills became disco%ntableL B<=*>C0
We see, ten, tat te s%spension o! tis Aank ?ct @as recei8ed @it relie! in te pro8inces as
@ell0
K<1=<0 'ast 3ctober /182>1 tere @as scarcely an
?merican b%yer p%rcasing goods ere @o did not at
once c%rtail is orders as m%c as e possibly co%ld#
and @en o%r ad8ices o! te dearness o! money
reaced ?merica, all !res orders ceased0L I K<1320
;orn and s%gar @ere special0 5e corn market @as
a!!ected by te prospects o! te ar8est, and s%gar @as
a!!ected by te immense stocks and imports0L I
K<2630 3! o%r indebtedness to ?merica 000 m%c @as
liD%idated by !orced sales o! consigned goods, and &
!ear tat m%c @as cancelled by te !ail%res ere0L I
3*3 ;apter JJJ&4
K<1*60 &! & recollect rigtly, @B per cent was paid on
our Stoc- 0change in :ctober ;<=@.L
/5e crisis o! 183> @it its protracted a!termat, !ollo@ed in 182< by a reg%lar post-crisis, and
te sel!-interested blindness o! ind%strialists and mercants, @o absol%tely re!%sed to see any
o8er-prod%ction I !or s%c a ting @as abs%rd and impossible according to 8%lgar economy I ad
%ltimately acie8ed tat con!%sion o! to%gt @ic enabled te ;%rrency $cool to p%t its
dogma into practice on a national scale0 5e bank legislation o! 1822 and 182+ @as passed0
5e Aank ?ct o! 1822 di8ides te Aank o! England into an iss%e department and a banking
department0 5e !ormer recei8es sec%rities I principally go8ernment obligations I amo%nting to
12 million, and te entire metal oard, o! @ic not more tan one-D%arter is to consist o! sil8er,
and iss%es notes to te !%ll amo%nt o! te total0 &n so !ar as tese notes are not in te ands o! te
p%blic, tey are eld in te banking department and, togeter @it te small amo%nt o! coin
reD%ired !or daily %se Babo%t one millionC, constit%te its e8er ready reser8e0 5e iss%e department
gi8es te p%blic gold !or notes and notes !or gold# te remaining transactions @it te p%blic are
carried on by te banking department0 ,ri8ate banks in England and Wales a%torised in 1822 to
iss%e teir o@n notes retained tis pri8ilege, b%t teir note iss%e @as !ixed# i! one o! tese banks
ceases to iss%e its o@n notes, te Aank o! England can increase its %nbacked notes by t@o-tirds
o! te D%ota t%s made a8ailable# in tis @ay its iss%e @as increased by 18*< !rom V12 to V16Z
million Bto be exact, V16,2+=,===C0
5%s, !or e8ery !i8e po%nds in gold @ic lea8e te bank treas%ry, a !i8e-po%nd note ret%rns to
te iss%e department and is destroyed# !or e8ery !i8e so8ereigns going into te treas%ry a ne@
!i8e-po%nd note comes into circ%lation0 &n tis manner, 38erstone"s ideal paper circ%lation, @ic
strictly !ollo@s te la@s o! metallic circ%lation, is carried o%t in practice, and by tis means,
according to te ad8ocates o! te ;%rrency 5eory, crises are made impossible !or all time0
A%t in reality te separation o! te Aank into t@o independent departments depri8ed its
management o! te possibility o! !reely %tilising its entire a8ailable means at critical times, so tat
sit%ations co%ld arise in @ic te banking department migt be on te 8erge o! bankr%ptcy @ile
te iss%e department still ad intact se8eral millions in gold and, in addition, its entire 12 million
in sec%rities0 ?nd tis co%ld take place so m%c more easily since tere is a period in almost
e8ery crisis @en ea8y exports o! gold take place @ic m%st be co8ered in te main by te
metal reser8e o! te bank0 A%t !or e8ery !i8e po%nds in gold @ic ten go abroad, te domestic
circ%lation is depri8ed o! a !i8e-po%nd note, so tat te D%antity o! circ%lating medi%m is red%ced
precisely at a time @en te largest D%antity is most needed0 5e Aank ?ct o! 1822 t%s directly
ind%ces te entire commercial @orld !ort@it to oard a reser8e !%nd o! bank-notes at te
o%tbreak o! a crisis# in oter @ords, to accelerate and intensi!y te crisis0 Ay s%c arti!icial
intensi!ication o! demand !or money accommodation, tat is, !or means o! payment at te
decisi8e moment, and te sim%ltaneo%s restriction o! te s%pply te Aank ?ct dri8es te rate o!
interest to a iterto %nkno@n eigt d%ring a crisis0 6ence, instead o! eliminating crises, te ?ct,
on te contrary, intensi!ies tem to a point @ere eiter te entire ind%strial @orld m%st go to
pieces, or else te Aank ?ct0 Aot on 3ctober <+, 182>, and on -o8ember 1<, 18+>, te crisis
reaced s%c a point# te go8ernment ten li!ted te restriction !or te Aank in iss%ing notes by
s%spending te ?ct o! 1822, and tis s%!!iced in bot cases to o8ercome te crisis0 &n 182>, te
ass%rance tat bank-notes @o%ld again be iss%ed !or !irst-class sec%rities s%!!iced to bring to ligt
te V2 to V+ million o! oarded notes and p%t tem back into circ%lation# in 18+>, te iss%e o!
notes exceeding te legal amo%nt reaced almost one million, b%t tis lasted only !or a 8ery sort
time0
&t so%ld also be mentioned tat te 1822 legislation still so@s traces recalling te !irst t@enty
years o! te 1*t cent%ry, te period @en specie payments @ere s%spended and notes de8al%ated0
5e !ear tat notes may lose teir credit is still plainly in e8idence0 A%t tis !ear is D%ite
3*2 ;apter JJJ&4
gro%ndless, since e8en in 18<+ te iss%e o! a disco8ered old s%pply o! one-po%nd notes, @ic
ad been taken o%t o! circ%lation, broke te crisis and pro8ed tereby tat te credit o! te notes
remained %nsaken e8en in times o! te most general and deepest mistr%st0 ?nd tis is D%ite
%nderstandable# !or, a!ter all, te entire nation backs %p tese symbols o! 8al%e @it its credit0 I
'.0.1
'et %s no@ t%rn to a !e@ comments on te e!!ect o! te Aank ?ct0 Pon $t%art Mill belie8es tat
te Aank ?ct o! 1822 /&n te :erman 18*2 edition tis reads: 182>0 I 0d1 kept do@n o8er-
spec%lation0 6appily tis sage spoke on P%ne 1<, 18+>0 Fo%r monts later te crisis broke o%t0 6e
literally congrat%lated te Kbank directors and te commercial p%blic generallyL on te !act tat
tey
K%nderstand m%c better tan tey did te nat%re o! a
commercial crisis, and te extreme miscie! @ic
tey do bot to temsel8es and to te p%blic by
%polding o8er-spec%lation0L BA0;0 18+>, -o0 <=310C
5e sagacio%s Mr0 Mill tinks tat i! one-po%nd notes are iss%ed
Kas ad8ances to man%!act%rers and oters, @o pay
@ages 000 te notes may get into te ands o! oters
@o expend tem !or cons%mption, and in tat case
te notes do constit%te in temsel8es a demand !or
commodities and may !or some time tend to promote
a rise o! pricesL /<=6610
7oes Mr0 Mill ass%me, ten, tat man%!act%rers @ill pay iger @ages beca%se tey pay tem in
paper instead o! goldQ 3r does e belie8e tat i! a man%!act%rer recei8es is loan in V1== notes
and excanges tem !or gold, tese @ages @o%ld constit%te less demand tan i! paid immediately
in one-po%nd notesQ ?nd does e not kno@ tat, !or instance, in certain mining districts @ages
@ere paid in te notes o! local banks, so tat se8eral labo%rers togeter recei8ed one !i8e-po%nd
noteQ 7oes tis increase teir demandQ 3r @ill bankers ad8ance money to man%!act%rers more
easily and in larger D%antities in small notes tan in large onesQ
/5is sing%lar !ear @ic Mill as !or one-po%nd notes @o%ld be inexplicable i! is @ole @ork
on political economy did not re8eal an eclecticism @ic so@s no esitation in te !ace o! any
contradiction0 3n te one and, e agrees on many points @it 5ooke as opposed to 38erstone#
on te oter, e belie8es tat commodity-prices are determined by te D%antity o! a8ailable
money0 6e is t%s by no means con8inced tat, all oter conditions being eD%al, a so8ereign @ill
!ind its @ay into te co!!ers o! te Aank !or e8ery one-po%nd note iss%ed0 6e !ears tat te
D%antity o! circ%lating medi%m co%ld be increased and tereby de8al%ated, tat is, commodity-
prices migt rise0 5is and noting more is concealed beind te abo8e-mentioned appreension0
I '.0.C
5ooke expresses te !ollo@ing 8ie@s be!ore te ;0 70 1828N+> concerning te di8ision o! te
Aank into t@o departments and te excessi8e preca%tions taken to sa!eg%ard te casing o! notes:
5e greater !l%ct%ations o! te interest rate in 182>, as
compared @it 183> and 183*, are d%e solely to te
separation o! te Aank into t@o departments B3=1=C0 I
5e sa!ety o! bank-notes @as a!!ected neiter in 18<+
3*+ ;apter JJJ&4
nor in 183> and 183* B3=1+C0 I 5e demand !or gold
in 18<+ @as aimed only at !illing te 8ac%%m created
by te complete discredit o! te one-po%nd notes o!
co%ntry banks# tis 8ac%%m co%ld be !illed only by
gold, %ntil s%c time as te Aank o! England also
iss%ed one-po%nd notes B3=<<C0 I &n -o8ember and
7ecember 18<+ not te sligtest demand existed !or
gold !or export p%rposes B3=<3C0
K&n point o! discredit at ome as @ell as abroad, a
!ail%re in paying te di8idends and te deposits @o%ld
be o! !ar greater conseD%ence tan te s%spending o!
te payment o! te bank-notes B3=<8C0L
K3=3+0 Wo%ld yo% not say tat any circ%mstance,
@ic ad te e!!ect o! %ltimately endangering te
con8ertibility o! te note, @o%ld be one likely to add
serio%s di!!ic%lty in a moment o! commercial
press%reQ I -ot at all0L
K&n te co%rse o! 182> 000 an increased iss%e !rom te
circ%lating department migt a8e contrib%ted to
replenis te co!!ers o! te Aank, as it did in 18<+L
B3=+8C0
Ae!ore te ;ommittee on A0 ?0 18+>, -e@marc testi!ies:
K13+>0 5e !irst miscie8o%s e!!ect 000 o! tat
separation o! departmentsL Bo! te AankC K and 000 a
necessary conseD%ence !rom te c%tting in t@o o! te
reser8e o! b%llion as been tat te banking b%siness
o! te Aank o! England, tat is to say, te @ole o!
tat part o! te operation o! te Aank o! England
@ic brings it more immediately into contact @it
te commerce o! te co%ntry, as been carried on
%pon a moiety only o! its !ormer amo%nts o! reser8e0
3%t o! tat di8ision o! te reser8e as arisen,
tere!ore, tis state o! tings, tat @ene8er te
reser8e o! te banking department as been
diminised, e8en to a small extent, it as rendered
3*6 ;apter JJJ&4
necessary an action by te Aank %pon its rate o!
disco%nt0 5at diminised reser8e, tere!ore, as
prod%ced a !reD%ent s%ccession o! canges and Herks
in te rate o! disco%nt0L I K13+80 5e alterations since
1822L /%ntil P%ne 18+>1 Ka8e been some 6= in
n%mber, @ereas te alterations prior to 1822 in te
same space o! time certainly did not amo%nt to a
doEen0L
3! special interest is te testimony o! ,almer, a 7irector o! te Aank o! England since 1811 and
!or a @ile its :o8ernor, be!ore te 'ords" ;ommittee on ;0 70 1828N+>:
K8<80 &n 7ecember 18<+, tere @as abo%t V1,1==,===
o! b%llion remaining in te Aank0 ?t tat period it
m%st %ndo%btedly a8e !ailedin toto, i! tis ?ct ad
been in existenceL /meaning te ?ct o! 182210 K5e
iss%e in 7ecember, & tink, @as + or 6 millions o!
notes in a @eek, @ic relie8ed te panic tat existed
at tat period0L
K8<+0 5e !irst periodL /since P%ly 1, 18<+1 K@en te
present ?ct @o%ld a8e !ailed, i! te Aank ad
attempted to carry o%t te transactions ten
%ndertaken, @as on te <8t o! Febr%ary 183># at tat
period tere @ere V3,*==,=== to V2,===,=== o! b%llion
in te possession o! te Aank, and ten te Aank
@o%ld a8e been le!t @it V6+=,=== only in te
reser8e0 ?noter period is in te year 183*, @ic
contin%ed !rom te *t o! P%ly to te +t o!
7ecember0L I K8<60 Wat @as te amo%nt o! te
reser8e in tat caseQ I 5e reser8e @as min%s
altogeter V<==,=== %pon te +t o! $eptember0 3n
te +t o! -o8ember it rose to abo%t a million or a
million and a al!0L I K83=0 5e ?ct o! 1822 @o%ld
a8e pre8ented te Aank gi8ing assistance to te
?merican trade in 183>0L I K8310 5ere @ere tree o!
te principal ?merican o%ses tat !ailed0 000 ?lmost
e8ery o%se connected @it ?merica @as in a state o!
discredit, and %nless te Aank ad come !or@ard at
3*> ;apter JJJ&4
tat period, & do not belie8e tat tere @o%ld a8e
been more tan one or t@o o%ses tat co%ld a8e
s%stained temsel8es0L I K8360 5e press%re in 183>
is not to be compared @it tat o! 182>0 5e press%re
in te !ormer year @as cie!ly con!ined to te
?merican trade0L I 8380 BEarly in P%ne 183> te
management o! te Aank disc%ssed te D%estion o!
o8ercoming te press%re0C K$ome gentlemen
ad8ocated te opinion 000 tat te correct principle @as
to raise te rate o! interest, by @ic te price o!
commodities @o%ld be lo@ered# in sort, to make
money dear and commodities ceap, by @ic te
!oreign payment @o%ld be accomplised0L I K*=60
5e establisment o! an arti!icial limitation o! te
po@ers o! te Aank %nder te ?ct o! 1822, instead o!
te ancient and nat%ral limitation o! te Aank"s
po@ers, namely, te act%al amo%nt o! its specie, tends
to create arti!icial di!!ic%lty, and tere!ore an
operation %pon te prices o! mercandise tat @o%ld
a8e been %nnecessary b%t !or te pro8isions o! te
?ct0L I K*680 .o% cannot, by te @orking o! te ?ct
o! 1822, materially red%ce te b%llion, %nder ordinary
circ%mstances, belo@ nine million and a al!0 &t @o%ld
ten ca%se a press%re %pon prices and credit @ic
@o%ld occasion s%c an ad8ance in te excange @it
!oreign co%ntries as 1= increase te import o! b%llion,
and to tat extent add to te amo%nt in te iss%e
department0L I K**60 (nder te limitation tat yo%L
/te Aank1 Kare no@ s%bHect to, yo% a8e not te
command o! sil8er to an extent tat yo% reD%ire at a
time @en sil8er @o%ld be reD%ired !or an action %pon
te !oreign excanges0L I K***0 Wat @as te obHect
o! te reg%lation restricting te Aank as to te amo%nt
o! sil8er to one-!i!tQ I & cannot ans@er tat
D%estion0L
3*8 ;apter JJJ&4
5e p%rpose @as to make money dear# aside !rom te ;%rrency 5eory, te separation o! te t@o
bank departments and te reD%irement !or $cottis and &ris banks to old gold in reser8e !or
backing notes iss%ed beyond a certain amo%nt ad te same p%rpose0 5is bro%gt abo%t a
decentralisation o! te national metal reser8e, @ic decreased its capability o! correcting
%n!a8o%rable excange rates0 ?ll te !ollo@ing stip%lations aim to raise te interest rate: tat te
Aank o! England sall not iss%e notes exceeding 12 million except against gold reser8e# tat te
banking department sall be administered as an ordinary bank, !orcing te interest rate do@n
@en money is plenti!%l and dri8ing it, %p @en money is scarce# limiting te sil8er reser8e, te
principal means o! recti!ying te rates o! excange @it te continent and ?sia# te reg%lations
concerning te $cottis and &ris banks, @ic ne8er reD%ire gold !or export b%t m%st no@ keep it
%nder te pretence o! ens%ring an act%ally ill%sory con8ertibility o! teir notes0 5e !act is tat te
?ct o! 1822 ca%sed a r%n on te $cottis banks !or gold in 18+> !or te !irst time0 -or does te
ne@ bank legislation make any distinction bet@een a drain o! gold abroad or !or domestic
p%rposes, alto%g it goes @ito%t saying tat teir e!!ects are D%ite di!!erent0 6ence te contin%al
large !l%ct%ations in te market rate o! interest0 Wit re!erence to sil8er, ,almer says on t@o
separate occasions, **< and **2, tat te Aank can b%y sil8er !or notes only @en te rate o!
excange is !a8o%rable !or England, i.e., sil8er is s%per!l%o%s# !or:
K1==30 5e only obHect in olding a considerable
amo%nt o! b%llion in sil8er is to !acilitate making te
!oreign payment so long as te excanges are against
te co%ntry0L I K1==20 $il8er is 000 a commodity
@ic, being money in e8ery oter part o! te @orld,
is tere!ore te most direct commodity !or te
p%rposeL /payments abroad10 K5e (nited $tates
latterly a8e taken gold alone0L
&n is opinion, te Aank did not a8e to raise te interest rate abo8e its old le8el o! +T in times o!
stringency, so long as %n!a8o%rable excange rates do not drain gold to !oreign co%ntries0 Were it
not !or te ?ct o! 1822, te Aank @o%ld be able to disco%nt all !irst-class bills presented to it
@ito%t di!!ic%lty0 /1=18-<=01 A%t %nder te ?ct o! 1822 and in te state in @ic te Aank !o%nd
itsel! in 3ctober 182>,
Ktere @as no rate o! interest @ic te Aank co%ld
a8e carged to o%ses o! credit, @ic tey @o%ld
not a8e been @illing to pay to carry on teir
paymentsL /1=<<10
?nd tis ig interest rate @as precisely te p%rpose o! te ?ct0
K1=<*0 000 :reat distinction @ic & @is to dra@
bet@een te action o! te rate o! interest %pon a
!oreign demandL /!or precio%s metal1 Kand an ad8ance
in te rate !or te obHect o! cecking a demand %pon
te Aank d%ring a period o! internal discredit0L I
K2=<30 ,re8io%sly to te ?ct o! 1822 000 @en te
excanges @ere in !a8o%r o! te co%ntry, and positi8e
3** ;apter JJJ&4
panic and alarm existed tro%g te co%ntry, tere
@as no limit p%t %pon te iss%e, by @ic alone tat
state o! distress co%ld be relie8ed0L
$o speaks a man @o as occ%pied a post !or 3* years in te administration o! te Aank o!
England0 'et %s no@ listen to a pri8ate banker, 5@ells, an associate o! $pooner, ?tt@ood g ;o0
since 18=10 6e is alone among te @itnesses be!ore te A0 ;0 28+> @o pro8ides %s @it an
insigt into te co%ntry"s act%al state o! a!!airs and @o sees te crisis approacing0 &n oter
respects, o@e8er, e is a sort o! little-silling man !rom Airmingam, like is associates, te
?tt@ood broters, @o are te !o%nders o! tis scool0 B$ee %ur Hriti- der pol. :e-., $0 +*0C 6e
testi!ies:
K22880 6o@ do yo% tink tat te ?ct o! 1822 as
operatedQ I &! & @ere to ans@er yo% as a banker, &
so%ld say tat it as operated exceedingly @ell, !or it
as a!!orded a ric ar8est to bankers and
/money-1capitalists o! all kinds0 A%t it as operated
8ery badly to te onest ind%strio%s trades-man @o
reD%ires steadiness in te rate o! disco%nt, tat e may
be enabled to make is arrangements @it
con!idence0000 &t as made money-lending a most
pro!itable p%rs%it0L I K228*0 &t /te Aank ?ct,1 enables
te 'ondon Hoint-stock banks to ret%rn !rom <= to
<<T to teir proprietorsQ I 5e oter day one o! tem
@as paying 18T and & tink anoter <=T# tey o%gt
to s%pport te ?ct o! 1822 8ery strongly0L I K22*=0
5e little tradesmen and respectable mercants, @o
a8e not a large capital 000 it pinces tem 8ery m%c
indeed 000 5e only means tat & a8e o! kno@ing is
tat & obser8e s%c an amaEing D%antity o! teir
acceptances %npaid0 5ey are al@ays small, peraps
ranging !rom V<= to V2==, a great many o! tem are
%npaid and go back %npaid to all parts o! te co%ntry,
@ic is al@ays an indication o! s%!!ering amongst 000
little sopkeepers0L
22*20 6e declares tat b%siness is not pro!itable no@0 5e !ollo@ing remarks o! is are important
beca%se tey so@ tat e sa@ te latent existence o! te crisis @en none o! te oters ad e8en
an inkling o! it0
2== ;apter JJJ&4
K22*20 5ings keep teir prices in Mincing 'ane, b%t
@e sell noting, @e cannot sell %pon any terms# @e
keep te nominal price0L
22*+0 6e relates te !ollo@ing case: ? Frencman sends a broker in Mincing 'ane commodities
!or V3,=== to be sold at a certain price0 5e broker cannot obtain te reD%ested price, and te
Frencman cannot sell belo@ tis price0 5e commodities remain %nsold, b%t te Frencman
needs money0 5e broker tere!ore makes im an ad8ance o! V1,=== and as te Frenc man
dra@ a bill o! excange o! V1,=== !or tree monts on te broker against is commodities as
sec%rity0 ?t te end o! te tree monts te bill becomes d%e, b%t te commodities still remain
%nsold0 5e broker m%st ten pay te bill, and alto%g e possesses sec%rity !or V3,===, e
cannot con8ert it into cas and as a res%lt !aces di!!ic%lties0 &n tis manner, one person drags
anoter do@n @it im0
K22*60 Wit regard to te large exports 000 @ere tere
is a depressed state o! trade at ome, it necessarily
!orces large exportation0L I K22*>0 7o yo% tink tat
te ome cons%mption as been diminisedQ I Lery
much indeed ... immensely ... te sopkeepers are te
best a%torities0L I K22*80 $till te importations are
8ery large# does not tat indicate a large
cons%mptionQ I &t does, if you can sellP b%t many o!
te @areo%ses are !%ll o! tese tings# in tis 8ery
instance @ic & a8e been relating, tere is V3,===
@ort imported, @ic cannot be sold0L
K2+120 Wen money is dear, @o%ld yo% say tat
capital @o%ld be ceapQ I .es0
5is man, ten, is by no means o! 38erstone"s opinion tat a ig rate o! interest is te same as
dear capital0
5e !ollo@ing so@s o@ b%siness is no@ cond%cted:
K26160 3ters are going to a 8ery great extent,
carrying on a prodigio%s trade in exports and imports,
to an extent !ar beyond @at teir capital H%sti!ies
tem in doing# tere can be no do%bt o! all o! tat0
5ese men may s%cceed# tey may by some l%cky
8ent%re get large !ort%nes, and p%t temsel8es rigt0
5at is 8ery m%c te system in @ic a great deal o!
trade is no@ carried on0 ,ersons @ill consent to lose
<=, 3=, and 2= per cent %pon a sipment# te next
8ent%re may bring it back to tem0 &! tey !ail in one
2=1 ;apter JJJ&4
a!ter anoter, ten tey are broken %p# and tat is H%st
te case @ic @e a8e o!ten seen recently#
mercantile o%ses a8e broken %p, @ito%t one
silling o! property being le!t0L
K2>*10 5e lo@ rate o! interestL /d%ring te last ten
years1 Koperates against bankers, it is tr%e, b%t &
so%ld a8e 8ery great di!!ic%lty in explaining to yo%,
%nless & co%ld so@ yo% te books, o@ m%c iger
te pro!itsL /is o@n1 K are no@ tan tey %sed to be
!ormerly0 Wen interest is lo@, !rom excessi8e iss%es,
@e a8e large deposits# @en interest is ig, @e get
te ad8antage in tat @ay0L I K2>*20 Wen money is
at a moderate rate, @e a8e more demand !or it# @e
lend more# it operates in tat @ayL /!or %s, te
bankers10 KWen it gets iger, @e get more tan a
!air proportion !or it# @e get more tan @e o%gt to
do0L
We a8e seen tat te credit o! Aank o! England notes is considered beyond D%estion by all
experts0 -e8erteless, te Aank ?ct completely ties %p nine to ten million in gold !or te
con8ertibility o! tese notes0 5e sacredness and in8iolability o! tis reser8e is tereby carried
m%c !arter tan among oarders o! olden times0 Mr0 Aro@n B'i8erpoolC testi!ies, ;0 70
182>N+>:
K<311: 5is moneyL /te metal reser8e in te iss%e
department1 Kmigt as @ell a8e been tro@n into te
sea !rom any %se tat it @as o! at tat time, tere
being no po@er to employ any o! it @ito%t 8iolating
te ?ct o! ,arliament0L
5e b%ilding contractor E0 ;apps, already cited earlier, @ose testimony is also %sed to ill%strate
te modern b%ilding system in 'ondon B4ol0 &&, ;0 J&&C, s%ms %p is opinion o! te Aank ?ct o!
1822 as !ollo@s /A0 ?0 18+>1:
K++=80 5en %pon te @ole 000 yo% tink tat te
present systemL /o! bank legislation1 Kis a some@at
adroit sceme !or bringing te pro!its o! ind%stry
periodically into te %s%rer"s bagQ I & tink so0 & kno@
tat it as operated so in te b%ilding trade0L
?s mentioned be!ore, te $cottis banks @ere !orced by te Aank ?ct o! 182+ into a system
resembling tat o! te Englis0 5ey @ere obliged to old gold in reser8e !or teir note iss%e
2=< ;apter JJJ&4
beyond te limit !ixed !or eac bank0 5e e!!ect o! tis may be seen !rom te !ollo@ing testimony
be!ore te ;0 70 1828N+>0
Kennedy, 7irector o! a $cottis bank:
K33>+0 Was tere anyting tat yo% can call a
circ%lation o! gold in $cotland pre8io%sly to te
passing o! te ?ct o! 182+Q I -one @ate8er0L I
K33>60 6as tere been any additional circ%lation o!
gold sinceQ I -one @ate8er# te people dislike
gold0L I 32+=0
5e s%m o! abo%t V*==,=== in gold, @ic te $cottis banks are compelled to keep since 182+,
can only be inH%rio%s in is opinion and
Kabsorbs %npro!itably so m%c o! te capital o!
$cotland0L
F%rtermore, ?nderson, 7irector o! te (nion Aank o! $cotland:
K3+880 5e only press%re %pon te Aank o! England
by te banks in $cotland !or gold @as !or !oreign
excangesQ I &t @as# and tat is not to be relie8ed by
olding gold in Edinb%rg0L I K3+*=0 6a8ing te
same amo%nt o! sec%rities in te Aank o! EnglandL /or
in te pri8ate banks o! England1 K@e a8e te same
po@er tat @e ad be!ore o! making a drain %pon te
Aank o! England0L
Finally, @e D%ote an article !rom te 0conomist BWilsonC:
K5e $cotc banks keep %nemployed amo%nts o! cas
@it teir 'ondon agents# tese keep tem in te
Aank o! England0 5is gi8es to te $cotc banks,
@itin te limits o! tese amo%nts, command o8er te
metal reser8e o! te Aank, and ere it is al@ays in te
place @ere it is needed, @en !oreign payments are
to be made0L
5is system @as dist%rbed by te ?ct o! 182+:
K&n conseD%ence o! te ?ct o! 182+ !or $cotland o!
late a large drain o! te coin o! te Aank as taken
place, to s%pply a mere contingent demand in
$cotland, @ic may ne8er occ%r000 $ince tat period
tere as been a large s%m %ni!ormly locked %p in
2=3 ;apter JJJ&4
$cotland, and anoter considerable s%m constantly
tra8elling back and !or@ard bet@een 'ondon and
$cotland0 &! a period arri8es @en a $cotc bank
expects an increased demand !or its notes, a box o!
gold is bro%gt do@n !rom 'ondon# @en tis period
is past, te same box, generally %nopened, is sent
back to 'ondon0L B0conomist, 3ctober <3, 182> /pp0
1<12-1<1+10C
/?nd @at does te !ater o! te Aank ?ct, banker $am%el Pones 'oyd, alias 'ord 38erstone, say
to all tisQ
?lready in 1828 e repeated be!ore te 'ords" ;ommittee on ;ommercial 7istress tat
Kpress%re, and a ig rate o! interest ca%sed by te
@ant o! s%!!icient capital, cannot be relie8ed by an
extra iss%e o! bank-notesL B1+12C,
in spite o! te !act tat te mere authority to increase te note iss%e, gi8en by te :o8ernment"s
'etter o! 3ctober <+, 182>, ad s%!!iced to take te edge o!! te crisis0
6e olds to te 8ie@ tat
Kte ig rate o! interest and te depression o! te
man%!act%ring interests @as te necessary res%lt o!
te dimin%tion o! te materialcapital applicable to
man%!act%ring and trading p%rposesL B16=2C0
?nd yet te depressed condition o! te man%!act%ring ind%stry ad !or monts consisted in
material commodity-capital !illing te @areo%ses to o8er!lo@ing and being act%ally %nsaleable#
so tat !or precisely tis reason, material prod%cti8e capital lay @olly or partly idle, in order not
to prod%ce still more %nsaleable commodity-capital0
?nd be!ore te Aank ;ommittee o! 18+> e says:
KAy strict and prompt aderence to te principles o!
te ?ct o! 1822, e8eryting as passed o!! @it
reg%larity and ease, te monetary system is sa!e and
%nsaken, te prosperity o! te co%ntry is %ndisp%ted,
te p%blic con!idence in te @isdom o! te ?ct o!
1822 is daily gaining strengt, and i! te ;ommittee
@is !or !%rter practical ill%stration o! te so%ndness
o! te principles on @ic it rests, or o! te bene!icial
res%lts @ic it as ens%red, te tr%e and s%!!icient
ans@er to te ;ommittee is, look aro%nd yo%, look at
te present state o! te trade o! tis co%ntry, 000 look at
2=2 ;apter JJJ&4
te contentment o! te people, look at te @ealt and
prosperity @ic per8ades e8ery class o! te
comm%nity, and ten a8ing done so, te ;ommittee
may be !airly called %pon to decide @eter tey @ill
inter!ere @it te contin%ance o! an ?ct %nder @ic
tose res%lts a8e been de8eloped0L BA0 ;0 18+>, -o0
218*0C
5o tis song o! praise by 38erstone be!ore te ;ommittee on P%ly 12, te antistrope @as gi8en
on -o8ember 1< o! te same year in te sape o! a letter to te Aank"s management, in @ic te
go8ernment s%spended te miracle-@orking la@ o! 1822 to sa8e @at co%ld still be sa8ed0 I '. 0.1
Chapter 35. Precious Metal and Rate of
Exchange
I. *ovement "f The Gold )eserve
&t so%ld be noted in regard to te acc%m%lation o! notes in times o! stringency, tat it is a
repetition o! te oarding o! precio%s metal as %sed to take place in tro%bled times in te most
primiti8e conditions o! society0 5e ?ct o! 1822 is interesting in its operation beca%se it seeks to
trans!orm all precio%s metal existing in te co%ntry into a circ%lating medi%m# it seeks to eD%ate a
drain o! gold @it a contraction o! te circ%lating medi%m and a ret%rn !lo@ o! gold @it an
expansion o! te circ%lating medi%m0 ?s a res%lt, te experiment pro8ed te contrary to be te
case0 Wit a single exception, @ic @e sall mention sortly, te D%antity o! circ%lating notes o!
te Aank o! England as ne8er, since 1822, reaced te maxim%m @ic it @as a%torised to
iss%e0 5e crisis o! 18+> pro8ed on te oter and tat tis maxim%m does not s%!!ice %nder
certain circ%mstances0 From -o8ember 13 to 3=, 18+>, a daily a8erage o! V288,83= abo8e tis
maxim%m @as circ%lating BA0 ?0 18+8, p0 J&C0 5e legal maxim%m @as at tat time V12,2>+,===,
pl%s te amo%nt o! metal reser8e in te 8a%lts o! te Aank0
;oncerning te o%t!lo@ and in!lo@ o! precio%s metal, te !ollo@ing is to be noted:
'irst, a distinction so%ld be made bet@een te back and !ort mo8ement o! metal @itin a
region @ic does not prod%ce any gold and sil8er, on te one and, and, on te oter, te !lo@ o!
gold and sil8er !rom teir so%rces o! prod%ction to 8ario%s oter co%ntries and te distrib%tion o!
tis additional metal among tem0
Ae!ore te gold mines o! )%ssia, ;ali!ornia and ?%stralia made 5eir in!l%ence !elt, te s%pply
since te beginning o! te 1*t cent%ry s%!!iced only !or te replacement o! @orn-o%t coins, !or
general %se in articles o! l%x%ry, and !or te export o! sil8er to ?sia0
6o@e8er, in te !irst place, sil8er exports to ?sia a8e since increased extraordinarily, o@ing to
te ?siatic trade o! ?merica and E%rope0 5e sil8er exported !rom E%rope @as largely replaced
by te additional s%pply o! gold0 $econdly, a portion o! te ne@ly imported gold @as absorbed by
internal money circ%lation0 &t is estimated tat %p to 18+> abo%t 3= million in gold @ere added to
England"s internal circ%lation0
xxiii
F%rtermore, te a8erage le8el o! metal reser8es in all te
central banks o! E%rope and ?merica increased since 18220 5e expansion o! domestic money
circ%lation res%lted at te same time in bank reser8es gro@ing more rapidly in te period o!
stagnation !ollo@ing %pon te panic, beca%se o! te larger D%antity o! gold coins tr%st o%t o!
domestic circ%lation and immobilised0 Finally, te cons%mption o! precio%s metal !or l%x%ry
articles increased since te disco8ery o! ne@ gold deposits as a conseD%ence o! te increased
@ealt0
Secondly, precio%s metal !lo@s back and !ort bet@een co%ntries @ic do not prod%ce any gold
or sil8er, te same co%ntry contin%ally importing, and also exporting0 &t is only te preponderance
o! tis mo8ement in one or anoter direction @ic, in te !inal analysis, determines @eter a
drain or an a%gmentation as taken place, since te mere oscillations and !reD%ently parallel
mo8ements largely ne%tralise one anoter0 A%t !or tis reason, in so !ar as te res%lt is concerned,
te contin%ity and, in te main, te parallel co%rse o! bot mo8ements is o8erlooked0 ? greater
import or a greater export o! precio%s metal is al@ays interpreted to be solely te e!!ect and
expression o! te relation bet@een te imports and exports o! commodities, @ereas it is
2=6 ;apter JJJ4
sim%ltaneo%sly indicati8e o! te relation bet@een exports and imports o! precio%s metal itsel!,
D%ite independent o! commodity trade0
4hirdly, te preponderance o! imports o8er exports, and 8ice 8ersa, is meas%red on te @ole by
te increase or decrease in metal reser8es o! te central banks0 5e greater or lesser precision o!
tis criterion nat%rally depends primarily on te degree o! centralisation o! te banking b%siness
in general0 For on tis depends te extent tat precio%s metal in general acc%m%lated in te so-
called national banks represents te national metal reser8e0 A%t ass%ming tis to be te case, te
criterion is not acc%rate beca%se an additional import may be absorbed %nder certain
circ%mstances by domestic circ%lation and te gro@ing cons%mption o! gold and sil8er in
prod%cing l%x%ry articles# !%rtermore, beca%se @ito%t additional import, a @itdra@al o! gold
coin !or domestic circ%lation co%ld take place, and t%s te metal reser8e co%ld decrease e8en
@ito%t a sim%ltaneo%s increase in exports0
'ourthly, an export o! metal ass%mes te aspect o! a drain @en te mo8ement o! decrease
contin%es !or a long time, so tat te decrease represents a tendency o! mo8ement and depresses
te metal reser8e o! te bank considerably belo@ its a8erage le8el, do@n to approximately its
a8erage minim%m0 5is minim%m is more or less arbitrarily !ixed, in so !ar as it is di!!erently
determined in e8ery indi8id%al case by legislation concerning backing !or te casing o! notes,
etc0 ;oncerning te D%antitati8e limits @ic s%c a drain can reac in England, -e@marc
testi!ied be!ore te ;ommittee on A0 ?0 18+>, E8idence -o0 12*2:
KP%dging !rom experience, it is 8ery %nlikely tat te
e!!l%x o! treas%re arising !rom any oscillation in te
!oreign trade @ill proceed beyond V3,===,=== or
V2,===,===0L
&n 182>, te lo@est gold reser8e le8el o! te Aank o! England, occ%rring on 3ctober <3, so@ed a
decrease o! V+,1*8,1+6 as compared @it tat o! 7ecember <6, 1826, and a decrease o!
V6,2+3,>28 as compared @it te igest le8el o! 1826 B?%g%st <*C0
'ifthly, te determination o! te metal reser8e o! te so-called national banks, a determination,
o@e8er, @ic does not by itsel! reg%late te magnit%de o! tis metal oard, !or it can gro@
solely by te paralysis o! domestic and !oreign trade, is tree!old: 1C reser8e !%nd !or
international payments, in oter @ords, reser8e !%nd o! @orld-money# <C reser8e !%nd !or
alternately expanding and contracting domestic metal circ%lation# 3C reser8e !%nd !or te payment
o! deposits and !or te con8ertibility o! notes Btis is connected @it te !%nction o! te bank and
as noting to do @it te !%nctions o! money as s%cC0 5e reser8e !%nd can, tere!ore, also be
in!l%enced by conditions @ic a!!ect e8ery one o! tese tree !%nctions0 5%s, as an international
!%nd it can be in!l%enced by te balance o! payments, no matter by @at !actors te latter may be
determined and @ate8er its relation to te balance o! trade may be0 ?s a reser8e !%nd !or
domestic metal circ%lation it can be in!l%enced by te latter"s expansion or contraction0 5e tird
!%nction I tat o! a sec%rity !%nd I does not, admittedly, determine te independent mo8ement o!
te metal reser8e, b%t as a t@o-!old e!!ect0 &! notes are iss%ed @ic replace metallic money
Balso incl%ding sil8er coins in co%ntries @ere sil8er is a meas%re o! 8al%eC in domestic
circ%lation, te !%nction o! te reser8e !%nd %nder <C drops a@ay0 ?nd a portion o! te precio%s
metal, @ic ser8ed to per!orm tis !%nction, @ill !or a long time !ind its @ay abroad0 &n tis case
metallic coins are not @itdra@n !or domestic circ%lation, and t%s te temporary a%gmentation
o! te metal reser8e by immobilising a part o! te circ%lating coined metal sim%ltaneo%sly !alls
a@ay0 F%rtermore, i! a minim%m metal reser8e m%st be maintained %nder all circ%mstances !or
te payment o! deposits and !or te con8ertibility o! notes, tis a!!ects in its o@n @ay te res%lts
o! a drain or ret%rn !lo@ o! gold# it a!!ects tat part o! te reser8e @ic te bank is obliged to
maintain %nder all circ%mstances, or tat part @ic it seeks to get rid o! as %seless at certain
2=> ;apter JJJ4
times0 &! te circ%lation @ere p%rely metallic and te banking system concentrated, te bank
@o%ld like@ise a8e to consider its metal reser8e as sec%rity !or te payment o! its deposits, and a
drain o! metal co%ld ca%se a panic s%c as @as @itnessed in 6amb%rg in 18+>0
Sithly, @it te exception o! peraps 183>, te real crisis al@ays broke o%t only a!ter a cange in
te rates o! excange, tat is, as soon as te import o! precio%s metal ad again gained
preponderance o8er its export0
&n 18<+, te real cras came a!ter te drain on gold ad ceased0 &n 183*, tere @as a drain on
gold, b%t it did not bring abo%t a cras0 &n 182>, te drain on gold ceased in ?pril and te cras
came in 3ctober0 &n 18+>, te drain on gold to !oreign co%ntries ad ceased in early -o8ember,
and te cras did not come %ntil later tat same mont0
5is is partic%larly e8ident in te crisis o! 182>, @en te drain on gold ceased in ?pril a!ter
ca%sing a sligt preliminary crisis, and te real b%siness crisis did not come %ntil 3ctober0
5e !ollo@ing testimony @as presented at te $ecret ;ommittee o! te 6o%se o! 'ords on
;ommercial 7istress, 18280 5is e8idence @as not printed %ntil 18+> Balso cited as ;0 70
1828N+>C0
E8idence o! 5ooke:
&n ?pril 182>, a stringency arose, @ic, strictly
speaking, eD%alled a panic, b%t @as o! relati8ely sort
d%ration and not accompanied by any commercial
!ail%res o! importance0 &n 3ctober te stringency @as
!ar more intensi8e tan at any time d%ring ?pril, an
almost %neard-o! n%mber o! commercial !ail%res
taking place B<**6C0 I &n ?pril te rates o! excange,
partic%larly @it ?merica, compelled %s to export a
considerable amo%nt o! gold in payment !or %n%s%ally
large imports# only by an extreme e!!ort did te Aank
stop te drain and dri8e te rates iger B<**>C0 I &n
3ctober te rates o! excange !a8o%red England
B<**8C0 I 5e cange in te rates o! excange ad
beg%n in te tird @eek o! ?pril B3===C0 I 5ey
!l%ct%ated in P%ly and ?%g%st# since te beginning o!
?%g%st tey al@ays !a8o%red England B3==1C0 I 5e
drain on gold in ?%g%st arose !rom a demand !or
internal circ%lation /3==310
P0 Morris, :o8ernor o! te Aank o! England:
?lto%g te rate o! excange !a8o%red England since
?%g%st 182>, and an import o! gold ad taken place in
2=8 ;apter JJJ4
conseD%ence, te b%llion reser8e o! te Aank
decreased0
KV<,<==,=== @ent o%t into te co%ntry in conseD%ence
o! te internal demandL B13>C0 I 5is is explained on
te one and by an increased employment o!
labo%rers in rail@ay constr%ction, and on te oter by
te Kcirc%mstance o! te bankers @ising to pro8ide
temsel8es @it gold in times o! distressL B12>C0
,almer, ex-go8ernor and a 7irector o! te Aank o! England since 1811:
K6820 7%ring te @ole period !rom te middle o!
?pril 182> to te day o! @itdra@ing te restricti8e
cla%se in te ?ct o! 1822 te !oreign excanges @ere
in !a8o%r o! tis co%ntry0L
5e drain o! b%llion, @ic created an independent money panic in ?pril 182> @as ere
tere!ore, as al@ays, b%t a prec%rsor o! te crisis, and a t%rn ad already taken place be!ore it
broke o%t0 &n 183*, a ea8y drain o! b%llion took place !or grain, etc0, @ile b%siness @as strongly
depressed, b%t tere @as no crisis or money panic0
Seventhly, as soon as general crises a8e spent temsel8es, gold and sil8er I lea8ing aside te
in!lo@ o! ne@ precio%s metal !rom te prod%cing co%ntries I distrib%te temsel8es once more in
te proportions in @ic tey existed in a state o! eD%ilibri%m as indi8id%al oards o! te 8ario%s
co%ntries0 3ter conditions being eD%al, te relati8e magnit%de o! a oard in eac co%ntry @ill be
determined by te role o! tat co%ntry in te @orld-market0 5ey !lo@ !rom te co%ntry @ic
ad more tan its normal sare to tose @it less tan a normal amo%nt0 5ese mo8ements o!
o%tgoing and incoming metal merely restore te original distrib%tion among te 8ario%s national
reser8es0 5is redistrib%tion, o@e8er, is bro%gt abo%t by te e!!ects o! 8ario%s circ%mstances,
@ic @ill be taken %p in o%r treatment o! rates o! excange0 ?s soon as te normal distrib%tion is
once more restored I beginning @it tis moment I a stage o! gro@t sets in and ten again a
drain0 /5is last statement applies, o! co%rse, only to England, as te centre o! te @orld money-
market0 I '.0.1
0ighthly, a drain o! metal is generally te symptom o! a cange in te state o! !oreign trade, and
tis cange in t%rn is a premonition tat conditions are again approacing a crisis0
xxi8

$inthly, te balance o! payments can !a8o%r ?sia against E%rope and ?merica0
xx8

?n import o! precio%s metal takes place mainly d%ring t@o periods0 3n te one and, it takes
place in te !irst pase o! a lo@ interest rate, @ic !ollo@s %pon a crisis and re!lects a restriction
o! prod%ction# and ten in te second pase, @en te interest rate rises, b%t be!ore it attains its
a8erage le8el0 5is is te pase d%ring @ic ret%rns come D%ickly, commercial credit is
ab%ndant, and tere!ore te demand !or loan capital does not gro@ in proportion to te expansion
o! prod%ction0 &n bot pases, @it loan capital relati8ely ab%ndant, te s%per!l%o%s addition o!
capital existing in te !orm o! gold and sil8er, i.e., a !orm in @ic it can primarily ser8e only as
loan capital, m%st serio%sly a!!ect te rate o! interest and concomitantly te atmospere o!
b%siness in general0
3n te oter and, a drain, a contin%ed and ea8y export o! precio%s metal, takes place as soon as
ret%rns no longer !lo@, markets are o8erstocked, and an ill%sory prosperity is maintained only by
means o! credit# in oter @ords, as soon as a greatly increased demand !or loan capital exists and
2=* ;apter JJJ4
te interest rate, tere!ore, as reaced at least its a8erage le8el0 (nder s%c circ%mstances, @ic
are re!lected precisely in a drain o! precio%s metal, te e!!ect o! contin%ed @itdra@al o! capital,
in a !orm in @ic it exists directly as loanable money-capital, is considerably intensi!ied0 5is
m%st a8e a direct in!l%ence on te interest rate0 A%t instead o! restricting credit transactions, te
rise in interest rate extends tem and leads to an o8er-straining o! all teir reso%rces0 5is period,
tere!ore, precedes te cras0
-e@marc is asked, A0 ?0 18+>:
K1+<=0 A%t ten te 8ol%me o! bills in circ%lation
increases @it te rate o! disco%ntQ I &t seems to do
so0L I K1+<<0 &n D%iet ordinary times te ledger is te
real instr%ment o! excange# b%t @en any di!!ic%lty
arises# @en, !or example, %nder s%c circ%mstances
as & a8e s%ggested, tere is a rise in te bank-rate o!
disco%nt 000 ten te transactions nat%rally resol8e
temsel8es into dra@ing bills o! excange, tose bills
o! excange being not only more con8enient as
regards legal proo! o! te transaction @ic as taken
place, b%t also being more con8enient in order to
e!!ect p%rcases else@ere, and being pre-eminently
con8enient as a means o! credit by @ic capital can
be raised0L
F%rtermore, as soon as some@at treatening conditions ind%ce te bank to raise its disco%nt
rate I @ereby te probability exists at te same time tat te bank @ill c%t do@n te r%nning
time o! te bills to be disco%nted by it I te general appreension spreads tat tis @ill rise in
crescendo0 E8eryone, and abo8e all te credit s@indler, @ill tere!ore stri8e to disco%nt te !%t%re
and a8e as many means o! credit as possible at is command at te gi8en time0 5ese reasons,
ten, amo%nt to tis: it is not tat te mere D%antity o! imported or exported precio%s metal as
s%c @ic makes its in!l%ence !elt, b%t tat it exerts its e!!ect, !irstly, by 8irt%e o! te speci!ic
caracter o! precio%s metal as capital in money-!orm, and secondly, by acting like a !eater
@ic, @en added to te @eigt on te scales, s%!!ices to tip te oscillating balance de!initely to
one side# it acts beca%se it arises %nder conditions @en any addition decides in !a8o%r o! one or
te oter side0 Wito%t tese gro%nds, it @o%ld be D%ite inexplicable @y a drain o! gold
amo%nting to, say, V+,===,=== to V8,===,=== I and tis is te limit o! experience to date I so%ld
a8e any appreciable e!!ect0 5is small decrease or increase o! capital, @ic seems insigni!icant
e8en compared to te V>= million in gold @ic circ%late on an a8erage in England, is really a
negligibly small magnit%de @en compared to prod%ction o! s%c 8ol%me as tat o! te
Englis0
xx8i
A%t it is precisely te de8elopment o! te credit and banking system, @ic tends, on
te one and, to press all money-capital into te ser8ice o! prod%ction Bor @at amo%nts to te
same ting, to trans!orm all money income into capitalC, and @ic, on te oter and, red%ces
te metal reser8e to a minim%m in a certain pase o! te cycle, so tat it can no longer per!orm
te !%nctions !or @ic it is intended I it is te de8eloped credit and banking system @ic
creates tis o8er-sensiti8eness o! te @ole organism0 ?t less de8eloped stages o! prod%ction, te
decrease or increase o! te oard belo@ or abo8e its a8erage le8el is a relati8ely insigni!icant
21= ;apter JJJ4
matter0 $imilarly, on te oter and, e8en a 8ery considerable drain o! gold is relati8ely
ine!!ecti8e i! it does not occ%r in te critical period o! te ind%strial cycle0
&n te gi8en explanation @e a8e not considered cases in @ic a drain o! gold takes place as a
res%lt o! crop !ail%res, etc0 &n s%c cases te large and s%dden dist%rbance o! te eD%ilibri%m o!
prod%ction, @ic is expressed by tis drain, reD%ires no !%rter explanation as to its e!!ect0 5is
e!!ect is tat m%c greater te more s%c a dist%rbance occ%rs in a period @en prod%ction is in
!%ll s@ing0
We a8e also omitted !rom consideration te !%nction o! te metal reser8e as a sec%rity !or bank-
note con8ertibility and as te pi8ot o! te entire credit system0 5e central bank is te pi8ot o! te
credit system0 ?nd te metal reser8e, in t%rn, is te pi8ot o! te bank0
xx8ii
5e cange-o8er !rom
te credit system to te monetary system is necessary, as & a8e already so@n in 4ol0 & B;0 &&&C
in disc%ssing means o! payment0 5at te greatest sacri!ices o! real @ealt are necessary to
maintain te metallic basis in a critical moment as been admitted by bot 5ooke and 'oyd-
38erstone0 5e contro8ersy re8ol8es merely ro%nd a pl%s or a min%s, and ro%nd te more or less
rational treatment o! te ine8itable0
xx8iii
? certain D%antity o! metal, insigni!icant compared @it
te total prod%ction, is admitted to be te pi8otal point o! te system0 6ence te s%perb
teoretical d%alism, aside !rom te appalling mani!estation o! tis caracteristic tat it possesses
as te pi8otal point d%ring crises0 $o long as enligtened economy treats Ko! capitalL e professo,
it looks do@n %pon gold and sil8er @it te greatest disdain, considering tem as te most
indi!!erent and %seless !orm o! capital0 A%t as soon as it treats o! te banking system, e8eryting
is re8ersed, and gold and sil8er become capital par ecellence, !or @ose preser8ation e8ery oter
!orm o! capital and labo%r is to be sacri!iced0 A%t o@ are gold and sil8er disting%ised !rom
oter !orms o! @ealtQ -ot by te magnit%de o! teir 8al%e, !or tis is determined by te D%antity
o! labo%r incorporated in tem# b%t by te !act tat tey represent independent incarnations,
expressions o! te social caracter o! @ealt0 /5e @ealt o! society exists only as te @ealt o!
pri8ate indi8id%als, @o are its pri8ate o@ners0 &t preser8es its social caracter only in tat tese
indi8id%als m%t%ally excange D%alitati8ely di!!erent %se-8al%es !or te satis!action o! teir
@ants0 (nder capitalist prod%ction tey can do so only by means o! money0 5%s te @ealt o!
te indi8id%al is realised as social @ealt only tro%g te medi%m o! money0 &t is in money, in
tis ting, tat te social nat%re o! tis @ealt is incarnated0 I '.0.1 5is social existence o!
@ealt tere!ore ass%mes te aspect o! a @orld beyond, o! a ting, matter, commodity, alongside
o! and external to te real elements o! social @ealt0 $o long as prod%ction is in a state o! !l%x tis
is !orgotten0 ;redit, like@ise a social !orm o! @ealt, cro@ds o%t money and %s%rps its place0 &t is
!ait in te social caracter o! prod%ction @ic allo@s te money-!orm o! prod%cts to ass%me te
aspect o! someting tat is only e8anescent and ideal, someting merely imaginati8e0 A%t as soon
as credit is saken I and tis pase o! necessity al@ays appears in te modern ind%strial cycle I
all te real @ealt is to be act%ally and s%ddenly trans!ormed into money, into gold and sil8er I a
mad demand, @ic, o@e8er, gro@s necessarily o%t o! te system itsel!0 ?nd all te gold and
sil8er @ic is s%pposed to satis!y tese enormo%s demands amo%nts to b%t a !e@ millions in te
8a%lts o! te Aank0
xxix

?mong te e!!ects o! te gold drain, ten, te !act tat prod%ction as social prod%ction is not
really s%bHect to social control, is strikingly empasised by te existence o! te social !orm o!
@ealt as a ting external to it0 5e capitalist system o! prod%ction, in !act, as tis !eat%re in
common @it !ormer systems o! prod%ction, in so !ar as tey are based on trade in commodities
and pri8ate excange0 A%t only in te capitalist system o! prod%ction does tis become apparent
in te most striking and grotesD%e !orm o! abs%rd contradiction and paradox, beca%se, in te !irst
place, prod%ction !or direct %se-8al%e, !or cons%mption by te prod%cers temsel8es, is most
completely eliminated %nder te capitalist system, so tat @ealt exists only as a social process
expressed as te intert@ining o! prod%ction and circ%lation# and secondly, @it te de8elopment
o! te credit system, capitalist prod%ction contin%ally stri8es to o8ercome te metal barrier, @ic
211 ;apter JJJ4
is sim%ltaneo%sly a material and imaginati8e barrier o! @ealt and its mo8ement, b%t again and
again it breaks its back on tis barrier0
&n te crisis, te demand is made tat all bills o! excange, sec%rities and commodities sall be
sim%ltaneo%sly con8ertible into bank money, and all tis bank money, in t%rn, into gold0
II. The )ate "f !change
/5e rate o! excange is kno@n to be te barometer !or te international mo8ement o! money
metals0 &! England as more payments to make to :ermany tan :ermany to England, te price
o! marks, expressed in sterling, rises in 'ondon, and te price o! sterling, expressed in marks,
!alls in 6amb%rg and Aerlin0 &! tis preponderance o! England"s payment obligations to@ards
:ermany is not balanced again, !or instance, by a preponderance o! p%rcases by :ermany in
England, te sterling price o! bills o! excange in marks on :ermany m%st rise to te point @ere
it @ill pay to send metal Bgold coin or b%llionC !rom England to :ermany in payment o!
obligations, instead o! sending bills o! excange0 5is is te typical co%rse o! e8ents0
&! tis export o! precio%s metal ass%mes a larger scope and lasts !or a longer period, ten te
Englis bank reser8e is a!!ected, and te Englis money-market, partic%larly te Aank o!
England, m%st take protecti8e meas%res0 5ese consist mainly, as @e a8e already seen, in raising
te interest rate0 Wen te drain on gold is considerable, te money-market as a r%le becomes
tigt, tat is, te demand !or loan capital in te !orm o! money signi!icantly exceeds te s%pply
and te iger interest rate !ollo@s D%ite nat%rally !rom tis# te disco%nt rate !ixed by te Aank
o! England corresponds to tis sit%ation and asserts itsel! on te market0 6o@e8er tere are cases
@en te drain on b%llion is d%e to oter tan ordinary combinations o! b%siness transactions B!or
instance, loans to !oreign states, in8estment o! capital in !oreign co%ntries, etc0C, and te 'ondon
money-market as s%c does not H%sti!y an e!!ecti8e rise in te interest rate# te Aank o! England
m%st ten !irst Kmake money scarce,L as te prase goes, tro%g ea8y loans in te Kopen
marketL and t%s arti!icially create a sit%ation @ic H%sti!ies, or renders necessary, a rise in te
interest rate# s%c a manoe%8re becomes more di!!ic%lt !rom year to year0 I '.001
6o@ tis raising o! te interest rate a!!ects te rates o! excange is so@n by te !ollo@ing
testimony be!ore te ;ommittee o! te 'o@er 6o%se concerning bank legislation in 18+> BD%oted
as A0 ?0 or A0 ;0 18+>C0
Pon $t%art Mill: K<1>60 Wen tere is a state o!
commercial di!!ic%lty tere is al@ays 000 a
considerable !all in te price o! sec%rities 000 !oreigners
send o8er to b%y rail@ay sares in tis co%ntry, or
Englis olders o! !oreign rail@ay sares sell teir
!oreign rail@ay sares abroad 000 tere is so m%c
trans!er o! b%llion pre8ented0L I K<18<0 ? large and
ric class o! bankers and dealers in sec%rities, tro%g
@om te eD%alisation o! te rate o! interest and te
eD%alisation o! commercial press%re bet@een di!!erent
co%ntries %s%ally takes place 000 are al@ays on te look
o%t to b%y sec%rities @ic are likely to rise0000 5e
place !or tem to b%y sec%rities @ill be te co%ntry
21< ;apter JJJ4
@ic is sending b%llion a@ay0L I K<1820 5ese
in8estments o! capital took place to a 8ery
considerable extent in 182>, to a s%!!icient extent to
a8e relie8ed te drain considerably0L
P0 :0 6%bbard, ex-:o8ernor, and a 7irector o! te Aank o! England since 1838:
K<+2+0 5ere are great D%antities o! E%ropean
sec%rities 000 @ic a8e a E%ropean c%rrency in all
te di!!erent money-markets, and tose bonds, as soon
as teir 8al%e is red%ced by 1 or < per cent in one
market, are immediately p%rcased !or transmission to
tose markets @ere teir 8al%e is still %nimpaired0L I
K<+6+0 ?re not !oreign co%ntries considerably in debt
to te mercants o! tis co%ntryQ I 4ery largely0L I
K<+660 5ere!ore, te casment o! tose debts migt
be s%!!icient to acco%nt !or a 8ery large acc%m%lation
o! capital in tis co%ntryQ I &n 182>, te %ltimate
restoration o! o%r position @as e!!ected by o%r
striking o!! so many millions pre8io%sly d%e by
?merica, and so many millions d%e by )%ssia to tis
co%ntry0L
/?t te same time, England o@ed tese same co%ntries Kso and so many millionsL !or grain and
also did not !ail to Kdra@ a lineL tro%g te greater portion o! tese millions 8ia te bankr%ptcy
o! te Englis debtors0 $ee te report on Aank ?cts, 18+>, ;apter JJJ abo8e. J '.001
K<+><0 &n 182>, te excange bet@een tis co%ntry
and $t0 ,etersb%rg @as 8ery ig0 Wen te
:o8ernment 'etter came o%t a%torising te Aank to
iss%e irrespecti8ely o! te limitation o! V12,===,===
/abo8e and beyond te gold reser8e I '.0.1, te
stip%lation @as tat te rate o! disco%nt so%ld be 8T0
?t tat moment, @it te ten rate o! disco%nt, it @as
a pro!itable operation to order gold to be sipped !rom
$t0 ,etersb%rg to 'ondon and on its arri8al to lend it at
8T %p to te mat%rity o! te tree monts" bills dra@n
against te p%rcase o! gold0L I K<+>30 &n all b%llion
operations tere are many points to be taken into
consideration# tere is te rate o! excange and te
213 ;apter JJJ4
rate o! interest, @ic is a8ailable !or te in8estment
d%ring te period o! te mat%rity o! te bill /dra@n
against it I '.0010L
Rate Of Exchange With Asia
5e !ollo@ing points are important beca%se, on te one and, tey so@ o@ England reco%ps its
losses @en its rate o! excange @it ?sia is %n!a8o%rable, at te expense o! oter co%ntries,
@ose imports !rom ?sia are paid tro%g Englis middlemen0 3n te oter and, tey are
important beca%se Mr0 Wilson once again makes te !oolis attempt ere to identi!y te e!!ects o!
te export o! precio%s metal on te rates o! excange @it te e!!ect o! te export o! capital in
general %pon tese rates# te export being in bot cases not as a means o! paying or b%ying, b%t
!or capital in8estment0 &n te !irst place, it goes @ito%t saying tat @eter so many millions o!
po%nds sterling are sent to &ndia in precio%s metal or iron rails, to be in8ested in rail@ays tere,
tese are merely t@o di!!erent !orms o! trans!erring te same amo%nt o! capital to anoter
co%ntry# namely, a trans!er @ic does not enter te calc%lation o! ordinary mercantile b%siness,
and !or @ic te exporting co%ntry expects no oter ret%rn tan te !%t%re ann%al re8en%e !rom
te income o! tese rail@ays0 &! tis export is made in te !orm o! precio%s metal, it @ill exert a
direct in!l%ence %pon te money-market and @it it %pon te interest rate o! te co%ntry exporting
tis precio%s metal# i! not necessarily %nder all circ%mstances, ten %nder te pre8io%sly o%tlined
conditions, since it is precio%s metal and as s%c is directly loanable money-capital and te basis
o! te entire money system0 $imilarly, tis export also directly a!!ects te rate o! excange0
,recio%s metal is exported only !or te reason, and to te extent, tat bills o! excange, say on
&ndia, @ic are o!!ered in te 'ondon money-market, do not s%!!ice to make tese extra
remittances0 &n oter @ords, tere is a demand !or &ndian bills o! excange @ic exceeds teir
s%pply, and so te rates t%rn !or a time against England, not beca%se it is in debt to &ndia, b%t
beca%se it as to send extraordinary s%ms to &ndia0 &n te long r%n, s%c a sipment o! precio%s
metal to &ndia m%st a8e te e!!ect o! increasing te &ndian demand !or Englis commodities,
beca%se it indirectly increases te cons%ming po@er o! &ndia !or E%ropean goods0 A%t, i! te
capital is sipped in te !orm o! rails, etc0, it cannot a8e any in!l%ence on te rates o! excange,
since &ndia as no ret%rn payment to make !or it0 ,recisely !or tis reason, it need not a8e any
in!l%ence on te money-market0 Wilson seeks to establis te existence o! s%c an in!l%ence by
declaring tat s%c an extra expendit%re @o%ld bring abo%t an additional demand !or money
accommodation and @o%ld t%s in!l%ence te interest rate0 5is may be te case# b%t to maintain
tat it m%st take place %nder all circ%mstances is totally @rong0 -o matter @ere te rails are
sipped and @eter laid on Englis or &ndian soil, tey represent noting b%t a de!inite
expansion o! Englis prod%ction in a partic%lar spere0 5o contend tat an expansion o!
prod%ction, e8en @itin 8ery broad limits, cannot take place @ito%t dri8ing %p te interest rate,
is abs%rd0 Money accommodation, i.e., te amo%nt o! b%siness transacted @ic incl%des credit
operations, may gro@# b%t tese credit operations can increase @ile te interest rate remains
%ncanged0 5is @as act%ally te case d%ring te rail@ay mania in England in te !orties0 5e
interest rate did not rise0 ?nd it is e8ident tat, so !ar as act%al capital is concerned, in tis case
commodities, te e!!ect on te money-market @ill e H%st te same, @eter tese commodities
are destined !or !oreign co%ntries or !or domestic cons%mption0 &t co%ld only make a di!!erence
@en capital in8estments by England in !oreign co%ntries exerted a restraining in!l%ence %pon its
commercial exports, i.e., exports !or @ic payment m%st be made, t%s gi8ing rise to a ret%rn
!lo@, or to te extent tat tese capital in8estments are already general symptoms indicating te
o8er-expansion o! credit and te initiation o! s@indling operations0
&n te !ollo@ing, Wilson p%ts te D%estions and -e@marc replies0
212 ;apter JJJ4
K1>860 3n a !ormer day yo% stated, @it re!erence to
te demand !or sil8er !or te East, tat yo% belie8ed
tat te excanges @it &ndia @ere in !a8o%r o! tis
co%ntry, not@itstanding te large amo%nt o! b%llion
tat is contin%ally transmitted to te East# a8e yo%
any gro%nd !or s%pposing te excanges to be in
!a8o%r o! tis co%ntryQ I .es, & a8e0000 & !ind tat te
real 8al%e o! te exports !rom te (nited Kingdom to
&ndia in 18+1 @as V>,2<=,===# to tat is to be added
te amo%nt o! &ndia 6o%se dra!ts, tat is, te !%nds
dra@n !rom &ndia by te East &ndia ;ompany !or te
p%rpose o! teir o@n expendit%re0 5ose dra!ts in tat
year amo%nted to V3,<==,===, making, tere!ore, te
total export !rom te (nited Kingdom to &ndia
V1=,6<=,===0 &n 18++000 te act%al 8al%e o! te export
o! goods !rom te (nited Kingdom ad risen to
V1=,3+=,=== and te &ndia 6o%se dra!ts @ere
V3,>==,===, making, tere!ore, te total export !rom
tis co%ntry V12,=+=,===0 -o@ as regards 18+1, &
belie8e tere are no means o! stating @at @as te
real 8al%e o! te import o! goods !rom &ndia to tis
co%ntry, b%t in 18+2 and 18++ @e a8e a statement o!
te real 8al%e# in 18++, te total real 8al%e o! te
imports o! goods !rom &ndia to tis co%ntry @as
V1<,6>=,=== and tat s%m, compared @it te
V12,=+=,=== & a8e mentioned, le!t a balance in
!a8o%r o! te (nited Kingdom, as regards te direct
trade bet@een te t@o co%ntries, o! V1,38=,===L /A0
?0 18+>10
5ere%pon Wilson remarks tat te rates o! excange are also a!!ected by indirect commerce0 For
instance, exports !rom &ndia to ?%stralia and -ort ?merica are co8ered by dra!ts on 'ondon, and
tere!ore a!!ect te rate o! excange H%st as to%g te commodities ad gone directly !rom &ndia
to England0 F%rtermore, @en &ndia and ;ina are considered togeter, te balance is against
England, since ;ina as constantly to make ea8y payments to &ndia !or opi%m, and England
as to make payments to ;ina, so tat te s%ms go by tis circ%ito%s ro%te to &ndia B1>8>, 1>88C0
1>*10 Wilson no@ asks i! te e!!ect on te rates o! excange @ill not be te same @eter capital
21+ ;apter JJJ4
K@ent in te !orm o! iron rails and locomoti8es, or
@eter it @ent in te !orm o! coin0L
-e@marc correctly ans@ers:
K5e V1< million @ic a8e been sent d%ring te last
!e@ years to &ndia !or rail@ay constr%ction ser8ed to
p%rcase an ann%ity @ic &ndia as to pay at reg%lar
inter8als to England0 KA%t as !ar as regards te
immediate operation on te b%llion market, te
in8estments o! te V1< million @o%ld only be
operati8e as !ar as b%llion @as reD%ired to be sent o%t
!or act%al money disb%rsements0L
1>*>0 /Weg%elin asks:C K&! no ret%rn is made !or tis iron BrailsC, o@ can it be said to a!!ect te
excangesQ I & do not tink tat tat part o! te expendit%re @ic is sent o%t in te !orm o!
commodities a!!ects te comp%tation o! te excange0000 5e comp%tation o! te excange
bet@een t@o co%ntries is a!!ected, one migt say, solely by te D%antity o! obligations or bills
o!!ering in one co%ntry, as compared @it te D%antity o!!ering in te oter co%ntry against it# tat
is te rationale o! te excange0 -o@, as regards te transmission o! tose V1<,===,===, te
money in te !irst place is s%bscribed in tis co%ntry 000 no@, i! te nat%re o! te transaction @as
s%c tat te @ole o! tat V1<,===,=== @as reD%ired to be laid do@n in ;alc%tta, Aombay, and
Madras in treas%re 000 a s%dden demand @o%ld 8ery 8iolently operate %pon te price o! sil8er, and
%pon te excange, H%st te same as i! te &ndia ;ompany @ere to gi8e notice tomorro@ tat teir
dra!ts @ere to be raised !rom V3,===,=== to V1<,===,===0 A%t al! o! tose V1<,===,=== is
spent 000 in b%ying commodities in tis co%ntry 000 iron rails and timber, and oter materials it is an
expendit%re in tis co%ntry o! te capital o! tis co%ntry !or a partic%lar kind o! commodity to be
sent o%t to &ndia, and tere is an end o! it0L I K1>*80 /Weg%elin:1 A%t te prod%ction o! tose
articles o! iron and timber necessary !or te rail@ays prod%ces a large cons%mption o! !oreign
articles, @ic migt a!!ect te excangeQ I ;ertainly0L
Wilson no@ tinks tat iron represents labo%r to a large extent, and tat te @age paid !or tis
labo%r largely represents imported goods B1>**C, and ten D%estions !%rter:
K18=10 A%t speaking D%ite generally, it @o%ld a8e te
e!!ect o! t%rning te excanges against tis co%ntry i!
yo% sent abroad te articles @ic @ere prod%ced by
te cons%mption o! te imported articles @ito%t
recei8ing any remittance !or tem eiter in te sape
o! prod%ce or oter@iseQ I 5at principle is exactly
@at took place in tis co%ntry d%ring te time o! te
great rail@ay expendit%re /182+10 For tree or !o%r or
!i8e years, yo% spent %pon rail@ays V3=,===,===,
nearly te @ole o! @ic @ent in te payment o!
@ages0 .o% s%stained in tree years a larger
216 ;apter JJJ4
pop%lation employed in constr%cting rail@ays, and
locomoti8es, and carriages, and stations tan yo%
employed in te @ole o! te !actory districts0 5e
people 000 spent tose @ages in b%ying tea and s%gar
and spirits and oter !oreign commodities# tose
commodities @ere imported# b%t it @as a !act, tat
d%ring te time tis great expendit%re @as going on
te !oreign excanges bet@een tis co%ntry and oter
co%ntries @ere not materially deranged0 5ere @as no
e!!l%x o! b%llion, on te contrary, tere @as rater an
in!l%x0L
18=<0 Wilson insists tat @it an eD%alised trade balance and par rates bet@een England and &ndia
te extra sipment o! iron and locomoti8es K@o%ld a!!ect te excanges @it &ndia0L -e@marc
cannot see it tat @ay so long as te rails are sent o%t as capital in8estment and &ndia as no
payment to make !or tem in one !orm or anoter# e adds:
K& agree @it te principle tat no one co%ntry can
a8e permanently against itsel! an ad8erse state o!
excange @it all te oter co%ntries, @it @ic it
deals# an ad8erse excange @it one co%ntry
necessarily prod%ces a !a8o%rable excange @it
anoter0L
Wilson retorts @it tis tri8iality:
K18=30 A%t @o%ld not a trans!er o! capital be te same
@eter it @as sent in one !orm or anoterQ I ?s
regards te obligation it @o%ld0L I K18=20 5e e!!ect
tere!ore o! making rail@ays in &ndia, @eter yo%
send b%llion or @eter yo% send materials, @o%ld be
te same %pon te capital-market ere in increasing
te 8al%e o! capital as i! te @ole @as sent o%t in
b%llionQ
&! iron prices did not rise, it @as in any case proo! tat te K8al%eL o! KcapitalL contained in te
rails ad not been increased0 Wat @e are ere concerned @it is te 8al%e o! money-capital, i.e.,
te interest rate0 Wilson @o%ld like to identi!y money-capital @it capital in general0 5e simple
!act is essentially tat 1< million @ere s%bscribed in England !or &ndian rail@ays0 5is is a matter
@ic as noting directly to do @it te rates o! excange, and te designation o! te V1<
million is also te same to te money-market0 &! te money-market is in good sape, it need not
prod%ce any e!!ect at all on it, H%st as te Englis rail@ay s%bscriptions in 1822 and 182+ le!t te
money-market %na!!ected0 &! te money-market is already in some@at di!!ic%lt straits, te
interest rate migt indeed be a!!ected by it, b%t certainly only in an %p@ard direction, and tis,
21> ;apter JJJ4
according to Wilson"s teory, @o%ld !a8o%rably a!!ect te rates o! excange !or England, tat is, it
@o%ld @ork against te tendency to export precio%s metal# i! not to &ndia, ten to some oter
co%ntry0 Mr0 Wilson H%mps !rom one ting to anoter0 &n M%estion 18=< it is te rates o! excange
tat are s%pposed to be a!!ected, and &n M%estion 18=2 te K8al%e o! capitalL I @ic are t@o 8ery
di!!erent tings0 5e interest rate may a!!ect te rates o! excange, and te rates o! excange may
a!!ect te interest rate, b%t te latter can be stable @ile te rates o! excange !l%ct%ate, and te
rates o! excange can be stable @ile te interest rate !l%ct%ates0 Wilson cannot get it tro%g is
ead tat te mere !orm in @ic capital is sipped abroad makes s%c a di!!erence in te e!!ect,
i.e., tat te di!!erence in te !orm o! capital is o! s%c importance, and partic%larly its money-
!orm, @ic r%ns 8ery m%c co%nter to enligtened economy0 -e@marc replies to Wilson one-
sidedly in tat e does not indicate tat e as H%mped so s%ddenly and @ito%t reason !rom rate
o! excange to interest rate0 -e@marc ans@ers M%estion 18=2 @it %ncertainty and
eD%i8ocation:
K-o do%bt, i! tere is a demand !or V1<,===,=== to be
raised, it is immaterial, as regards te general rate o!
interest, @eter tat V1< million is reD%ired to be
sent in b%llion or in materials0 & tink, o@e8erL
/a !ine transition, tis Ko@e8er,L @en e intends to say te exact opposite1
Kit is not D%ite immaterialL
/it is immaterial, b%t, ne8erteless, it is not immaterial1
Kbeca%se in te one case te V6 million @o%ld be
ret%rned immediately# in te oter case it @o%ld not
be ret%rned so rapidly0 5ere!ore it @o%ld make
someL
/@at de!initenessS1
Kdi!!erence, @eter te V6 million @as expended in
tis co%ntry or sent @olly o%t o! it0L
Wat does e mean @en e says six million @o%ld ret%rn immediatelyQ &n so !ar as te V6
million a8e been expended in England, tey exist in rails, locomoti8es, etc0, @ic are sipped
to &ndia, @ence tey do not ret%rn# teir 8al%e ret%rns 8ery slo@ly tro%g amortisation, @ereas
te six million in precio%s metal may peraps ret%rn 8ery D%ickly in kind0 &n so !ar as te six
million a8e been expended in @ages, tey a8e been cons%med# b%t te money %sed !or
payment circ%lates in te co%ntry te same as e8er, or !orms a reser8e0 5e same olds tr%e !or
te pro!its o! rail prod%cers and tat portion o! te six million @ic replaces teir constant
capital0 5%s, tis ambig%o%s statement abo%t ret%rns is %sed by -e@marc only to a8oid saying
directly: 5e money as remained in te co%ntry, and in so !ar as it ser8es as loanable money-
capital te di!!erence !or te money-market Baside !rom te possibility tat circ%lation co%ld a8e
absorbed more coinC is only tat it is carged to te acco%nt o! ? instead o! A0 ?n in8estment o!
tis kind, @ere capital is trans!erred to oter co%ntries in commodities, not in precio%s metal,
can a!!ect te rate o! excange Bb%t not te rate o! excange @it te co%ntry in @ic te
exported capital is in8estedC only in so !ar as te prod%ction o! tese exported commodities
reD%ires an additional import o! oter !oreign commodities0 5is prod%ction ten cannot balance
o%t te additional import0 6o@e8er, te same ting appens @it e8ery export on credit, no
matter @eter intended !or capital in8estment or ordinary commercial p%rposes0 Moreo8er, tis
218 ;apter JJJ4
additional import can also call !ort by @ay o! reaction an additional demand !or Englis goods,
!or instance, on te part o! te colonies or te (nited $tates0
,re8io%sly B1>86C, -e@marc stated tat, o@ing to dra!ts o! te East &ndia ;ompany, exports
!rom England to &ndia @ere larger tan imports0 $ir ;arles Wood cross-examines im on tis
score0 5is preponderance o! Englis exports to &ndia o8er imports !rom &ndia is act%ally bro%gt
abo%t by imports !rom &ndia !or @ic England does not pay any eD%i8alent0 5e dra!ts o! te
East &ndia ;ompany Bno@ te East &ndia go8ernmentC reser8e temsel8es into a trib%te le8ied on
&ndia0 For instance, in 18++, imports !rom &ndia to England amo%nted to V1<,6>=,===# Englis
exports to &ndia amo%nted to V1=,3+=,===# balance in &ndia"s !a8o%r V<,<+=,===0 /i.e,
approximately <[ million: more precisely, V<,3<=,===0 I 0d.1
K&! tat @as te @ole state o! te case, tat
V<,<+=,=== @o%ld a8e to be remitted in some !orm to
&ndia0 A%t ten come in te ad8ertisements !rom te
&ndia 6o%se0 5e &ndia 6o%se ad8ertise to tis e!!ect
tat tey are prepared to grant dra!ts on te 8ario%s
presidencies in &ndia to te extent o! V3,<+=,===0L
/5is amo%nt @as le8ied !or te 'ondon expenses o! te East &ndia ;ompany and !or te
di8idends to be paid to stockolders01
K?nd tat not merely liD%idates te V<,<+=,=== @ic
arose o%t o! te co%rse o! trade, b%t it presents
V1,===,=== o! s%rpl%sL B1*1>C /A0 ?0 18+>10
K1*<<0 /Wood:1 5en te e!!ect o! tose &ndia 6o%se
dra!ts is not to increase te exports to &ndia, b%t pro
tanto to diminis temQL
/5is so%ld read: to red%ce te necessity o! co8ering te imports !rom &ndia by exports to tat
co%ntry to te same amo%nt01 Mr0 -e@marc explains tis by saying tat te Aritis import Kgood
go8ernmentL into &ndia !or tese V3,>==,=== B1*<+C0 Wood, as a !ormer Minister !or &ndia, kno@s
!%ll @ell te kind o! Kgood go8ernmentL @ic te Aritis import to &ndia, and correctly replies
@it irony:
K1*<60 5en te export, @ic, yo% state, is ca%sed by
te East &ndia dra!ts, is an export o! good go8ernment,
and not o! prod%ce0L
$ince England exports a good deal Kin tis @ayL !or Kgood go8ernmentL and as capital
in8estment in !oreign co%ntries I t%s obtaining imports @ic are completely independent o! te
ordinary r%n o! b%siness, trib%te partly !or exported Kgood go8ernmentL and partly in te !orm o!
re8en%es !rom capital in8ested in te colonies or else@ere, i.e., trib%te !or @ic it does not a8e
to pay any eD%i8alent I it is e8ident tat te rates o! excange are not a!!ected @en England
simply cons%mes tis trib%te @ito%t exporting anyting in ret%rn0 6ence, it is also e8ident tat
te rates o! excange are not a!!ected @en it rein8ests tis trib%te, not in England, b%t
prod%cti8ely or %nprod%cti8ely in !oreign co%ntries# !or instance, @en it sends m%nitions !or it to
te ;rimea0 Moreo8er, to te extent tat imports !rom abroad enter into te re8en%e o! England I
21* ;apter JJJ4
o! co%rse, tey m%st be paid !or in te !orm o! trib%te, !or @ic no eD%i8alent ret%rn is necessary,
or by excange !or tis %npaid trib%te or in te ordinary co%rse o! commerce I England can eiter
cons%me tem or rein8est tem as capital0 &n neiter case are te rates o! excange a!!ected, and
tis is o8erlooked by te sage Wilson0 Weter a domestic or a !oreign prod%ct constit%tes a part
o! te re8en%e I @ereby te latter case merely reD%ires an excange o! domestic !or !oreign
prod%cts I te cons%mption o! tis re8en%e, be it prod%cti8e or %nprod%cti8e, alters noting in te
rates o! excange, e8en to%g it may alter te scale o! prod%ction0 5e !ollo@ing so%ld be read
@it te !oregoing in mind:
1*320 Wood asks -e@marc o@ te sipment o! @ar s%pplies to te ;rimea @o%ld a!!ect te
rate o! excange @it 5%rkey0 -e@marc replies:
K& do not see tat te mere transmission o! @arlike
stores @o%ld necessarily a!!ect te excange, b%t
certainly te transmission o! treas%re @o%ld a!!ect te
excange0L
&n tis case e t%s disting%ises capital in te !orm o! money !rom capital in oter !orms0 A%t
no@ Wilson asks:
K1*3+0 &! yo% make an export o! any article to a great
extent, !or @ic tere is to be no corresponding
importL
/Mr0 Wilson !orgets tat tere are 8ery considerable imports into England !or @ic
corresponding exports a8e ne8er taken place, except in te !orm o! Kgood go8ernmentL or o!
pre8io%sly exported in8estment capital# in any case imports @ic do not enter into normal
commercial mo8ement0 A%t tese imports are again excanged, !or instance, !or ?merican
prod%cts, and te circ%mstance tat ?merican goods are exported @ito%t corresponding imports
does not alter te !act tat te 8al%e o! tese imports can be cons%med @ito%t an eD%i8alent !lo@
abroad# tey a8e been recei8ed @ito%t reciprocal exports and can tere!ore be cons%med
@ito%t entering into te balance o! trade1,
Kyo% do not discarge te !oreign debt yo% a8e
created by yo%r importsL
/b%t, i! yo% a8e pre8io%sly paid !or tese imports, !or instance, by credit gi8en abroad, ten no
debt is contracted tereby, and te D%estion as noting to do @it te international balance# it
resol8es itsel! into prod%cti8e and %nprod%cti8e expendit%res, no matter @eter te prod%cts so
cons%med are domestic or !oreign1,
Kand tere!ore yo% m%st by tat transaction a!!ect te
excanges by not discarging te !oreign debt, by
reason o! yo%r export a8ing no corresponding
importsQ I 5at is tr%e as regards co%ntries
generally0L
5is lect%re by Wilson amo%nts to saying tat e8ery export @it no corresponding import is
sim%ltaneo%sly an import @it no corresponding export, beca%se !oreign, i.e., imported,
commodities enter into te prod%ction o! te exported article0 5e ass%mption is tat e8ery export
o! tis kind is based on, or creates, an %npaid import and t%s pres%pposes a debt abroad0 5is is
@rong, e8en @en te !ollo@ing t@o circ%mstances are disregarded: 1C England recei8es certain
2<= ;apter JJJ4
imports !ree o! carge !or @ic it pays no eD%i8alent, e.g., a portion o! its &ndian imports0 &t can
excange tese !or ?merican imports and export te latter @ito%t importing in ret%rn# in any
case, so !ar as te 8al%e is concerned, it as only exported someting tat as cost it noting0 <C
England may a8e paid !or imports, !or instance, ?merican imports, @ic constit%te additional
capital# i! it cons%mes tese %nprod%cti8ely, !or instance, as @ar materials, tis does not constit%te
any debt to@ards ?merica and does not a!!ect te rate o! excange @it ?merica0 -e@marc
contradicts imsel! in -os0 1*32 and 1*3+, and Wood calls tis to is attention in -o0 1*38:
K&! no portion o! te goods @ic are employed in te
man%!act%re o! te articles exported @ito%t ret%rn
/@ar materials1, came !rom te co%ntry to @ic tose
articles are sent, o@ is te excange @it tat
co%ntry a!!ected# s%pposing te trade @it 5%rkey to
be in an ordinary state o! eD%ilibri%m, o@ is te
excange bet@een tis co%ntry and 5%rkey a!!ected
by te export o! @arlike stores to te ;rimeaQL
6ere -e@marc loses is eD%animity# e !orgets tat e as ans@ered te same simple D%estion
correctly in -o0 1*32, and says:
KWe seem, & tink, to a8e exa%sted te practical
D%estion, and to a8e no@ attained a 8ery ele8ated
region o! metapysical disc%ssion0L
/Wilson as still anoter 8ersion o! is claim tat te rate o! excange is a!!ected by e8ery
trans!er o! capital !rom one co%ntry to anoter, no matter @eter in te !orm o! precio%s metal or
commodities0 Wilson kno@s, o! co%rse, tat te rate o! excange is a!!ected by te interest rate,
partic%larly by te relation o! te rates o! interest pre8ailing in te t@o co%ntries @ose m%t%al
rates o! excange are %nder disc%ssion0 &! e can no@ demonstrate tat s%rpl%ses o! capital in
general, i.e., in te !irst place, commodities o! all kinds incl%ding precio%s metal, a8e a and in
in!l%encing te interest rate, ten e is a step closer to is goal# a trans!er o! any considerable
portion o! tis capital to some oter co%ntry m%st ten cange te interest rate in bot co%ntries,
@it te cange taking place in opposite directions0 5ereby, in a secondary @ay, te rate o!
excange bet@een bot co%ntries is also altered0 I '. 001
6e ten says in te 0conomist, May <<, 182>, page +>2, @ic e edited at te time:
K-o do%bt, o@e8er, s%c ab%ndance o! capital as is
indicated by large stocks o! commodities o! all kinds,
incl%ding b%llion, @o%ld necessarily lead, not only to
lo@ prices o! commodities in general, b%t also to a
lo@er rate o! interest !or te %se o! capital0 &! @e a8e
a stock o! commodities on and, @ic is s%!!icient to
ser8e te co%ntry !or t@o years to come, a command
o8er tose commodities @o%ld be obtained !or a gi8en
2<1 ;apter JJJ4
period, at a m%c lo@er rate tan i! te stocks @ere
barely s%!!icient to last %s t@o monts0 ?ll loans o!
money, in @ate8er sape tey are made, are simply a
trans!er o! a command o8er commodities !rom one to
anoter0 Wene8er, tere!ore, commodities are
ab%ndant, te interest o! money m%st be lo@, and
@en tey are scarce, te interest o! money m%st be
ig0 ?s commodities become ab%ndant, te n%mber
o! sellers, in proportion to te n%mber o! b%yers,
increases, and, in proportion as te D%antity is more
tan is reD%ired !or immediate cons%mption, so m%st a
larger portion be kept !or !%t%re %se0 (nder tese
circ%mstances, te terms on @ic a older becomes
@illing to sell !or a !%t%re payment, or on credit,
become lo@er tan i! e @ere certain tat is @ole
stock @o%ld be reD%ired @itin a !e@ @eeksL0
&n regard to te statement, it is to be noted tat a large influ in precio%s metal can take place
sim%ltaneo%sly @it a contraction in prod%ction, as is al@ays te case in te period !ollo@ing a
crisis0 &n te s%bseD%ent pase, precio%s metal may come in !rom co%ntries @ic mainly prod%ce
precio%s metal# imports o! oter commodities are generally balanced by exports d%ring tis
period0 &n tese t@o pases, te interest rate is lo@ and rises b%t slo@ly# @e a8e already
disc%ssed te reason !or tis0 5is lo@ interest rate co%ld al@ays be explained @ito%t reco%rse to
te in!l%ence o! any Klarge stocks o! commodities o! all kinds0L ?nd o@ is tis in!l%ence to take
placeQ 5e lo@ price o! cotton, !or instance, renders possible te ig pro!its o! te spinners, etc0
-o@ @y is te interest rate lo@Q $%rely not beca%se te pro!it, @ic may be made on borro@ed
capital, is ig0 A%t simply and solely beca%se, %nder existing conditions, te demand !or loan
capital does not gro@ in proportion to tis pro!it# in oter @ords, beca%se loan capital as a
mo8ement di!!erent !rom ind%strial capital0 Wat te 0conomist @ants to pro8e is exactly te
re8erse, namely, tat te mo8ements o! loan capital are identical @it tose o! ind%strial capital0
&n regard to te statement, i! @e red%ce te abs%rd ass%mption o! stocks !or t@o years in ad8ance
to te point @ere it begins to take on some meaning, it signi!ies tat te market is o8erstocked0
5is @o%ld ca%se a !all in prices0 'ess @o%ld a8e to be paid !or a bale o! cotton0 5is @o%ld by
no means H%sti!y te concl%sion tat money !or te p%rcase o! tis cotton is more easily
borro@ed0 5is depends on te state o! te money-market0 &! money can be borro@ed more easily,
it is only beca%se commercial credit is in a state reD%iring it to make less %se tan %s%al o! bank
credit0 5e commodities gl%tting te market are eiter means o! s%bsistence or means o!
prod%ction0 5e lo@ price o! bot increases te ind%strial capitalist"s pro!it0 Wy so%ld it depress
te interest rate, %nless it be tro%g te antitesis, rater tan te identity, bet@een te
ab%ndance o! ind%strial capital and te demand !or money accommodationQ ;irc%mstances are
s%c tat te mercant and ind%strial capitalist can more easily ad8ance credit to one anoter#
o@ing to tis !acilitation o! commercial credit, bot ind%strialist as @ell as mercant need less
bank credit# ence te interest rate can be lo@0 5is lo@ interest rate as noting to do @it te
in!l%x in precio%s metal, alto%g bot may r%n parallel to eac oter, and te same ca%ses
2<< ;apter JJJ4
bringing abo%t lo@ prices o! imported articles may also prod%ce a s%rpl%s o! imported precio%s
metal0 &! te import market @ere really gl%tted, it @o%ld pro8e tat a decrease in te demand !or
imported articles ad taken place, and tis @o%ld be inexplicable at lo@ prices, %nless it @ere
attrib%ted to a contraction o! domestic ind%strial prod%ction# b%t tis, again, @o%ld be
inexplicable, so long as tere is excessi8e importing at lo@ prices0 ? mass o! abs%rdities I in
order to pro8e tat a !all in prices R a !all in te interest rate0 Aot may sim%ltaneo%sly exist side
by side0 A%t i! tey do, it @ill be a re!lection o! te opposition in te directions o! te mo8ement
o! ind%strial capital and te mo8ement o! loanable money-capital0 &t @ill not be a re!lection o!
teir identity0
&n regard to te statement, it is ard to %nderstand e8en a!ter tis exposition @y money interest
so%ld be lo@ @en commodities are a8ailable in ab%ndance0 &! commodities are ceap, ten &
may need only V1,=== instead o! te pre8io%s V<,=== to b%y a de!inite D%antity0 A%t peraps &
ne8erteless in8est V<,===, and t%s b%y t@ice te D%antity @ic & co%ld a8e bo%gt !ormerly0
&n tis @ay, & expand my b%siness by ad8ancing te same capital, @ic & may a8e to borro@0 &
b%y V<,=== @ort o! commodities, te same as be!ore0 My demand on te money-market
tere!ore remains te same, e8en to%g my demand on te commodity-market rises @it te !all
in commodity-prices0 A%t i! tis demand !or commodities so%ld decrease, tat is, i! prod%ction
so%ld not expand @it te !all in commodity-prices, an e8ent @ic @o%ld contradict all te
la@s o! te 0conomist, ten te demand !or loanable money-capital @o%ld decrease, alto%g te
pro!it @o%ld increase0 A%t tis increasing pro!it @o%ld create a demand !or loan capital0
&ncidentally, a lo@ le8el o! commodity-prices may be d%e to tree ca%ses0 First, to lack o!
demand0 &n s%c a case, te interest rate is lo@ beca%se prod%ction is paralysed and not beca%se
commodities are ceap, !or te lo@ prices are b%t a reHection o! tat paralysis0 $econd, it may be
d%e to s%pply exceeding demand0 5is may be te res%lt o! a gl%t on te market, etc0, @ic may
lead to a crisis and coincide @it a ig interest rate d%ring te crisis itsel!# or, it may be te res%lt
o! a !all in te 8al%e o! commodities, so tat te same demand can be satis!ied at lo@er prices0
Wy so%ld te interest rate !all in te last caseQ Aeca%se pro!its increaseQ &! tis @ere d%e to less
money-capital being reD%ired !or obtaining te same prod%cti8e or commodity-capital, it @o%ld
merely pro8e tat pro!it and interest are in8ersely proportional to eac oter0 &n any case, te
general statement o! te 0conomist is !alse0 'o@ money-prices !or commodities and a lo@
interest rate do not necessarily go togeter0 3ter@ise, te interest rate @o%ld be lo@est in te
poorest co%ntries, @ere money-prices !or prod%ce are lo@est, and igest in te ricest
co%ntries, @ere money-prices !or agric%lt%ral prod%cts are igest0 &n general, te 0conomist
admits: &! te 8al%e o! money !alls, it exerts no in!l%ence on te interest rate0 V1== bring V1=+ te
same as e8er0 &! te V1== are @ort less, so are te V+ interest0 5is relation is not a!!ected by te
appreciation or depreciation o! te original s%m0 ;onsidered !rom te point o! 8ie@ o! 8al%e, a
de!inite D%antity o! commodities is eD%al to a de!inite s%m o! money0 &! tis 8al%e increases, it is
eD%al to a larger s%m o! money0 5e opposite is tr%e @en it !alls0 &! te 8al%e is eD%al to <,===,
ten +T R 1==# i! it is eD%al to 1,===, ten +T R +=0 A%t tis does not alter te interest rate in any
@ay0 5e rational part o! tis matter is merely tat greater money accommodation is reD%ired
@en it takes V<,=== to sell te same D%antity o! commodities tan @en only V1,=== are
reD%ired0 A%t tis merely so@s tat pro!it and interest are ere in8ersely proportional to eac
oter0 For te lo@er te prices o! te components o! constant and 8ariable capital, te iger te
pro!it and te lo@er te interest0 A%t te opposite can also be and is o!ten te case0 For instance,
cotton may be ceap beca%se no demand exists !or yarn and !abrics# and cotton may be relati8ely
expensi8e beca%se a large pro!it in te cotton ind%stry creates a great demand !or it0 3n te oter
and, te pro!its o! ind%strialists may be ig precisely beca%se te price o! cotton is lo@0
6%bbard"s table pro8es tat te interest rate and te prices o! commodities exec%te completely
independent mo8ements, @ereas te mo8ements o! te interest rate adere closely to tose o!
te metal reser8e and te rates o! excange0
2<3 ;apter JJJ4
5e 0conomist states:
KWene8er, tere!ore, commodities are ab%ndant, te
interest o! money m%st be lo@0L
,recisely te opposite obtains d%ring crises0 ;ommodities are s%perab%ndant, incon8ertible into
money, and tere!ore te interest rate is ig# in anoter pase o! te cycle te demand !or
commodities is great and tere!ore D%ick ret%rns are made, b%t at te same time, prices are rising
and beca%se o! te D%ick ret%rns te interest rate is lo@0
KWen tey /te commodities1 are scarce, te interest
o! money m%st be ig0L
5e opposite is again tr%e in te slack period !ollo@ing a crisis0 ;ommodities are scarce,
absol%tely speaking, not @it re!erence to demand# and te interest rate is lo@0
&n regard to te statement, it is pretty e8ident tat an o@ner o! commodities, pro8ided e can sell
te latter at all, @ill get rid o! tem at a lo@er price @en te market is gl%tted tan e @o%ld
@en tere is a prospect o! te existing s%pply becoming rapidly exa%sted0 A%t @y te interest
rate so%ld !all beca%se o! tat is not so clear0
&! te market is gl%tted @it imported commodities, te interest rate may rise as a res%lt o! an
increased demand on te part o! te o@ners !or loan capital, in order to a8oid d%mping teir
commodities on te market0 5e interest rate may !all, beca%se te !l%idity o! commercial credit
may keep te demand !or bank credit relati8ely lo@0
5e 0conomist mentions te rapid e!!ect on rates o! excange in 182> o! te raising o! te
interest rate and oter circ%mstances exerting press%re on te money-market0 A%t it so%ld be
borne in mind tat te gold drain contin%ed %ntil te end o! ?pril in spite o! te cange in te
rates o! excange# a t%rn did not take place ere %ntil early May0
3n Pan%ary 1, 182>, te metal reser8e o! te Aank @as V1+,=66,6*1# te interest rate 3ZT# tree
monts" rates o! excange on ,aris <+0>+# on 6amb%rg 1301=# on ?msterdam 1<03[0 3n Marc +,
te metal reser8e ad !allen to V11,+*+,+3+# te disco%nt ad risen to 2T# te rate o! excange
!ell to <+06>Z on ,aris# 130*[ on 6amb%rg# and 1<0<Z on ?msterdam0 5e drain o! gold
contin%ed0 $ee te !ollo@ing table:
182>
A%llion )eser8e o!
te Aank o! England
Money-Market
6igest
5ree-Mont
)ates
,aris 6amb%rg ?msterdam
Marc <= 11,<31,63= Aank disc0 2T <+06>Z 130*` 1<0<Z
?pril 3 1=,<26,21= ,, ,, +T <+08= 1301= 1<03Z
?pril 1= *,86>,=+3 Money 8ery scarce <+0*= 1301=Z 1<02Z
?pril 1> *,3<*,821 Aank disc0 +0+T <60=<Z 1302=` 1<0+Z
?pril <2 *,<13,8*= ,ress%re <60=+ 1301< 1<06
2<2 ;apter JJJ4
May 2 *,33>,>26 &ncreasing press%re <602+ 1301<` 1<06Z
May 8 *,+88,>+* 6igest press%re <60<>Z 1301+Z 1<0>`
&n 182>, te total export o! precio%s metal !rom England amo%nted to V8,6=<,+*>0
3! tis to te
(nited $tates V3,<<6,211
France V<,2>*,8*<
6anse to@ns V*+8,>81
6olland V<2>,>23
&n spite o! te cange in te rates at te end o! Marc, te drain o! gold contin%ed !or anoter !%ll
mont, probably to te (nited $tates0
KWe t%s seeL /says te 0conomist, ?%g%st <, 182>, p0
*+21 Ko@ rapid and striking @as te e!!ect o! a rise
in te rate o! interest, and te press%re @ic ens%ed
in correcting an ad8erse excange, and in t%rning te
tide o! b%llion back to tis co%ntry0 5is e!!ect @as
prod%ced entirely independent o! te balance o! trade0
? iger rate o! interest ca%sed a lo@er price o!
sec%rities, bot !oreign and Englis, and ind%ced large
p%rcases to be made on !oreign acco%nt, @ic
increased te amo%nt o! bills to be dra@n !rom tis
co%ntry, @ile, on te oter and, te ig rate o!
interest and te di!!ic%lty o! obtaining money @as
s%c tat te demand o! tose bills !ell o!!, @ile teir
amo%nt increased0000 For te same ca%se orders !or
imports @ere co%ntermanded, and in8estments o!
Englis !%nds abroad @ere realised and bro%gt ome
!or employment ere0 5%s, !or example, @e read in
te 9io de Janeiro &rice Current o! te 1=t May,
"Excange /on England1 as experienced a !%rter
decline, principally ca%sed by a press%re on te
market !or remittance o! te proceeds o! large sales o!
/AraEilian1 go8ernment stock, on Englis acco%nt0
;apital belonging to tis co%ntry, @ic as been
in8ested in p%blic and oter sec%rities abroad, @en
2<+ ;apter JJJ4
te interest @as 8ery lo@ ere, @as t%s again bro%gt
back @en te interest became ig0L
England's Balance Of Trade
&ndia alone as to pay + million in trib%te !or Kgood go8ernment,L interest and di8idends on
Aritis capital, etc0, not co%nting te s%ms sent ome ann%ally by o!!icials as sa8ings !rom teir
salaries, or by Englis mercants as part o! teir pro!it to be in8ested in England0 E8ery Aritis
colony contin%ally as to make large remittances !or te same reason0 Most o! te banks in
?%stralia, te West &ndies, and ;anada, a8e been !o%nded @it Englis capital, and te
di8idends are payable in England0 &n te same @ay, England o@ns many !oreign sec%rities I
E%ropean, -ort ?merican and $o%t ?merican I on @ic it dra@s interest0 &n addition to tis it
as interests in !oreign rail@ays, canals, mines, etc0, @it corresponding di8idends0 )emittance on
all tese items is made almost excl%si8ely in prod%cts o8er and abo8e te amo%nt o! Englis
exports0 3n te oter and @at is sent !rom England to o@ners o! Englis sec%rities abroad and
!or cons%mption by Englismen abroad, is insigni!icant in comparison0
5e D%estion, so !ar as it concerns te balance o! trade and te rates o! excange, is Kat any
partic%lar moment one o! time0L
K,ractically speaking 000 England gi8es long credits
%pon er exports, @ile te imports are paid !or in
ready money0 ?t partic%lar moments tis di!!erence o!
practice as a considerable e!!ect %pon te excanges0
?t a time @en o%r exports are 8ery considerably
increasing, e0g0, 18+=, a contin%al increase o!
in8estment o! Aritis capital m%st be going on 000 in
tis @ay remittances o! 18+= may be made against
goods exported in 182*0 A%t i! te exports o! 18+=
exceed tose o! 182* by more tan 6 million, te
practical e!!ect m%st e tat more money is sent
abroad, to tis amo%nt, tan ret%rned in te same year0
?nd in tis @ay an e!!ect is prod%ced on te rates o!
excange and te rate o! interest0 Wen, on te
contrary, o%r trade is depressed a!ter a commercial
crisis, and @en o%r exports are m%c red%ced, te
remittances d%e !or te past years o! larger exports
greatly exceed te 8al%e o! o%r imports# te
excanges become correspondingly in o%r !a8o%r,
capital rapidly acc%m%lates at ome, and te rate o!
interest becomes less0L BEconomist, Pan%ary 11, 18+1
/p0 3=10C
5e !oreign rates o! excange can cange:
2<6 ;apter JJJ4
1C &n conseD%ence o! te immediate balance o! payments, no matter @at te ca%se I a p%rely
mercantile one, or capital in8estment abroad, or go8ernment expendit%res !or @ars, etc0, in so !ar
as cas payments tereby are made to !oreign co%ntries0
<C &n conseD%ence o! money depreciation I @eter metal or paper I in a partic%lar co%ntry0 5is
is p%rely nominal0 &! V1 so%ld represent only al! as m%c money as !ormerly, it @o%ld nat%rally
be co%nted as 1<0+ !rancs instead o! <+ !rancs0
3C Wen it is a matter o! a rate o! excange bet@een co%ntries, o! @ic one %ses sil8er and te
oter gold as Kmoney,L te rate o! excange depends %pon te relati8e !l%ct%ations o! te 8al%e o!
tese t@o metals, since tese necessarily alter te parity bet@een tem0 5is is ill%strated by te
rates o! excange in 18+=# tey @ere %n!a8o%rable to England, alto%g tat co%ntry"s export rose
enormo%sly0 .et no drain o! gold took place0 5is @as a res%lt o! a momentary rise in te 8al%e o!
sil8er as against gold0 B$ee 0conomist, -o8ember 3=, 18+= /pp0 131*-13<=10C
,arity !or te rate o! excange o! V1 is: ,aris, <+ !rancs <= cent0# 6amb%rg, 13 marks banko 1=0+
sillings# ?msterdam, 11 !lorins *> cent0 5o te extent tat te ,aris rate o! excange exceeds
<+0<= !rancs, it becomes more !a8o%rable to te Englis debtor o! France, or te b%yer o! Frenc
commodities0 &n bot cases e needs !e@er po%nds sterling in order to accomplis is p%rpose0 I
&n remoter co%ntries, @ere precio%s metal is not easily obtained @en bills o! excange are
scarce and ins%!!icient !or remittances to be made to England, te nat%ral e!!ect is to dri8e %p te
prices o! s%c prod%cts as are generally sipped to England since a greater demand arises !or
tem, in order to send tem to England in place o! bills o! excange# tis is o!ten te case in
&ndia0
?n %n!a8o%rable rate o! excange, or e8en a drain on gold, can take place @en tere is a great
ab%ndance o! money in England, te interest rate is lo@ and te price !or sec%rities is ig0
&n te co%rse o! 1828 England recei8ed large D%antities o! sil8er !rom &ndia, since good bills o!
excange @ere rare and mediocre ones @ere not readily accepted in conseD%ence o! te crisis o!
182> and te general lack o! credit in b%siness @it &ndia0 ?ll tis sil8er ad barely arri8ed be!ore
it !o%nd its @ay to te continent, @ere te re8ol%tion led to te !ormation o! many oards0 5e
b%lk o! te same sil8er made te trip back to &ndia in 18+=, since te rate o! excange no@ made
tis pro!itable0
5e monetary system is essentially a ;atolic instit%tion, te credit system essentially ,rotestant0
K5e $cotc ate gold0L &n te !orm o! paper te monetary existence o! commodities is only a
social one0 &t is 'aith tat brings sal8ation0 Fait in money-8al%e as te immanent spirit o!
commodities, !ait in te mode o! prod%ction and its predestined order, !ait in te indi8id%al
agents o! prod%ction as mere personi!ications o! sel!-expanding capital0 A%t te credit system
does not emancipate itsel! !rom te basis o! te monetary system any more tan ,rotestantism as
emancipated itsel! !rom te !o%ndations o! ;atolicism0
Chapter 36. Pre-Capitalist Relationships
&nterest-bearing capital, or, as @e may call it in its antiD%ated !orm, %s%rer"s capital, belongs
togeter @it its t@in broter, mercant"s capital, to te antedil%8ian !orms o! capital, @ic long
precede te capitalist mode o! prod%ction and are to be !o%nd in te most di8erse economic
!ormations o! society0
5e existence o! %s%rer"s capital merely reD%ires tat at least a portion o! prod%cts so%ld be
trans!ormed into commodities, and tat money so%ld a8e de8eloped in its 8ario%s !%nctions
along @it trade in commodities0
5e de8elopment o! %s%rer"s capital is bo%nd %p @it te de8elopment o! mercant"s capital and
especially tat o! money-dealing capital0 &n ancient )ome, beginning @it te last years o! te
)ep%blic, @en man%!act%ring stood !ar belo@ its a8erage le8el o! de8elopment in te ancient
@orld, mercant"s capital, money-dealing capital, and %s%rer"s capital de8eloped to teir igest
point @itin te ancient !orm0
We a8e seen BEnglis edition: 4ol0 &, pp0 13=-320 I 0d.C tat oarding necessarily appears along
@it money0 A%t te pro!essional oarder does not become important %ntil e is trans!ormed into
a %s%rer0
5e mercant borro@s money in order to make a pro!it @it it, in order to %se it as capital, tat is,
to expend it0 6ence in earlier !orms o! society te money-lender stands in te same relation to
im as to te modern capitalist0 5is speci!ic relation @as also experienced by te ;atolic
%ni8ersities0
K5e %ni8ersities o! ?lcali, $alamanca, &ngolstadt,
Freib%rg in Areisga%, Mayence, ;ologne, 5rj8es, one
a!ter anoter recogniEed te legality o! interest !or
commercial loans0 5e !irst !i8e o! tese approbations
@ere deposited in te arci8es o! te ;ons%late o! te
city o! 'yons and p%blised in te appendix to te
4rait2 de l5usure et des int7rWts, by Ar%yset-,ont%s,
'yons0L BM0 ?%gier, ,e Cr2dit public, etc., ,aris,
182<, p0 <=60C
&n all te !orms in @ic sla8e economy Bnot te patriarcal kind, b%t tat o! later :recian and
)oman timesC ser8es as a means o! amassing @ealt, @ere money tere!ore is a means o!
appropriating te labo%r o! oters tro%g te p%rcase o! sla8es, land, etc0, money can be
expanded as capital, i0e0, bear interest, !or te 8ery reason tat it can be so in8ested0
5e caracteristic !orms, o@e8er, in @ic %s%rer"s capital exists in periods antedating capitalist
prod%ction are o! t@o kinds0 & p%rposely say caracteristic !orms0 5e same !orms repeat
temsel8es on te basis o! capitalist prod%ction, b%t as mere s%bordinate !orms0 5ey are ten no
longer te !orms @ic determine te caracter o! interest-bearing capital0 5ese t@o !orms are:
!irst, %s%ry by lending money to extra8agant members o! te %pper classes, partic%larly
lando@ners# secondly, %s%ry by lending money to small prod%cers @o possess teir o@n
conditions o! labo%r I tis incl%des te artisan, b%t mainly te peasant, since partic%larly %nder
2<8 ;apter JJJ4&
pre-capitalist conditions, in so !ar as tey permit o! small independent indi8id%al prod%cers, te
peasant class necessarily constit%tes te o8er@elming maHority o! tem0
Aot te r%in o! ric lando@ners tro%g %s%ry and te impo8erisment o! te small prod%cers
lead to te !ormation and concentration o! large amo%nts o! money-capital0 A%t to @at extent
tis process does a@ay @it te old mode o! prod%ction, as appened in modern E%rope, and
@eter it p%ts te capitalist mode o! prod%ction in its stead, depends entirely %pon te stage o!
istorical de8elopment and te attendant circ%mstances0
(s%rer"s capital as te caracteristic !orm o! interest-bearing capital corresponds to te
predominance o! small-scale prod%ction o! te sel!-employed peasant and small master
cra!tsman0 Wen te labo%rer is con!ronted by te conditions o! labo%r and by te prod%ct o!
labo%r in te sape o! capital, as %nder te de8eloped capitalist mode o! prod%ction, e as no
occasion to borro@ any money as a prod%cer0 Wen e does any money borro@ing, e does so,
!or instance, at te pa@nsop to sec%re personal necessities0 A%t @ere8er te labo%rer is te
o@ner, @eter act%al or nominal, o! is conditions o! labo%r and is prod%ct, e stands as a
prod%cer in relation to te money-lender"s capital, @ic con!ronts im as %s%rer"s capital0
-e@man expresses te matter insipidly @en e says te banker is respected, @ile te %s%rer is
ated and despised, beca%se te banker lends to te ric, @ereas te %s%rer lends to te poor0 BF0
W0 -e@man, ,ectures on &olitical 0conomy, 'ondon, 18+1, p0 220C 6e o8erlooks te !act tat a
di!!erence bet@een t@o modes o! social prod%ction and teir corresponding social orders lies at
te eart o! te matter and tat te sit%ation cannot be explained by te distinction bet@een ric
and poor0 Moreo8er, te %s%ry @ic s%cks dry te small prod%cer goes and in and @it te
%s%ry @ic s%cks dry te ric o@ner o! a large estate0 ?s soon as te %s%ry o! te )oman
patricians ad completely r%ined te )oman plebeians, te small peasants, tis !orm o!
exploitation came to an end and a p%re sla8e economy replaced te small-peasant economy0
&n te !orm o! interest, te entire s%rpl%s abo8e te barest means o! s%bsistence Bte amo%nt tat
later becomes @ages o! te prod%cersC can be cons%med by %s%ry Btis later ass%mes te !orm o!
pro!it and gro%nd-rentC, and ence it is igly abs%rd to compare te le8el o! tis interest, @ic
assimilates all te s%rpl%s-8al%e excepting te sare claimed by te state, @it te le8el o! te
modern interest rate, @ere interest constit%tes at least normally only a part o! te s%rpl%s-8al%e0
$%c a comparison o8erlooks tat te @age-@orker prod%ces and gi8es to te capitalist @o
employs im, pro!it, interest and gro%nd-rent, i0e0, te entire s%rpl%s-8al%e0 ;arey makes tis
abs%rd comparison in order to so@ o@ ad8antageo%s te de8elopment o! capital, and te !all in
te interest rate tat accompanies it, are !or te labo%rer0 F%rtermore, @ile te %s%rer, not
content @it sD%eeEing te s%rpl%s-labo%r o%t o! is 8ictim, grad%ally acD%ires possession e8en o!
is 8ery conditions o! labo%r, land, o%se, etc0, and is contin%ally engaged in t%s expropriating
im, it is again !orgotten tat, on te oter and, tis complete expropriation o! te labo%rer !rom
is conditions o! labo%r is not a res%lt @ic te capitalist mode o! prod%ction seeks to acie8e,
b%t rater te establised condition !or its point o! depart%re0 5e @age-sla8e, H%st like te real
sla8e, cannot become a creditor"s sla8e d%e to is position I at least in is capacity as prod%cer#
te @age-sla8e, it is tr%e, can become a creditor"s sla8e in is capacity as cons%mer0 (s%rer"s
capital in te !orm @ereby it indeed appropriates all o! te s%rpl%s-labo%r o! te direct
prod%cers, @ito%t altering te mode o! prod%ction# @ereby te o@nersip or possession by te
prod%cers o! te conditions o! labo%r and small-scale prod%ction corresponding to tis I is its
essential prereD%isite# @ereby, in oter @ords, capital does not directly s%bordinate labo%r to
itsel!, and does not, tere!ore, con!ront it as ind%strial capital I tis %s%rer"s capital impo8erises
te mode o! prod%ction, paralyses te prod%cti8e !orces instead o! de8eloping tem, and at te
same time perpet%ates te miserable conditions in @ic te social prod%cti8ity o! labo%r is not
de8eloped at te expense o! labo%r itsel!, as in te capitalist mode o! prod%ction0
(s%ry t%s exerts, on te one and, an %ndermining and destr%cti8e in!l%ence on ancient and
!e%dal @ealt and ancient and !e%dal property0 3n te oter and, it %ndermines and r%ins small-
2<* ;apter JJJ4&
peasant and small-b%rger prod%ction, in sort, all !orms in @ic te prod%cer still appears as
te o@ner o! is means o! prod%ction0 (nder te de8eloped capitalist mode o! prod%ction, te
labo%rer is not te o@ner o! te means o! prod%ction, i0e0, te !ield @ic e c%lti8ates, te ra@
materials @ic e processes, etc0 A%t %nder tis system separation o! te prod%cer !rom te
means o! prod%ction re!lects an act%al re8ol%tion in te mode o! prod%ction itsel!0 5e isolated
labo%rers are bro%gt togeter in large @orksops !or te p%rpose o! carrying o%t separate b%t
interconnected acti8ities# te tool becomes a macine0 5e mode o! prod%ction itsel! no longer
permits te dispersion o! te instr%ments o! prod%ction associated @it small property# nor does it
permit te isolation o! te labo%rer imsel!0 (nder te capitalist mode o! prod%ction %s%ry can no
longer separate te prod%cer !rom is means o! prod%ction, !or tey a8e already been separated0
(s%ry centraliEes money @ealt @ere te means o! prod%ction are dispersed0 &t does not alter te
mode o! prod%ction, b%t attaces itsel! !irmly to it like a parasite and makes it @retced0 &t s%cks
o%t its blood, ener8ates it and compels reprod%ction to proceed %nder e8er more pitiable
conditions0 6ence te pop%lar atred against %s%rers, @ic @as most prono%nced in te ancient
@orld @ere o@nersip o! means o! prod%ction by te prod%cer imsel! @as at te same time te
basis !or political stat%s, te independence o! te citiEen0
5o te extent tat sla8ery pre8ails, or in so !ar as te s%rpl%s prod%ct is cons%med by te !e%dal
lord and is retin%e, @ile eiter te sla8e-o@ner or te !e%dal lord !all into te cl%tces o! te
%s%rer, te mode o! prod%ction still remains te same# it only becomes arder on te labo%rer0 5e
indebted sla8e older or !e%dal lord becomes more oppressi8e beca%se e is imsel! more
oppressed0 3r e !inally makes @ay !or te %s%rer, @o becomes a landed proprietor or a sla8e-
older imsel!, like te knigts in ancient )ome0 5e place o! te old exploiter, @ose
exploitation @as more or less patriarcal beca%se it @as largely a means o! political po@er, is
taken by a ard, money mad par8en%0 A%t te mode o! prod%ction itsel! is not altered tereby0
(s%ry as a re8ol%tionary e!!ect in all pre-capitalist modes o! prod%ction only in so !ar as it
destroys and dissol8es tose !orms o! property on @ose solid !o%ndation and contin%al
reprod%ction in te same !orm te political organiEation is based0 (nder ?sian !orms, %s%ry can
contin%e a long time, @ito%t prod%cing anyting more tan economic decay and political
corr%ption0 3nly @ere and @en te oter prereD%isites o! capitalist prod%ction are present does
%s%ry become one o! te means assisting in establisment o! te ne@ mode o! prod%ction by
r%ining te !e%dal lord and small-scale prod%cer, on te one and, and centraliEing te conditions
o! labo%r into capital, on te oter0
&n te Middle ?ges no co%ntry ad a general rate o!
interest0 5e ;%rc !orbade, !rom te o%tset, all
lending at interest0 'a@s and co%rts o!!ered little
protection !or loans0 &nterest @as so m%c te iger
in indi8id%al cases0 5e limited circ%lation o! money,
te need to make most payments in cas, compelled
people to borro@ money, and all te more so @en te
excange b%siness as still %nde8eloped0 5ere!ore
large di8ergences bot in interest rates and te
conceptions o! %s%ry0 &n te time o! ;arlemagne it
@as considered %s%rio%s to carge 1==T0 &n 'inda%
on 'ake ;onstance, some local b%rgers took <16WT
23= ;apter JJJ4&
in 13280 &n 9%ric, te ;ity ;o%ncil decreed tat 23X
T so%ld be te legal interest rate0 &n &taly 2=T ad to
be paid sometimes, alto%g te %s%al rate !rom te
1<t to te 12t cent%ry did not exceed <=T0 4erona
ordered tat 1<ZT be te legal rate0 Emperor
Friedric && !ixed te rate at 1=T, b%t only !or Pe@s0
6e did not deign to speak !or ;ristians0 &n te
:erman )ine pro8inces, 1=T @as te r%le as early
as te 13t cent%ry0 B6%llmann, Geschichte des
StXdtewesens, &&, $0 ++-+>0C
(s%rer"s capital employs te metod o! exploitation caracteristic o! capital yet @ito%t te
latter"s mode o! prod%ction0 5is condition also repeats itsel! @itin bo%rgeois economy, in
back@ard brances o! ind%stry or in tose brances @ic resist te transition to te modern
mode o! prod%ction0 For instance, i! @e @is to compare te Englis interest rate @it te &ndian,
@e so%ld not take te interest rate o! te Aank o! England, b%t rater, e0g0, tat carged by
lenders o! small macinery to small prod%cers in domestic ind%stry0
(s%ry, in contradistinction to cons%ming @ealt, is istorically important, inasm%c as it is in
itsel! a process generating capital0 (s%rer"s capital and mercant"s @ealt promote te !ormation
o! moneyed @ealt independent o! landed property0 5e less prod%cts ass%me te caracter o!
commodities, and te less intensi8ely and extensi8ely excange-8al%e as taken old o!
prod%ction, te more does money appear as act%al @ealt as s%c, as @ealt in general I in
contrast to its limited representation in %se-8al%es0 5is is te basis o! oarding0 ?side !rom
money as @orld-money and as oard, it is, in partic%lar, te !orm o! means o! payment @ereby it
appears as te absol%te !orm o! commodities0 ?nd it is especially its !%nction as a means o!
payment @ic de8elops interest and tereby money-capital0 Wat sD%andering and corr%pting
@ealt desires is money as s%c, money as a means o! b%ying e8eryting Balso as a means o!
paying debtsC0 5e small prod%cer needs money abo8e all !or making payments0 B5e
trans!ormation o! ser8ices and taxes in kind to landlords and te state into money-rent and
money-taxes plays a great role ere0C &n eiter case, money is needed as s%c0 3n te oter and,
it is in %s%ry tat oarding !irst becomes reality and tat te oarder !%l!ills is dream0 Wat is
so%gt !rom te o@ner o! a oard is not capital, b%t money as s%c# b%t by means o! interest e
trans!orms tis oard o! money into capital, tat is, into a means o! appropriating s%rpl%s labo%r
in part or in its entirety, and similarly sec%ring a old on a part o! te means o! prod%ction
temsel8es, e8en to%g tey may nominally remain te property o! oters0 (s%ry li8es in te
pores o! prod%ction, as it @ere, H%st as te gods o! Epic%r%s li8ed in te space bet@een @orlds0
Money is so m%c arder to obtain, te less te commodity-!orm constit%tes te general !orm o!
prod%cts0 6ence te %s%rer kno@s no oter barrier b%t te capacity o! tose @o need money to
pay or to resist0 &n small-peasant and small-b%rger prod%ction money ser8es as a means o!
p%rcase, mainly, @ene8er te means o! prod%ction o! te labo%rer B@o is still predominantly
teir o@ner %nder tese modes o! prod%ctionC are lost to im eiter by accident or tro%g
extraordinary %pea8als, or at least are not replaced in te normal co%rse o! reprod%ction0 Means
o! s%bsistence and ra@ materials constit%te an essential part o! tese reD%irements o! prod%ction0
&! tese become more expensi8e, it may make it impossible to replace tem o%t o! te ret%rns !or
te prod%ct, H%st as ordinary crop !ail%res may pre8ent te peasant !rom replacing is seed in
kind0 5e same @ars tro%g @ic te )oman patricians r%ined te plebe Hails by compelling
tem to ser8e as soldiers and @ic pre8ented tem !rom reprod%cing teir conditions o! labo%r,
231 ;apter JJJ4&
and tere!ore made pa%pers o! tem Band pa%periEation, te crippling or loss o! te prereD%isites
o! reprod%ction is ere te predominant !ormC tese same @ars !illed te store-rooms and co!!ers
o! te patricians @it looted copper, te money o! tat time0 &nstead o! directly gi8ing plebeians
te necessary commodities, i0e0, grain, orses, and cattle, tey loaned tem tis copper !or @ic
tey ad no %se temsel8es, and took ad8antage o! tis sit%ation to exact enormo%s %s%rio%s
interest, tereby t%rning te plebeians into teir debtor sla8es0 7%ring te reign o! ;arlemagne,
te Frankis peasants @ere like@ise r%ined by @ars, so tat tey !aced no coice b%t to become
ser!s instead o! debtors0 &n te )oman Empire, as is kno@n, extreme %nger !reD%ently res%lted in
te sale o! cildren and also in !ree men selling temsel8es as sla8es to te ric0 $o m%c !or
general t%rning-points0 &n indi8id%al cases te maintenance or loss o! te means o! prod%ction on
te part o! small prod%cers depends on a to%sand contingencies, and e8ery one o! tese
contingencies or losses signi!ies impo8erisment and becomes a cre8ice into @ic a parasitic
%s%rer may creep0 5e mere deat o! is co@ may render te small peasant incapable o! rene@ing
is reprod%ction on its !ormer scale0 6e ten !alls into te cl%tces o! te %s%rer, and once in te
%s%rer"s po@er e can ne8er extricate imsel!0
5e really important and caracteristic domain o! te %s%rer, o@e8er, is te !%nction o! money
as a means o! payment0 E8ery payment o! money, gro%nd-rent, trib%te, tax, etc0, @ic becomes
d%e on a certain date, carries @it it te need to sec%re money !or s%c a p%rpose0 6ence !rom te
days o! ancient )ome to tose o! modern times, @olesale %s%ry relies %pon tax-collectors,
fermiers g2n2rau, receveurs g2n2rau0 5en, tere de8elops @it commerce and te
generaliEation o! commodity- prod%ction te separation, in time, o! p%rcase and payment0 5e
money as to be paid on a de!inite date0 6o@ tis can lead to circ%mstances in @ic te money-
capitalist and %s%rer, e8en no@adays, merge into one is so@n by modern money crises0 5is
same %s%ry, o@e8er, becomes one o! te principal means o! !%rter de8eloping te necessity !or
money as a means o! payment I by dri8ing te prod%cer e8er more deeply into debt and
destroying is %s%al means o! payment, since te b%rden o! interest alone makes is normal
reprod%ction impossible0 ?t tis point, %s%ry spro%ts %p o%t o! money as a means o! payment and
extends tis !%nction o! money as its 8ery o@n domain0
5e credit system de8elops as a reaction against %s%ry0 A%t tis so%ld not be mis%nderstood, nor
by any means interpreted in te manner o! te ancient @riters, te c%rc !aters, '%ter or te
early socialists0 &t signi!ies no more and no less tan te s%bordination o! interest-bearing capital
to te conditions and reD%irements o! te capitalist mode o! prod%ction0
3n te @ole, interest-bearing capital %nder te modern credit system is adapted to te conditions
o! te capitalist mode o! prod%ction0 (s%ry as s%c does not only contin%e to exist, b%t is e8en
!reed, among nations @it a de8eloped capitalist prod%ction, !rom te !etters imposed %pon it by
all pre8io%s legislation0 &nterest-bearing capital retains te !orm o! %s%rer"s capital in relation to
persons or classes, or in circ%mstances @ere borro@ing does not, nor can, take place in te sense
corresponding to te capitalist mode o! prod%ction# @ere borro@ing takes place as a res%lt o!
indi8id%al need, as at te pa@nsop# @ere money is borro@ed by @ealty spendtri!ts !or te
p%rpose o! sD%andering# or @ere te prod%cer is a non-capitalist prod%cer, s%c as a small !armer
or cra!tsman, @o is t%s still, as te immediate prod%cer, te o@ner o! is o@n means o!
prod%ction# !inally @ere te capitalist prod%cer imsel! operates on s%c a small scale tat e
resembles tose sel!-employed prod%cers0
Wat disting%ises interest-bearing capital I in so !ar as it is an essential element o! te capitalist
mode o! prod%ction I !rom %s%rer"s capital is by no means te nat%re or caracter o! tis capital
itsel!0 &t is merely te altered conditions %nder @ic it operates, and conseD%ently also te totally
trans!ormed caracter o! te borro@er @o con!ronts te money-lender0 E8en @en a man
@ito%t !ort%ne recei8es credit in is capacity o! ind%strialist or mercant, it occ%rs @it te
expectation tat e @ill !%nction as capitalist and appropriate %npaid labo%r @it te borro@ed
capital0 6e recei8es credit in is capacity o! potential capitalist0 5e circ%mstance tat a man
23< ;apter JJJ4&
@ito%t !ort%ne b%t possessing energy, solidity, ability and b%siness ac%men may become a
capitalist in tis manner I and te commercial 8al%e o! eac indi8id%al is pretty acc%rately
estimated %nder te capitalist mode o! prod%ction I is greatly admired by apologists o! te
capitalist system0 ?lto%g tis circ%mstance contin%ally brings an %n@elcome n%mber o! ne@
soldiers o! !ort%ne into te !ield and into competition @it te already existing indi8id%al
capitalists, it also rein!orces te s%premacy o! capital itsel!, expands its base and enables it to
recr%it e8er ne@ !orces !or itsel! o%t o! te s%bstrat%m o! society0 &n a similar @ay, te
circ%mstance tat te ;atolic ;%rc in te Middle ?ges !ormed its ierarcy o%t o! te best
brains in te land, regardless o! teir estate, birt or !ort%ne, @as one o! te principal means o!
consolidating ecclesiastical r%le and s%ppressing te laity0 5e more a r%ling class is able to
assimilate te !oremost minds o! a r%led class, te more stable and dangero%s becomes its r%le0
5e initiators o! te modern credit system take as teir point o! depart%re not an anatema against
interest-bearing capital in general, b%t on te contrary, its explicit recognition0
We are not re!erring ere to s%c reactions against %s%ry @ic attempted to protect te poor
against it, like te Monts1de1pi2t2 B13+= in $arlins in France-;omtF, later in ,er%gia and $a8ona
in &taly, 12== and 12>*C0 5ese are note@orty mainly beca%se tey re8eal te irony o! istory,
@ic t%rns pio%s @ises into teir 8ery opposite d%ring te process o! realiEation0 ?ccording to a
moderate estimate, te Englis @orking-class pays 1==T to te pa@nsops, te modern
s%ccessors o! Monts1de1pi2t2
xxx
We are also not re!erring to te credit !antasies o! s%c men as
7r0 6%g ;amberleyne or Pon Ariscoe, @o attempted d%ring te last decade o! te 1>t
cent%ry to emancipate te Englis aristocracy !rom %s%ry by means o! a !armers" bank %sing
paper money based on real estate0
xxxi

5e credit associations establised in te 1<t and 12t cent%ries in 4enice and :enoa arose !rom
te need !or marine commerce and te @olesale trade associated @it it to emancipate
temsel8es !rom te domination o! o%tmoded %s%ry and te monopoliEation o! te money
b%siness0 Wile te act%al banks !o%nded in tose city-rep%blics ass%med sim%ltaneo%sly te
sape o! p%blic credit instit%tions !rom @ic te state recei8ed loans on !%t%re tax re8en%es, it
so%ld not be !orgotten tat te mercants !o%nding tose associations @ere temsel8es
prominent citiEens o! tose states and as m%c interested in emancipating teir go8ernment as
tey @ere in emancipating temsel8es !rom te exactions o! %s%rers,
xxxii
and at te same time in
getting tigter and more sec%re control o8er te state0 6ence, @en te Aank o! England @as to
be establised, te 5ories also protested:
KAanks are rep%blican instit%tions0 Flo%rising banks
existed in 4enice, :enoa, ?msterdam, and 6amb%rg0
A%t @o e8er eard o! a Aank o! France or $painQL
5e Aank o! ?msterdam, in 16=*, @as not epoc-making in te de8elopment o! te modern credit
system any more tan tat o! 6amb%rg in 161*0 &t @as p%rely a bank !or deposits0 5e cecks
iss%ed by te bank @ere indeed merely receipts !or te deposited coined and %ncoined precio%s
metal, and circ%lated only @it te endorsement o! te acceptors0 A%t in 6olland commercial
credit and dealing in money de8eloped and in and @it commerce and man%!act%re, and
interest-bearing capital @as s%bordinated to ind%strial and commercial capital by te co%rse o!
de8elopment itsel!0 5is co%ld already be seen in te lo@ interest rate0 6olland, o@e8er, @as
considered in te 1>t cent%ry te model o! economic de8elopment, as England is no@0 5e
monopoly o! old-style %s%ry, based on po8erty, collapsed in tat co%ntry o! its o@n @eigt0
7%ring te entire 18t cent%ry tere is te cry, @it 6olland re!erred to as an example, !or a
comp%lsory red%ction o! te rate o! interest Band legislation acts accordinglyC, in order to
s%bordinate interest-bearing capital to commercial and ind%strial capital, instead o! te re8erse0
5e main spokesman !or tis mo8ement is $ir Posia ;ild, te !ater o! ordinary Englis pri8ate
233 ;apter JJJ4&
banking0 6e declaims against te monopoly o! %s%rers in m%c te same @ay as te @olesale
cloting man%!act%rers, Moses g $on, do @en leading te ligt against te monopoly o!
Kpri8ate tailors0L 5is same Posia ;ild is sim%ltaneo%sly te !ater o! Englis stock-Hobbing0
5%s, tis a%tocrat o! te East &ndia ;ompany de!ends its monopoly in te name o! !ree trade0
4ers%s 5omas Manley)Dnterest of Money Mista-en I 5omas Manley @as not te a%tor o! tis
book0 &t @as p%blised anonymo%sly in 'ondon in 16680 I 0d.C e says:
K?s te campion o! te timid and trembling band o!
%s%rers e erects is main batteries at tat point @ic
& a8e declared to be te @eakest e denies point-
blank tat te lo@ rate o! interest is te ca%se o!
@ealt and 8o@s tat it is merely its e!!ect0L B4rait2s
sur le Commerce, etc., 166*, trad0 ?msterdam et
Aerlin, 1>+20C K&! it is commerce tat enrices a
co%ntry, and i! a lo@ering o! interest increases
commerce, ten a lo@ering o! interest or a restriction
o! %s%ry is do%btless a !r%it!%l primary ca%se o! te
@ealt o! a nation0 &t is not at all abs%rd to say tat te
same ting may be sim%ltaneo%sly a ca%se %nder
certain circ%mstances, and an e!!ect %nder otersL Bl0
c0, p0 1++C0 K5e egg is te ca%se o! te en, and te
en is te ca%se o! te egg0 5e lo@ering o! interest
may ca%se an increase o! @ealt, and te increase o!
@ealt may ca%se a still greater red%ction o! interestL
Bl0 c0, p0 1+6C0 K& am te de!ender o! ind%stry and my
opponent de!ends laEiness and slotL Bp0 1>*C0
5is 8iolent battle against %s%ry, tis demand !or te s%bordination o! interest-bearing capital to
ind%strial capital, is b%t te erald o! te organic creations tat establis tese prereD%isites o!
capitalist prod%ction in te modern banking system, @ic on te one and robs %s%rer"s capital
o! its monopoly by concentrating all idle money reser8es and tro@ing tem on te money
market, and on te oter and limits te monopoly o! te precio%s metal itsel! by creating credit-
money0
5e same opposition to %s%ry, te demand !or te emancipation o! commerce, ind%stry and te
state !rom %s%ry, @ic are obser8ed ere in te case o! ;ild, @ill be !o%nd in all @ritings on
banking in England d%ring te last tird o! te 1>t and te early 18t cent%ries0 We also !ind
colossal ill%sions abo%t te mirac%lo%s e!!ects o! credit, abolition o! te monopoly o! precio%s
metal, its displacement by paper, etc0 5e $cotsman William ,aterson, !o%nder o! te Aank o!
England and te Aank o! $cotland, is by all odds 'a@ te First0
?gainst te Aank o! England Kall goldsmits and
pa@nbrokers set %p a o@l o! rage0L BMaca%lay,
(istory of 0ngland, &4, p02**0C
232 ;apter JJJ4&
K7%ring te !irst ten years te Aank ad to str%ggle
@it great di!!ic%lties# great !oreign !e%ds# its notes
@ere only accepted !ar belo@ teir nominal 8al%e 000
te goldsmitsL Bin @ose ands te trade in precio%s
metals ser8ed as a basis o! a primiti8e banking
b%sinessC K@ere Healo%s o! te Aank, beca%se teir
b%siness @as diminised, teir disco%nts @ere
lo@ered, teir transactions @it te go8ernment ad
passed to teir opponents0L B30 Francis, l0 c0, p0 >30C
E8en be!ore te establisment o! te Aank o! England a plan @as proposed in 1683 !or a -ational
Aank o! ;redit, @ic ad !or its p%rpose, among oters,
Ktat tradesmen, @en tey a8e a considerable
D%antity o! goods, may, by te elp o! tis bank,
deposit teir goods, by raising a credit on teir o@n
dead stock, employ teir ser8ants, and increase teir
trade, till tey get a good market instead o! selling
tem at a lossL /P0 Francis, l0 c0, pp0 3*-2=10
?!ter many endea8ors tis Aank o! ;redit @as establised in 7e8onsire 6o%se on Aisopsgate
$treet0 &t made loans to ind%strialists and mercants on te sec%rity o! deposited goods to te
amo%nt o! tree-D%arters o! teir 8al%e, in te !orm o! bills o! excange0 &n order to make tese
bills o! excange capable o! circ%lating, a n%mber o! people in eac branc o! b%siness @ere
organiEed into a society, !rom @ic e8ery possessor o! s%c bills @o%ld be able to obtain goods
@it te same !acility as i! e @ere to o!!er tem cas payment0 5is bank"s b%siness did not
!lo%ris0 &ts macinery @as too complicated, and te risk too great in case o! a commodity
depreciation0
&! @e go by te act%al content o! tose records @ic accompany and teoretically promote te
!ormation o! te modern credit system in England, @e sall not !ind anyting in tem b%t I as one
o! its conditions I te demand !or a s%bordination o! interest-bearing capital and o! loanable
means o! prod%ction in general to te capitalist mode o! prod%ction0 3n te oter and, i! @e
simply cling to te praseology, @e sall be !reD%ently s%rprised by te agreement I incl%ding te
mode o! expression @it te ill%sions o! te !ollo@ers o! $aint-$imon abo%t banking and credit0
P%st as in te @ritings o! te pysiocrats te cultivateur does not stand !or te act%al tiller o! te
soil, b%t !or te big !armer, so te travailleur @it $aint-$imon, and contin%ing on tro%g is
disciples, does not stand !or te labo%rer, b%t !or te ind%strial and commercial capitalist0
KNn travailleur a besoin d5aides, de seconds,
d5ouvriersP il les cherche intelligents, habiles,
d2vou2sI il les met a l5oeuvre, et leurs travau sont
productifs.L B /En!antin1 ? travailleur B@orkerC needs
elpers, s%pporters, labo%rers# e looks !or s%c as are
intelligent, able, de8oted# e p%ts tem to @ork, and
23+ ;apter JJJ4&
teir labo%r is prod%cti8e0L B9eligion saint1
simonienne, 0conomie politi3ue et &oliti3ue, ,aris,
1831, p0 1=20C0
&n !act, one so%ld bear in mind tat only in is last @ork, ,e $ouveau Christianisme, $aint-
$imon speaks directly !or te @orking-class and declares teir emancipation to be te goal o! is
e!!orts0 ?ll is !ormer @ritings are, indeed, mere encomi%ms o! modern bo%rgeois society in
contrast to te !e%dal order, or o! ind%strialists and bankers in contrast to marsals and H%ristic
la@-man%!act%rers o! te -apoleonic era0 Wat a di!!erence compared @it te contemporaneo%s
@ritings o! 3@enS
xxxiii
For te !ollo@ers o! $aint-$imon, te ind%strial capitalist like@ise remains
te travailleur par ecellence, as te abo8e-D%oted passage indicates0 ?!ter reading teir @ritings
critically, one @ill not be s%rprised tat teir credit and bank !antasies materialiEed in te credit
mobilier, !o%nded by an ex-!ollo@er o! $aint-$imon, Emile ,Freire0 5is !orm, incidentally, co%ld
become dominant only in a co%ntry like France, @ere neiter te credit system nor large-scale
ind%stry ad reaced te modern le8el o! de8elopment0 5is @as not at all possible in England
and ?merica0 5e embryo o! Cr7dit mobili#er is already contained in te !ollo@ing passages !rom
Doctrine de Saint1Simon. 0position. &remiere ann2e, ;<F<1FA, 3me ed0, ,aris, 18310 &t is
%nderstandable tat bankers can lend money more ceaply tan te capitalists and pri8ate %s%rers0
5ese bankers are, tere!ore,
Kable to s%pply tools to te ind%strialists !ar more
ceaply, tat is, at lo@er interest, tan te real estate
o@ners and capitalists, @o may be more easily
mistaken in teir coice o! borro@ersL Bp0 <=<C0
A%t te a%tors temsel8es add in a !ootnote:
K5e ad8antage tat @o%ld accr%e !rom te mediation
o! bankers bet@een te idle ric and te travailleurs is
o!ten co%nterbalanced, or e8en canceled, by te
opport%nities o!!ered in o%r disorganiEed society to
egoism, @ic may mani!est itsel! in 8ario%s !orms o!
!ra%d and carlatanism0 5e bankers o!ten @orm teir
@ay bet@een te tra8aille%rs and idle ric !or te
p%rpose o! exploiting bot to te detriment o!
society0L
4ravailleur ere means capitaliste industriel0 &ncidentally, it is @rong to regard te means at te
command o! te modern banking system merely as te means o! idle people0 &n te !irst place, it
is te portion o! capital @ic ind%strialists and mercants temporarily old in te !orm o! idle
money, as a money reser8e or as capital to be in8ested0 6ence it is idle capital, b%t not capital o!
te idle0 &n te second place, it is te portion o! all re8en%e and sa8ings in general @ic is to be
temporarily or permanently acc%m%lated0 Aot are essential to te nat%re o! te banking system0
A%t it so%ld al@ays be borne in mind tat, in te !irst place, money I in te !orm o! precio%s
metal I remains te !o%ndation !rom @ic te credit system, by its 8ery nat%re, can never detac
itsel!0 $econdly, tat te credit system pres%pposes te monopoly o! social means o! prod%ction
by pri8ate persons Bin te !orm o! capital and landed propertyC, tat it is itsel!, on te one and, an
236 ;apter JJJ4&
immanent !orm o! te capitalist mode o! prod%ction, and on te oter, a dri8ing !orce in its
de8elopment to its igest and %ltimate !orm0
5e banking system, so !ar as its !ormal organiEation and centraliEation is concerned, is te most
arti!icial and most de8eloped prod%ct t%rned o%t by te capitalist mode o! prod%ction, a !act
already expressed in 16*> in Some 4houghts of the Dnterests of 0ngland0 5is acco%nts !or te
immense po@er o! an instit%tion s%c as te Aank o! England o8er commerce and ind%stry,
alto%g teir act%al mo8ements remain completely beyond its pro8ince and it is passi8e to@ard
tem0 5e banking system possesses indeed te !orm o! %ni8ersal book-keeping and distrib%tion
o! means o! prod%ction on a social scale, b%t solely te !orm0 We a8e seen tat te a8erage pro!it
o! te indi8id%al capitalist, or o! e8ery indi8id%al capital, is determined not by te s%rpl%s-labo%r
appropriated at !irst and by eac capital, b%t by te D%antity o! total s%rpl%s-labo%r appropriated
by te total capital, !rom @ic eac indi8id%al capital recei8es its di8idend only proportional to
its aliD%ot part o! te total capital0 5is social caracter o! capital is !irst promoted and @olly
realiEed tro%g te !%ll de8elopment o! te credit and banking system0 3n te oter and tis
goes !arter0 &t places all te a8ailable and e8en potential capital o! society tat is not already
acti8ely employed at te disposal o! te ind%strial and commercial capitalists so tat neiter te
lenders nor %sers o! tis capital are its real o@ners or prod%cers0 &t t%s does a@ay @it te
pri8ate caracter o! capital and t%s contains in itsel!, b%t only in itsel!, te abolition o! capital
itsel!0 Ay means o! te banking system te distrib%tion o! capital as a special b%siness, a social
!%nction, is taken o%t o! te ands o! te pri8ate capitalists and %s%rers0 A%t at te same time,
banking and credit t%s become te most potent means o! dri8ing capitalist prod%ction beyond its
o@n limits, and one o! te most e!!ecti8e 8eicles o! crises and s@indle0
5e banking system so@s, !%rtermore, by s%bstit%ting 8ario%s !orms o! circ%lating credit in
place o! money, tat money is in reality noting b%t a partic%lar expression o! te social caracter
o! labo%r and its prod%cts, @ic, o@e8er, as antitetical to te basis o! pri8ate prod%ction, m%st
al@ays appear in te last analysis as a ting, a special commodity, alongside oter commodities0
Finally, tere is no do%bt tat te credit system @ill ser8e as a po@er!%l le8er d%ring te transition
!rom te capitalist mode o! prod%ction to te mode o! prod%ction o! associated labo%r# b%t only as
one element in connection @it oter great organic re8ol%tions o! te mode o! prod%ction itsel!0
3n te oter and, te ill%sions concerning te mirac%lo%s po@er o! te credit and banking
system, in te socialist sense, arise !rom a complete lack o! !amiliarity @it te capitalist mode o!
prod%ction and te credit system as one o! its !orms0 ?s soon as te means o! prod%ction cease
being trans!ormed into capital B@ic also incl%des te abolition o! pri8ate property in landC,
credit as s%c no longer as any meaning0 5is, incidentally, @as e8en %nderstood by te
!ollo@ers o! $aint-$imon0 3n te oter and, as long as te capitalist mode o! prod%ction
contin%es to exist, interest-bearing capital, as one o! its !orms, also contin%es to exist and
constit%tes in !act te basis o! its credit system0 3nly tat sensational @riter, ,ro%don, @o
@anted to perpet%ate commodity-prod%ction and abolis money,
xxxi8
@as capable o! dreaming %p
te monstro%s crjdit grat%it, te ostensible realiEation o! te pio%s @is o! te petty-bo%rgeois
estate0
&n 9eligion saint1simonienne, 2conomie politi3ue et &oliti3ue, @e read on page 2+:
K;redit ser8es te p%rpose, in a society in @ic some
o@n te instr%ments o! ind%stry @ito%t te ability or
@ill to employ tem, and @ere oter ind%strio%s
people a8e no instr%ments o! labo%r, o! trans!erring
tese instr%ments in te easiest manner possible !rom
te ands o! te !ormer, teir o@ners, to te ands o!
23> ;apter JJJ4&
te oters @o kno@ o@ to %se tem0 -ote tat tis
de!inition regards credit as a res%lt o! te @ay in
@ic property is constit%ted0L
5ere!ore, credit disappears @it tis constit%tion o! property0 We read, !%rtermore, on page *8,
tat te present banks
Kconsider it teir b%siness to !ollo@ te mo8ement
initiated by transactions taking place o%tside o! teir
domain, b%t not temsel8es to pro8ide an imp%lse to
tis mo8ement# in oter @ords, te banks per!orm te
role o! capitalists in relation to te tra8aille%rs, @om
tey loan money0L
5e notion tat te banks temsel8es so%ld take o8er te management and disting%is
temsel8es
Ktro%g te n%mber and %se!%lness o! teir managed
establisments and o! promoted @orksL Bp0 1=1C
contains te Cr7dit mobilier in embryo0 &n te same @ay, ;arles ,ecD%e%r demands tat te
banks B@ic te !ollo@ers o! $aint-$imon call a Syst2me general des ban3uesC Kso%ld r%le
prod%ction0L ,ecD%e%r is essentially a !ollo@er o! $aint-$imon, b%t m%c more radical0 6e @ants
Kte credit instit%tion 000 to control te entire
mo8ement o! national prod%ction0L I K5ry to create a
national credit instit%tion, @ic sall ad8ance te
@ere@ital to needy people o! talent and merit,
@ito%t, o@e8er, !orcibly tying tese borro@ers
togeter tro%g close solidarity in prod%ction and
cons%mption, b%t on te contrary enabling tem to
determine teir o@n excange and prod%ction0 &n tis
@ay, yo% @ill only accomplis @at te pri8ate banks
already accomplis no@, tat is, anarcy,
disproportion bet@een prod%ction and cons%mption,
te s%dden r%in o! one person, and te s%dden
enricment o! anoter# so tat yo%r instit%tion @ill
ne8er get any !arter tan prod%cing a certain amo%nt
o! bene!its !or one person, corresponding to an
eD%i8alent amo%nt o! mis!ort%ne to be end%red by
anoter 000 and yo% @ill a8e only pro8ided te @age-
labo%rers assisted by yo% @it te means to compete
@it one anoter H%st as teir capitalist masters no@
238 ;apter JJJ4&
do0L B;0 ,ecD%e%r, 4h2orie $ouvelle 2conomie
sociale et &oliti3ue, ,aris, 182<, p0 2320C
We a8e seen tat mercant"s capital and interest-bearing capital are te oldest !orms o! capital0
A%t it is in te nat%re o! tings tat interest-bearing capital ass%mes in pop%lar conception te
!orm o! capital par ecellence0 &n mercant"s capital tere takes place te @ork o! te middleman,
no matter @eter considered as ceating, labo%r, or anyting else0 A%t in te case o! interest-
bearing capital te sel!-reprod%cing caracter o! capital, te sel!-expanding 8al%e, te prod%ction
o! s%rpl%s 8al%e, appears p%rely as an occ%lt property0 5is acco%nts !or te !act tat e8en some
political economists, partic%larly in co%ntries @ere ind%strial capital is not yet !%lly de8eloped,
as in France, cling to interest-bearing capital as te !%ndamental !orm o! capital and regard
gro%nd-rent, !or example, merely as a modi!ied !orm o! it, since te loan-!orm also predominates
ere0 &n tis @ay, te internal organisation o! te capitalist mode o! prod%ction is completely
mis%nderstood, and te !act is entirely o8erlooked tat land, like capital, is loaned only to
capitalists0 3! co%rse, means o! prod%ction in kind, s%c as macines and b%siness o!!ices, can
also be loaned instead o! money0 A%t tey ten represent a de!inite s%m o! money, and te !act
tat in addition to interest a part is paid !or @ear and tear is d%e to teir %se-8al%e, i0e0, te
speci!ic nat%ral !orm o! tese elements o! capital0 5e decisi8e !actor ere is again @eter tey
are loaned to direct prod%cers, @ic @o%ld pres%ppose te non-existence o! te capitalist mode
o! prod%ction-at least in te spere in @ic tis occ%rs I or @eter tey are loaned to ind%strial
capitalists, @ic is precisely te ass%mption based %pon te capitalist mode o! prod%ction0 &t is
still more irrele8ant and meaningless to drag te lending o! o%ses, etc0, !or indi8id%al %se into
tis disc%ssion0 5at te @orking-class is also s@indled in tis !orm, and to an enormo%s extent,
is sel! e8ident# b%t tis is also done by te retail dealer, @o sells means o! s%bsistence to te
@orker0 5is is secondary exploitation, @ic r%ns parallel to te primary exploitation taking
place in te prod%ction process itsel!0 5e distinction bet@een selling and loaning is D%ite
immaterial in tis case and merely !ormal, and, as already indicated, B,resent edition: pp0 32+-+=0
I Ed0C cannot appear as essential to anyone, %nless e be @olly %n!amiliar @it te act%al nat%re
o! te problem0
(s%ry, like commerce, exploits a gi8en mode o! prod%ction0 &t does not create it, b%t is related to
it o%t@ardly0 (s%ry tries to maintain it directly, so as to exploit it e8er ane@# it is conser8ati8e and
makes tis mode o! prod%ction only more pitiable0 5e less elements o! prod%ction enter into te
prod%ction process as commodities, and emerge !rom it as commodities, te more does teir
origination !rom money appear as a separate act0 5e more insigni!icant te role played by
circ%lation in te social reprod%ction, te more %s%ry !lo%rises0
5at money @ealt de8elops as a special kind o! @ealt, means in respect to %s%rer"s capital tat
it possesses all its claims in te !orm o! money claims0 &t de8elops tat m%c more in a gi8en
co%ntry, te more te main body o! prod%ction is limited to nat%ral ser8ices, etc0, tat is, to %se-
8al%es0
(s%ry is a po@er!%l le8er in de8eloping te preconditions !or ind%strial capital in so !ar as it plays
te !ollo@ing do%ble role, !irst, b%ilding %p, in general, an independent money @ealt alongside
tat o! te mercant, and, secondly, appropriating te conditions o! labo%r, tat is, r%ining te
o@ners o! te old conditions o! labo%r0
Interest In The Middle Ages
K&n te Middle ?ges te pop%lation @as p%rely
agric%lt%ral0 (nder s%c a go8ernment as @as te
23* ;apter JJJ4&
!e%dal system tere can be b%t little tra!!ic, and ence
b%t little pro!it0 6ence te la@s against %s%ry @ere
H%sti!ied in te Middle ?ges0 Aesides, in an
agric%lt%ral co%ntry a person seldom @ants to borro@
money except e be red%ced to po8erty or distress0000
&n te reign o! 6enry 4&&&, interest @as limited to 1=
per cent0 Pames & red%ced it to 8 per cent 000 ;arles &&
red%ced it to 6 per cent# in te reign o! M%een ?nne, it
@as red%ced to + per cent0000 &n tose times, te
lenders 000 ad, in !act, to%g not a legal, yet an
act%al monopoly, and ence it @as necessary tat tey,
like oter monopolists, so%ld be placed %nder
restraint0 &n o%r times, it is te rate o! pro!it @ic
reg%lates te rate o! interest0 &n tose times, it @as te
rate o! interest @ic reg%lated te rate o! pro!it0 &!
te money-lender carged a ig rate o! interest to te
mercant, te mercant m%st a8e carged a iger
rate o! pro!it on is goods0 6ence, a large s%m o!
money @o%ld be taken !rom te pockets o! te
p%rcasers to be p%t into te pockets o! te money-
lenders0L B:ilbart, (istory and &rinciples of Gan-ing,
pp0 163, 162, 16+0C
K& a8e been told tat 1= g%lden are no@ taken
ann%ally at e8ery 'eipEig Fair, B5e a%tor as in
mind te loan o! 1== g%lden @it interest payable in
tree installments at te 'eipEig Fair, eld tree times
ann%ally: Easter and $t0 Micael"s 7ayC tat is, 3= on
eac %ndred, some add te -e%enb%rg Fair, t%s
making 2= per %ndred# @eter tat is so, & don"t
kno@0 For sameS Wat @ill be te in!ernal o%tcome
o! tisQ 000 Woe8er no@ as 1== !lorins at 'eipEig
takes 2= ann%ally, @ic is te same as de8o%ring one
peasant or b%rger eac year0 &! one as 1,=== !lorins,
e takes 2== ann%ally @ic means de8o%ring a
knigt or a ric nobleman per year0 &! one as 1=,===
22= ;apter JJJ4&
!lorins, e takes 2,=== per year, @ic means
de8o%ring a ric co%nt eac year0 &! one as 1==,===
!lorins, as te big mercants m%st possess, e takes
2=,=== ann%ally, @ic means de8o%ring one a!!l%ent
prince eac year0 &! one as 1,===,=== !lorins, e takes
2==,=== ann%ally, @ic means de8o%ring one migty
king e8ery year0 ?nd e does not risk eiter is person
or is @ares, does not @ork, sits near is !ire-place
and roasts apples# so migt a lo@ly robber sit at ome
and de8o%r a @ole @orld in ten years0L BM%oted !rom
Gcher vom Haufhandel und "ucher 8om Pare 1+<2,
'%ter"s "er-e, Wittenberg, 1+8*, 5eil 6, $0 31<0C
KFi!teen years ago & took pen in and against %s%ry
@en it ad spread so alarmingly tat & co%ld scarcely
ope !or any impro8ement0 $ince ten it as become
so arrogant tat it deigns not to be classed as 8ice, sin,
or same, b%t acie8es praise as p%re 8irt%e and
ono%r, as to%g it @ere per!orming a great !a8o%r
and ;ristian ser8ice !or te people0 Wat @ill elp
deli8er %s no@ tat same as t%rned into ono%r and
8ice into 8irt%eQL BMartin '%ter, +n die &farherrn
wider den "ucher #u predigen, Wittenberg, 1+2=0C
KPe@s, 'ombards, %s%rers and extortioners @ere o%r
!irst bankers, o%r primiti8e tra!!ickers in money, teir
caracter little sort o! in!amo%s000 5ey @ere Hoined
by 'ondon goldsmits0 ?s a body 000 o%r primiti8e
bankers 000 @ere a 8ery bad set, tey @ere gripping
%s%rers, iron-earted extortioners0L B70 6ardcastle,
Gan-s and Gan-ers, <nd ed0, 'ondon, 1823, pp0 1*,
<=0C
K5e example so@n by 4eniceL Bin establising a
bankC K@as t%s D%ickly imitated# all sea-coast to@ns,
and in general all to@ns @ic ad earned !ame
tro%g teir independence and commerce, !o%nded
221 ;apter JJJ4&
teir !irst banks0 5e ret%rn 8oyage o! teir sips,
@ic o!ten @as o! long d%ration, ine8itably led to te
c%stom o! lending on credit0 5is @as !%rter
intensi!ied by te disco8ery o! ?merica and te
ens%ing trade @it tat continent0L B5is is te main
point0C K5e cartering o! sips made large loans
necessary-a proced%re already obtaining in ancient
?tens and :reece0 &n 13=8, te 6anse to@n o!
Ar%ges possessed an ins%rance company0 BM0 ?%gier,
l0 c0, pp0 <=<, <=30C
5o @at extent te granting o! loans to lando@ners, and t%s to te pleas%re-seeking @ealty in
general, still pre8ailed in te last tird o! te 1>t cent%ry, e8en in England, be!ore te
de8elopment o! modern credit, may be seen, among oters, in te @orks o! $ir 7%dley -ort0 6e
@as not only one o! te !irst Englis mercants, b%t also one o! te most prominent teoretical
economists o! is time:
K5e moneys employed at interest in tis nation, are
not near te tent part, disposed to trading people,
@ere@it to manage teir trades# b%t are !or te most
part lent !or te s%pplying o! l%x%ry, and to s%pport
te expense o! persons, @o to%g great o@ners o!
lands, yet spend !aster tan teir lands bring in# and
being loat to sell, coose rater to mortgage teir
estates0L BDiscourses upon 4rade, 'ondon, 16*1,
pp06->0C
,oland in te 18t cent%ry:
KWarsa@ carried on a large b%stling b%siness in bills o! excange @ic, o@e8er, ad as its
principal basis and aim te %s%ry o! its bankers0 &n order to sec%re money, @ic tey co%ld lend
to spendtri!t gentry at 8T and more, tey so%gt and obtained abroad open excange credit, tat
is, credit tat ad no commodity trade as its basis, b%t @ic te !oreign dra@ee contin%ed to
accept as long as te ret%rns !rom tese manip%lations did not !ail to come in0 6o@e8er, tey paid
ea8ily !or tis tro%g bankr%ptcies o! men like 5apper and oter igly respected Warsa@
bankers0L BP0 :0 Aesc, 4heoretisch1pra-tische Darstellung der (andlung, etc0, 3rd ed0, 6amb%rg,
18=8, 4ol0 &&, pp0 <3<, <330C
Advantages Derived By The h!rch "rom The #rohi$ition
Of Interest
K5aking interest ad been interdicted by te ;%rc0
A%t selling property !or te p%rpose o! !inding
s%cco%r in distress ad not been !orbidden0 &t ad not
e8en been proibited to trans!er property to te
22< ;apter JJJ4&
money-lender as sec%rity !or a certain term, %ntil a
debtor repaid is loan, lea8ing te money-lender !ree
to enHoy te %s%!r%ct o! te property as a re@ard !or
is abstinence !rom is money0000 5e ;%rc itsel!,
and its associated comm%nes and pia corpora, deri8ed
m%c pro!it !rom tis practice, partic%larly d%ring te
cr%sades0 5is bro%gt a 8ery large portion o! national
@ealt into possession o! te so-called "dead and," all
te more so beca%se te Pe@s @ere barred !rom
engaging in s%c %s%ry, te possession o! s%c !ixed
liens not being concealable0000 Wito%t te ban on
interest c%rces and cloisters @o%ld ne8er a8e
become so a!!l%entL Bl0 c0, p0 ++C0
Part VI. Transformation of
Surplus-Proft into Ground-Rent
Chapter 37. Introduction
5e analysis o! landed property in its 8ario%s istorical !orms is beyond te scope o! tis @ork0
We sall be concerned @it it only in so !ar as a portion o! te s%rpl%s-8al%e prod%ced by capital
!alls to te sare o! te lando@ner0 We ass%me, ten, tat agric%lt%re is dominated by te
capitalist mode o! prod%ction H%st as man%!act%re is# in oter @ords, tat agric%lt%re is carried on
by capitalists @o di!!er !rom oter capitalists primarily in te manner in @ic teir capital, and
te @age-labo%r set in motion by tis capital, are in8ested0 $o !ar as @e are concerned, te !armer
prod%ces @eat, etc0, in m%c te same @ay as te man%!act%rer prod%ces yarn or macines0 5e
ass%mption tat te capitalist mode o! prod%ction as encompassed agric%lt%re implies tat it
r%les o8er all speres o! prod%ction and bo%rgeois society, i0e0, tat its prereD%isites, s%c as !ree
competition among capitals, te possibility o! trans!erring te latter !rom one prod%ction spere
to anoter, and a %ni!orm le8el o! te a8erage pro!it, etc0, are !%lly mat%red0 5e !orm o! landed
property @ic @e sall consider ere is a speci!ically istorical one a !orm transformed tro%g
te in!l%ence o! capital and o! te capitalist mode o! prod%ction, eiter o! !e%dal lando@nersip,
or o! small-peasant agric%lt%re as a means o! li8eliood, in @ic te possession o! te land and
te soil constit%tes one o! te prereD%isites o! prod%ction !or te direct prod%cer, and in @ic is
ownership o! land appears as te most ad8antageo%s condition !or te prosperity o! his mode o!
prod%ction0 P%st as te capitalist mode o! prod%ction in general is based on te expropriation o!
te conditions o! labo%r !rom te labo%rers, so does it in agric%lt%re pres%ppose te expropriation
o! te r%ral labo%rers !rom te land and teir s%bordination to a capitalist, @o carries on
agric%lt%re !or te sake o! pro!it0 5%s, !or te p%rpose o! o%r analysis, te obHection tat oter
!orms o! landed property and o! agric%lt%re a8e existed, or still exist, is D%ite irrele8ant0 $%c an
obHection can only apply to tose economists @o treat te capitalist mode o! prod%ction in
agric%lt%re, and te !orm o! landed property corresponding to it, not as istorical b%t rater as
eternal categories0
For o%r p%rposes it is necessary to st%dy te modern !orm o! landed property, beca%se o%r task is
to consider te speci!ic conditions o! prod%ction and circ%lation @ic arise !rom te in8estment
o! capital in agric%lt%re0 Wito%t tis, o%r analysis o! capital @o%ld not be complete0 We tere!ore
con!ine o%rsel8es excl%si8ely to te in8estment o! capital in agric%lt%re itsel!, tat is, in
prod%cing te principal agric%lt%ral crop @ic !eeds a gi8en people0 We can %se @eat !or tis
p%rpose, beca%se it is te principal means o! s%bsistence in modern capitalistically de8eloped
nations0 B3r, instead o! agric%lt%re, @e can %se mining beca%se te la@s are te same !or bot0C
3ne o! te big contrib%tions o! ?dam $mit @as to a8e so@n tat gro%nd-rent !or capital
in8ested in te prod%ction o! s%c agric%lt%ral prod%cts as !lax and dye-st%!!s, and in independent
cattle-raising, etc0, is determined by te gro%nd-rent obtained !rom capital in8ested in te
prod%ction o! te principal article o! s%bsistence0 /$mit, +n Dn3uiry into the $ature and Causes
of the "ealth of $ations, ?berdeen, 'ondon, 1828, pp0 1=+-160 I 0d01 &n !act, no !%rter progress
as been made in tis regard since ten0 ?ny limitations or additions @o%ld belong in an
independent st%dy o! landed property, not ere0 6ence, @e sall not speak o! landed property e
222 ;apter JJJ4&&
professo I in so !ar as it does not re!er to land destined !or @eat prod%ction I b%t sall merely
re!er to it on occasion by @ay o! ill%stration0
&t so%ld be noted !or te sake o! completeness tat @e also incl%de @ater, etc0, in te term land,
in so !ar as it belongs to someone as an accessory to te land0
'anded property is based on te monopoly by certain persons o8er de!inite portions o! te globe,
as excl%si8e speres o! teir pri8ate @ill to te excl%sion o! all oters0
xxx8
Wit tis in mind, te
problem is to ascertain te economic 8al%e, tat is, te realisation o! tis monopoly on te basis
o! capitalist prod%ction0 Wit te legal po@er o! tese persons to %se or mis%se certain portions o!
te globe, noting is decided0 5e %se o! tis po@er depends @olly %pon economic conditions,
@ic are independent o! teir @ill0 5e legal 8ie@ itsel! only means tat te lando@ner can do
@it te land @at e8ery o@ner o! commodities can do @it is commodities0 ?nd tis 8ie@, tis
legal 8ie@ o! !ree pri8ate o@nersip o! land, arises in te ancient @orld only @it te dissol%tion
o! te organic order o! society, and in te modern @orld only @it te de8elopment o! capitalist
prod%ction0 &t as been imported by E%ropeans to ?sia only ere and tere0 &n te section dealing
@it primiti8e acc%m%lation BA%c &, Kap0 JJ&4 /Englis edition: ,art 4&&&0 I 0d10C, @e sa@ tat
tis mode o! prod%ction pres%pposes, on te one and, te separation o! te direct prod%cers !rom
teir position as mere accessories to te land Bin te !orm o! 8assals, ser!s, sla8es, etc0C, and, on
te oter and, te expropriation o! te mass o! te people !rom te land0 5o tis extent te
monopoly o! landed property is a istorical premise, and contin%es to remain te basis o! te
capitalist mode o! prod%ction, H%st as in all pre8io%s modes o! prod%ction @ic are based on te
exploitation o! te masses in one !orm or anoter0 A%t te !orm o! landed property @it @ic te
incipient capitalist mode o! prod%ction is con!ronted does not s%it it0 &t !irst creates !or itsel! te
!orm reD%ired by s%bordinating agric%lt%re to capital0 &t t%s trans!orms !e%dal landed property,
clan property, small peasant property in mark comm%nes I no matter o@ di8ergent teir H%ristic
!orms may be I into te economic !orm corresponding to te reD%irements o! tis mode o!
prod%ction0 3ne o! te maHor res%lts o! te capitalist mode o! prod%ction is tat, on te one and,
it trans!orms agric%lt%re !rom a mere empirical and mecanical sel!-perpet%ating process
employed by te least de8eloped part o! society into te conscio%s scienti!ic application o!
agronomy, in so !ar as tis is at all !easible %nder conditions o! pri8ate property#
xxx8i
tat it
di8orces landed property !rom te relations o! dominion and ser8it%de, on te one and, and, on
te oter, totally separates land as an instr%ment o! prod%ction !rom landed property and
lando@ner I !or @om te land merely represents a certain money assessment @ic e collects
by 8irt%e o! is monopoly !rom te ind%strial capitalist, te capitalist !armer# it dissol8es te
connection bet@een lando@nersip and te land so toro%gly tat te lando@ner may spend is
@ole li!e in ;onstantinople, @ile is estates lie in $cotland0 'anded property t%s recei8es its
p%rely economic !orm by discarding all its !ormer political and social embellisments and
associations, in brie! all tose traditional accessories, @ic are deno%nced, as @e sall see later,
as %seless and abs%rd s%per!l%ities by te ind%strial capitalists temsel8es, as @ell as teir
teoretical spokesmen, in te eat o! teir str%ggle @it landed property0 5e rationalising o!
agric%lt%re, on te one and, @ic makes it !or te !irst time capable o! operating on a social
scale, and te red%ction ad absurdum o! property in land, on te oter, are te great acie8ements
o! te capitalist mode o! prod%ction0 'ike all o! its oter istorical ad8ances, it also attained tese
by !irst completely impo8erising te direct prod%cers0
Ae!ore @e proceed to te problem itsel!, se8eral more preliminary remarks are necessary to a8oid
mis%nderstanding0
5e prereD%isites !or te capitalist mode o! prod%ction tere!ore are te !ollo@ing: 5e act%al
tillers o! te soil are @age labo%rers employed by a capitalist, te capitalist !armer @o is
engaged in agric%lt%re merely as a partic%lar !ield o! exploitation !or capital, as in8estment !or is
capital in a partic%lar spere o! prod%ction0 5is capitalist !armer pays te lando@ner, te o@ner
o! te land exploited by im, a s%m o! money at de!inite periods !ixed by contract, !or instance,
22+ ;apter JJJ4&&
ann%ally BH%st as te borro@er o! money-capital pays a !ixed interestC, !or te rigt to in8est is
capital in tis speci!ic spere o! prod%ction0 5is s%m o! money is called gro%nd-rent, no matter
@eter it is paid !or agric%lt%ral land, b%ilding lots, mines, !ising gro%nds, or !orests, etc0 &t is
paid !or te entire time !or @ic te lando@ner as contracted to rent is land to te capitalist
!armer0 :ro%nd-rent, tere!ore, is ere tat !orm in @ic property in land is realised
economically, tat is, prod%ces 8al%e0 6ere, ten, @e a8e all tree classes I @age-labo%rers,
ind%strial capitalists, and lando@ners constit%ting togeter, and in teir m%t%al opposition, te
!rame@ork o! modern society0
;apital may be !ixed in te land, incorporated in it eiter in a transitory manner, as tro%g
impro8ements o! a cemical nat%re, !ertilisation, etc0, or more permanently, as in drainage canals,
irrigation @orks, le8eling, !arm b%ildings, etc0 Else@ere & a8e called te capital t%s applied to
land la terre1capital0
xxx8ii
&t belongs to te category o! !ixed capital0 5e interest on capital
incorporated in te land and te impro8ements t%s made in it as an instr%ment o! prod%ction can
constit%te a part o! te rent paid by te capitalist !armer to te lando@ner,
xxx8iii
b%t it does not
constit%te te act%al gro%nd-rent, @ic is paid !or te %se o! te land as s%c I be it in a nat%ral
or c%lti8ated state0 &n a systematic treatment o! landed property, @ic is not @itin o%r scope,
tis part o! te lando@ner"s re8en%e @o%ld a8e to be disc%ssed at lengt0 A%t a !e@ @ords abo%t
it @ill s%!!ice ere0 5e more transitory capital in8estments, @ic accompany te ordinary
prod%ction processes in agric%lt%re, are all made @ito%t exception by te capitalist !armer0 5ese
in8estments, like c%lti8ation proper in general, impro8e te land,
xxxix
increase its o%tp%t, and
trans!orm te land !rom mere material into land-capital @en te c%lti8ation is carried on more or
less rationally, i0e0, @en it is not red%ced to a br%tal spoliation o! te soil, as @as in 8og%e, e0g0,
among te !ormer sla8e-olders in te (nited $tates# o@e8er, te gentlemen lando@ners sec%re
temsel8es against s%c practice by contract0 ? c%lti8ated !ield is @ort more tan an
%nc%lti8ated one o! te same nat%ral D%ality0 5e more permanent !ixed capital in8estments,
@ic are incorporated in te soil and %sed %p in a longer period o! time, are also in te main, and
in some speres o!ten excl%si8ely, made by te capitalist !armer0 A%t as soon as te time
stip%lated by contract as expired I and tis is one o! te reasons @y @it te de8elopment o!
capitalist prod%ction te lando@ners seek to sorten te contract period as m%c as possible I te
impro8ements incorporated in te soil become te property o! te lando@ner as an inseparable
!eat%re o! te s%bstance, te land0 &n te ne@ contract made by te lando@ner e adds te interest
!or capital incorporated in te land to te gro%nd-rent itsel!0 ?nd e does tis @eter e no@
leases te land to te capitalist !armer @o made tese impro8ements or to some oter !armer0
6is rent is t%s in!lated# and so%ld e @is to sell is land B@e sall see immediately o@ its
price is determinedC, its 8al%e is no@ iger0 6e sells not merely te land b%t te impro8ed land,
te capital incorporated in te land !or @ic e paid noting0 M%ite aside !rom te mo8ements o!
gro%nd-rent itsel!, ere lies one o! te secrets o! te increasing enricment o! lando@ners, te
contin%o%s in!lation o! teir rents, and te constantly gro@ing money-8al%e o! teir estates along
@it progress in economic de8elopment0 5%s tey pocket a prod%ct o! social de8elopment
created @ito%t teir elp I fruges consumere nati0 /6orace, 0pistles, Aook &, 0pistles F, F@0 I
0d10 A%t tis is at te same time one o! te greatest obstacles to a rational de8elopment o!
agric%lt%re, !or te tenant !armer a8oids all impro8ements and o%tlays !or @ic e cannot expect
complete ret%rns d%ring te term o! is lease0 We !ind tis sit%ation deno%nced as s%c an
obstacle again and again, not only in te 18t cent%ry by Pames ?nderson, te act%al disco8erer
o! te modern teory o! rent /3n P0 ?nderson"s teory o! rent see K0 Marx, 4heorien ber den
Mehrwert BK0 MarxNF0 Engels,"er-e, Aand <6, <0 5eil, $0 1=3-=+, 11=-12, 132-3*C0 I 0d01 I @o
@as also a practical capitalist !armer and an ad8anced agronomist !or is time I b%t also in o%r
o@n day by opponents o! te present constit%tion o! landed property in England0
?0?0 Walton, in is (istory of the ,anded 4enures of Great Gritain and Dreland, 'ondon, 186+,
says on tis score Bpp0*6, *>C:
226 ;apter JJJ4&&
K?ll te e!!orts o! te n%mero%s agric%lt%ral
associations tro%go%t te co%ntry m%st !ail to
prod%ce any 8ery extensi8e or really appreciable
res%lts in te real ad8ancement o! agric%lt%ral
impro8ement, so long as s%c impro8ements mean in
a !ar iger degree increased 8al%e to te estate and
rent-roll o! te landlord, tan bettering te condition
o! te tenant !armer or te labo%rer0 5e !armers,
generally, are as @ell a@are as eiter te landlord or
is agent, or e8en te president o! te ?gric%lt%ral
?ssociation, tat good drainage, plenty o! man%re,
and good management, combined @it te increased
employment o! labo%r, to toro%gly cleanse and
@ork te land, @ill prod%ce @onder!%l res%lts bot in
impro8ement and prod%ction0 5o do all tis, o@e8er,
considerable o%tlay is reD%ired, and te !armers are
also a@are, tat o@e8er m%c tey may impro8e te
land or enance its 8al%e, te landlords @ill, in te
long r%n, reap te principal bene!it, in iger rents
and te increased 8al%e o! teir estates0000 5ey are
sre@d eno%g to obser8e @at tose oratorsL
/lando@ners and teir agents speaking at agric%lt%ral
!esti8ities1, Kby some sing%lar inad8ertence, omit to
tell tem Inamely, tat te lion"s sare o! any
impro8ements tey may make is s%re to go into te
pockets o! te landlords in te long r%n0000 6o@e8er
m%c te !ormer tenant may a8e impro8ed te !arm,
is s%ccessor @ill !ind tat te landlord @ill al@ays
increase te rent in proportion to te increased 8al%e
o! te land !rom !ormer impro8ements0L
&n agric%lt%re proper tis process does not yet appear D%ite as plainly as @en te land is %sed !or
b%ilding p%rposes0 Ay !ar te largest portion o! land %sed in England !or b%ilding p%rposes b%t
not sold as a !reeold is leased by te lando@ners !or ** years or, i! possible, !or a sorter term0
?!ter te lapse o! tis period te b%ildings !all into te ands o! te lando@ner togeter @it te
land itsel!0
K5eyL /te tenants1 Kare bo%nd to deli8er %p te
o%se at te expiration o! te lease, in good tenantable
22> ;apter JJJ4&&
condition, to te great landlord, a!ter a8ing paid an
exorbitant gro%nd-rent %p to te expiration o! te
lease0 -o sooner is te lease expired, tan te agent or
s%r8eyor @ill come and examine yo%r o%se, and see
tat yo% p%t it into good repair, and ten take
possession o! it, and annex it to is lord"s domains0000
5e !act is, i! tis system is permitted to be in !%ll
operation !or any considerable period longer, te
@ole o! te o%se property in te kingdom @ill be in
te ands o! te great landlords, as @ell as te land0
5e @ole o! te West End o! 'ondon, nort and
so%t !rom 5emple Aar, may be said to belong to
abo%t al! a doEen great landlords, all let at enormo%s
rents, and @ere te leases a8e not D%ite expired
tey are !ast !alling d%e0 5e same may be said eiter
more or less o! e8ery to@n in te kingdom0 -or does
tis grasping system o! excl%sion and monopoly stop
e8en ere0 -early te @ole o! te dock
accommodation in o%r seaport to@ns is by te same
process o! %s%rpation in te ands o! te great
le8iatans o! te landL B10 c0, pp0*<-*3C0
and Wales in 1861 gi8es te total pop%lation as <=,=66,<<2 and te n%mber o! landlords as
36,=3<, te proportion o! o@ners to te n%mber o! o%ses and to pop%lation @o%ld look
completely di!!erent i! te large landlords @ere placed on one side and te small ones on te
oter0
5is ill%stration o! o@nersip in b%ildings is important0 &n te !irst place, it clearly so@s te
di!!erence bet@een act%al gro%nd-rent and interest on !ixed capital incorporated in te land,
@ic may constit%te an addition to gro%nd-rent0 &nterest on b%ildings, like tat on capital
incorporated in te land by te tenant in agric%lt%re, !alls into te ands o! te ind%strial
capitalist, te b%ilding spec%lator, or te tenant, so long as te lease lasts, and as in itsel! noting
to do @it gro%nd-rent, @ic m%st be paid on stated dates ann%ally !or te %se o! te land0
$econdly, it so@s tat capital incorporated in te land by oters %ltimately passes into te ands
o! te landlord togeter @it te land, and tat te interest !or it in!lates is rent0
$ome @riters, acting eiter as spokesmen o! landlordism and taking %p te c%dgels against te
attacks o! bo%rgeois economists, or in an endea8o%r to trans!orm te capitalist system o!
prod%ction !rom a system o! contradictions into one o! Karmonies,L like ;arey, a8e tried to
represent gro%nd-rent, te speci!ic economic expression o! landed property, as identical @it
interest0 5is @o%ld eliminate te opposition bet@een landlords and capitalists0 5e opposite
metod @as employed in te early stages o! capitalist prod%ction0 &n tose days, landed property
@as still regarded by pop%lar conception as te pristine and respectable !orm o! pri8ate property,
@ile interest on capital @as decried as %s%ry0 7%dley -ort, 'ocke and oters, tere!ore,
228 ;apter JJJ4&&
represented interest on capital as a !orm analogo%s to gro%nd-rent, H%st as 5%rgot ded%ced te
H%sti!ication !or interest !rom te existence o! gro%nd-rent0 I ?side !rom te !act tat gro%nd-rent
may, and does, exist in its p%re !orm @ito%t any addition !or interest on capital incorporated in
te land, tose more recent @riters !orget tat, in tis @ay, te landlord not only recei8es interest
on oter persons" capital tat costs im noting, b%t also pockets tis capital o! oters @ito%t
recompense0 5e H%sti!ication o! landed property, like tat o! all oter !orms o! property
corresponding to a certain mode o! prod%ction, is tat te mode o! prod%ction itsel! is a transient
istorical necessity, and tis incl%des te relations o! prod%ction and excange @ic stem !rom
it0 &t is tr%e, as @e sall see later, tat landed property di!!ers !rom oter kinds o! property in tat
it appears s%per!l%o%s and arm!%l at a certain stage o! de8elopment, e8en !rom te point o! 8ie@
o! te capitalist mode o! prod%ction0
:ro%nd-rent may in anoter !orm be con!%sed @it interest and tereby its speci!ic caracter
o8erlooked0 :ro%nd-rent ass%mes te !orm o! a certain s%m o! money, @ic te landlord dra@s
ann%ally by leasing a certain plot on o%r planet0 We a8e seen tat e8ery partic%lar s%m o! money
may be capitalised, tat is, considered as te interest on an imaginary capital0 For instance, i! te
a8erage rate o! interest is +T, ten an ann%al gro%nd-rent o! V<== may be regarded as interest on
a capital o! V2,===0 :ro%nd-rent so capitalised constit%tes te p%rcase price or 8al%e o! te land,
a category @ic like te price o! labo%r is prima facie irrational, since te eart is not te
prod%ct o! labo%r and tere!ore as no 8al%e0 A%t on te oter and, a real relation in prod%ction
is concealed beind tis irrational !orm0 &! a capitalist b%ys land yielding a rent o! V<== ann%ally
and pays V2,=== !or it, ten e dra@s te a8erage ann%al interest o! +T on is capital o! V2,===,
H%st as i! e ad in8ested tis capital in interest-bearing papers or loaned it directly at +T interest0
&t is te expansion o! a capital o! V2,=== at +T0 3n tis ass%mption, e @o%ld reco8er te
p%rcase price o! is estate tro%g its re8en%es in t@enty years0 &n England, tere!ore, te
p%rcase price o! land is calc%lated in so many years" p%rcase @ic is merely anoter @ay o!
expressing te capitalisation o! gro%nd-rent0 &t is in !act te p%rcase price-not o! te land, b%t o!
te gro%nd-rent yielded by it I calc%lated in accordance @it te %s%al interest rate0 A%t tis
capitalisation o! rent ass%mes te existence o! rent, @ile rent cannot in8ersely be deri8ed and
explained !rom its o@n capitalisation0 &ts existence, independent o! its sale, is rater te starting-
point !or te inD%iry0
&t !ollo@s, ten, tat te price o! land may rise or !all in8ersely as te interest rate rises or !alls i!
@e ass%me gro%nd-rent to be a constant magnit%de0 &! te ordinary interest rate so%ld !all !rom
+T to 2T, ten te ann%al gro%nd-rent o! V<== @o%ld represent te ann%al realisation !rom a
capital o! V+,=== instead o! V2,===0 5e price o! te same piece o! land @o%ld t%s a8e risen
!rom V2,=== to V+,===, or !rom <= years" to <+ years" p%rcase0 5e con8erse @o%ld take place in
te opposite case0 5is is a mo8ement o! te price o! land @ic is independent o! te mo8ement
o! gro%nd-rent itsel! and reg%lated only by te interest rate0 A%t as @e a8e seen tat te rate o!
pro!it as a tendency to !all in te co%rse o! social progress, and, tere!ore, te interest rate as
te same tendency, so !ar as it is reg%lated by te rate o! pro!it# and tat, !%rtermore, te interest
rate so@s a tendency to !all in conseD%ence o! te gro@t o! loanable capital, apart !rom te
in!l%ence o! te rate o! pro!it, it !ollo@s tat te price o! land as a tendency to rise, e8en
independently o! te mo8ement o! gro%nd-rent and te prices o! te prod%cts o! te land, o!
@ic rent constit%tes a part0
5e con!%sion o! gro%nd-rent itsel! @it te interest !orm @ic it ass%mes !or te b%yer o! te
land I a con!%sion res%lting !rom complete lack o! !amiliarity @it te nat%re o! gro%nd-rent I
m%st necessarily lead to te most abs%rd concl%sions0 $ince landed property is considered in all
ancient co%ntries as a partic%larly genteel !orm o! property, and its p%rcase also as an eminently
sa!e capital in8estment, te interest rate at @ic gro%nd-rent is bo%gt is generally lo@er tan
tat o! oter long-term in8estments o! capital, so tat a b%yer o! real estate dra@s, !or instance,
only 2T on is p%rcase price, @ereas e @o%ld dra@ +T !or te same capital in oter
22* ;apter JJJ4&&
in8estments0 &n oter @ords, e pays more capital !or gro%nd-rent tan e @o%ld !or te same
ann%al amo%nt o! income !rom oter in8estments0 5is leads Mr0 5iers to concl%de in is
generally 8ery poor @ork on ,a &ropri7t7 Ba reprint o! is speec in te Frenc -ational
?ssembly in 182* directed against ,ro%donC /,ro%don"s speec @as p%blised in KCompte
rendu des seances de l5+ssembl7e $ationale,L 5ome &&, ,aris, 182*, pp0 666->10 I 0d01 tat
gro%nd-rent is lo@, @ereas it merely pro8es tat its p%rcase price is ig0
5e !act tat capitalised gro%nd-rent appears as te price or 8al%e o! land, so tat land, tere!ore,
is bo%gt and sold like any oter commodity, ser8es some apologists as a H%sti!ication !or landed
property since te b%yer pays an eD%i8alent !or it, te same as !or oter commodities# and te
maHor portion o! landed property as canged ands in tis @ay0 5e same reason in tat case
@o%ld also ser8e to H%sti!y sla8ery, since te ret%rns !rom te labo%r o! te sla8e, @om te sla8e-
older as bo%gt, merely represent te interest on te capital in8ested in tis p%rcase0 5o deri8e
a H%sti!ication !or te existence o! gro%nd-rent !rom its sale and p%rcase means in general to
H%sti!y its existence by its existence0
?s important as it may be !or a scienti!ic analysis o! gro%nd-rent I tat is, te independent and
speci!ic economic !orm o! landed property on te basis o! te capitalist mode o! prod%ction I
st%dy it in its p%re !orm !ree o! all distorting and ob!%scating irrele8ancies, it is H%st as important
!or an %nderstanding o! te practical e!!ects o! landed property e8en !or a teoretical
compreension o! a m%ltit%de o! !acts @ic contradict te concept and nat%re o! gro%nd-rent and
yet appear as modes o! existence o! gro%nd-rent I to learn te so%rces @ic gi8e rise to s%c
m%ddling in teory0
&n practice, nat%rally, e8eryting appears as gro%nd-rent tat is paid as lease money by tenant to
landlord !or te rigt to c%lti8ate te soil0 -o matter @at te composition o! tis trib%te and no
matter @at its so%rces, it as tis in common @it te act%al gro%nd-rent I tat te monopoly o!
te so-called landed proprietor o! a portion o! o%r planet enables im to le8y s%c trib%te and
impose s%c an assessment0 &t as tis in common @it te act%al gro%nd-rent I tat it determines
te price o! land, @ic, as @e a8e indicated earlier, is noting b%t te capitalised income !rom
te lease o! te land0
We a8e already seen tat interest !or te capital incorporated in te land may constit%te s%c an
extraneo%s component o! gro%nd-rent, a component @ic m%st become a contin%ally gro@ing
extra carge on te total rent o! a co%ntry as economic de8elopment progresses0 A%t aside !rom
tis interest, it is possible tat te lease money may conceal in part, and in certain cases in its
entirety, i0e0, in complete absence o! te act%al gro%nd-rent @en te land is, tere!ore, act%ally
@ortless I a ded%ction !rom te a8erage pro!it or !rom te normal @ages, or bot0 5is portion,
@eter o! pro!it or @ages, appears ere as gro%nd-rent, beca%se instead o! !alling to te
ind%strial capitalist or te @age-@orker, as @o%ld normally be te case, it is paid to te landlord
in te !orm o! lease money0 Economically speaking, neiter te one nor te oter o! tese portions
constit%tes gro%nd-rent# b%t, in practice, it constit%tes te landlord"s re8en%e, an economic
realisation o! is monopoly, m%c as act%al gro%nd-rent, and it as H%st as determining an
in!l%ence on land prices0
We are not speaking no@ o! conditions in @ic gro%nd-rent, te manner o! expressing landed
property in te capitalist mode o! prod%ction, !ormally exists @ito%t te existence o! te
capitalist mode o! prod%ction itsel!, i0e0, @ito%t te tenant imsel! being an ind%strial capitalist,
nor te type o! is management being a capitalist one0 $%c is te case, e0g0, in Dreland0 5e
tenant tere is generally a small !armer0 Wat e pays to te landlord in te !orm o! rent
!reD%ently absorbs not merely a part o! is pro!it, tat is, is o@n s%rpl%s labo%r Bto @ic e is
entitled as possessor o! is o@n instr%ments o! labo%rC, b%t also a part o! is normal @age, @ic
e @o%ld oter@ise recei8e !or te same amo%nt o! labo%r0 Aesides, te landlord, @o does
noting at all !or te impro8ement o! te land, also expropriates is small capital, @ic te
tenant !or te most part incorporates in te land tro%g is o@n labo%r0 5is is precisely @at a
2+= ;apter JJJ4&&
%s%rer @o%ld do %nder similar circ%mstances, @it H%st te di!!erence tat te %s%rer @o%ld at
least risk is o@n capital in te operation0 5is contin%al pl%nder is te core o! te disp%te o8er
te &ris 5enancy )igts Aill0 5e main p%rpose o! tis Aill is to compel te landlord @en
ordering is tenant o!! te land to indemni!y te latter !or is impro8ements on te land, or !or is
capital incorporated in te land0 ,almerston %sed to @a8e tis demand aside @it te cynical
ans@er#
K5e 6o%se o! ;ommons is a o%se o! landed
proprietors0L
-or are @e re!erring to exceptional circ%mstances in @ic te landlord may en!orce a ig rental
I e8en in co%ntries @it capitalist prod%ction I tat stands in no relation to te yield !rom te soil0
3! s%c a nat%re, !or example, is te leasing o! small patces o! land to labo%rers in Englis
!actory districts, eiter as small gardens or !or amate%r spare-time !arming0 B)eports o! &nspectors
o! Factories0C
We are re!erring to gro%nd-rent in co%ntries @it de8eloped capitalist prod%ction0 ?mong Englis
tenants, !or instance, tere are a n%mber o! small capitalists @o are destined and compelled by
ed%cation, training, tradition, competition, and oter circ%mstances to in8est teir capital as
tenants in agric%lt%re0 5ey are !orced to be satis!ied @it less tan te a8erage pro!it, and to t%rn
o8er part o! it to te landlords as rent0 5is is te only condition %nder @ic tey are permitted
to in8est teir capital in te land, in agric%lt%re0 $ince landlords e8ery@ere exert considerable,
and in England e8en o8er@elming, in!l%ence on legislation, tey are able to exploit tis sit%ation
!or te p%rpose o! 8ictimising te entire class o! tenants0 For instance, te ;orn 'a@s o! 181+ I a
bread tax, admittedly imposed %pon te co%ntry to sec%re !or te idle landlords a contin%ation o!
teir abnormally increased rentals d%ring te anti-Pacobin @ar I ad indeed te e!!ect, excl%ding
cases o! a !e@ extraordinarily ric ar8ests, o! maintaining prices o! agric%lt%ral prod%cts abo8e
te le8el to @ic tey @o%ld a8e !allen ad corn imports been %nrestricted0 A%t tey did not
a8e te e!!ect o! maintaining prices at te le8el decreed by te la@making landlords to ser8e as
normal prices in s%c manner as to constit%te te legal limit !or imports o! !oreign corn0 A%t te
leaseolds @ere contracted in an atmospere created by tese normal prices0 ?s soon as te
ill%sion @as dispelled, a ne@ la@ @as passed, containing ne@ normal prices, @ic @ere as m%c
te impotent expression o! a greedy landlord"s !antasy as te old ones0 &n tis @ay, tenants @ere
de!ra%ded !rom 181+ %p to te tirties0 6ence te standing problem o! agric%lt%ral distress d%ring
tis entire period0 6ence te expropriation and te r%in o! a @ole generation o! tenants d%ring
tis period and teir replacement by a ne@ class o! capitalists0
xl
? m%c more general and important !act, o@e8er, is te depression o! te act%al !arm-labo%rer"s
@age belo@ its normal a8erage, so tat part o! it is ded%cted to become part o! te lease money
and t%s, in te g%ise o! gro%nd-rent, it !lo@s into te pocket o! te landlord rater tan te
labo%rer0 5is is, !or example, D%ite generally te case in England and $cotland, @it te
exception o! a !e@ !a8o%rably sit%ated co%nties0 5e inD%iries into te le8el o! @ages by te
parliamentary in8estigating committees, @ic @ere appointed be!ore te passage o! te ;orn
'a@s in England I so !ar te most 8al%able and almost %nexploited contrib%tions to te istory o!
@ages in te 1*t cent%ry, and at te same time a pillory erected !or temsel8es by te Englis
aristocracy and bo%rgeoisie I pro8ed con8incingly and beyond a do%bt tat te ig rates o! rent,
and te corresponding rise in land prices d%ring te anti-Pacobin @ar, @ere d%e in part to no oter
ca%se b%t ded%ctions !rom @ages and teir depression to a le8el tat @as e8en belo@ te pysical
minim%m reD%irement# in oter @ords, to part o! te normal @age being anded o8er to te
landlords0 4ario%s circ%mstances, s%c as te depreciation o! money and te manip%lation o! te
,oor 'a@s in te agric%lt%ral districts, ad made tis operation possible at a time @en te
incomes o! te tenants @ere enormo%sly increasing and te landlords @ere amassing !ab%lo%s
rices0 &ndeed, one o! te main arg%ments o! bot tenants and landlords !or te introd%ction o!
2+1 ;apter JJJ4&&
d%ties on corn @as tat it @as pysically impossible to depress !arm labo%rers" @ages any lo@er0
5is state o! a!!airs as not signi!icantly canged, and in England, as in all E%ropean co%ntries, a
portion o! te normal @age is absorbed by gro%nd-rent H%st as e8er0 Wen ;o%nt $a!tesb%ry,
ten 'ord ?sley, one o! te pilantropic aristocrats, @as so extraordinarily mo8ed by te
condition o! Englis !actory operati8es and acted as teir spokesman in ,arliament d%ring te
agitation !or a ten-o%r day, te spokesmen o! te ind%strialists took teir re8enge by p%blising
@age statistics o! agric%lt%ral labo%rers in te 8illages belonging to im Bsee A%c &, Kap0 JJ&&&,
+, e /Englis edition: ; JJ4 + e I Ed1CBK4he Gritish +gricultural &roletariatLC, @ic clearly
so@ed tat a portion o! te gro%nd-rent o! tis pilantropist consisted o! loot !ilced !or im by
is tenants o%t o! te @ages o! agric%lt%ral labo%rers0 5is p%blication is also interesting !or te
!act tat its re8elations may bra8ely take teir place beside te @orst expos%res made by te
committees in 1812 and 181+0 ?s soon as circ%mstances !orce a temporary increase in te @age
o! agric%lt%ral labo%rers a cry goes %p !rom te capitalist tenant !armers tat raising @ages to te
normal le8el, as done in oter brances o! ind%stry, @o%ld be impossible and @o%ld r%in tem,
%nless gro%nd-rent @ere red%ced at te same time0 5erein lies te con!ession tat %nder te ead
o! gro%nd-rent tere is a ded%ction o! te labo%rers" @ages @ic is anded o8er to te landlords0
For instance, !rom 182* to 18+* te @ages o! agric%lt%ral labo%rers rose in England tro%g a
combination o! momento%s e8ents: te exod%s !rom &reland, @ic c%t o!! te s%pply o!
agric%lt%ral labo%rers coming !rom tere# an extraordinary absorption o! te agric%lt%ral
pop%lation by !actories# a @ar-time demand !or soldiers# an exceptionally large emigration to
?%stralia and te (nited $tates B;ali!orniaC, and oter circ%mstances @ic need not be d@elt
%pon ere0 ?t te same time, a8erage prices o! grain !ell by more tan 16T d%ring tis period,
@it te exception o! te poor agric%lt%ral years 18+2 to 18+60 5e tenant !armers clamo%red !or
a red%ction in rents0 5ey @ere s%ccess!%l in indi8id%al cases, b%t on te @ole !ailed to acie8e
tis demand0 5ey ad reco%rse to a red%ction o! prod%ction costs, among oter tings by te
mass prod%ction o! steam-engines and ne@ macinery, @ic to some extent replaced orses and
p%sed tem o%t o! te economy, b%t also bro%gt abo%t, in part, an arti!icial o8er-pop%lation by
tro@ing agric%lt%ral day-labo%rers o%t o! @ork, and tereby ca%sed a ne@ drop in @ages0 ?nd
tis took place in spite o! te o8erall relati8e decrease in agric%lt%ral pop%lation d%ring tat
decade as compared @it te gro@t o! total pop%lation, and in spite o! an absol%te decrease in
agric%lt%ral pop%lation in some p%rely agric%lt%ral districts0
xli
5%s Fa@cett, ten pro!essor o!
political economy at ;ambridge /@o died in 1882 @ile ,ostmaster :eneral1, stated at te
$ocial $cience ;ongress on 3ctober 1<, 186+:
K5e labo%rers @ere beginning to emigrate, and te
!armers @ere already beginning to complain tat tey
@o%ld not be able to pay s%c ig rents as tey a8e
been acc%stomed to pay, beca%se labo%r @as
becoming dearer in conseD%ence o! emigration0L
6ere, ten, ig gro%nd-rent is directly identi!ied @it lo@ @ages0 ?nd in so !ar as te le8el o!
land prices is determined by tis circ%mstance-increasing rent I a rise in te 8al%e o! land is
identical @it a depreciation o! labo%r, te ig price o! land is identical @it te lo@ price o!
labo%r0
5e same is tr%e o! France0
K5e rental rises beca%se te prices o! bread, @ine,
meat, 8egetables and !r%it rise, on te one and,
@ile, on te oter and, te price o! labo%r remains
2+< ;apter JJJ4&&
%ncanged0 &! te older people examine te acco%nts
o! teir !aters, taking %s back abo%t 1== years, tey
@ill !ind tat te price o! a day"s labo%r in r%ral
France @as te same as it is no@0 5e price o! meat
as trebled since ten0000 Wo is te 8ictim o! tis
re8ol%tionQ &s it te ric man, @o is te proprietor o!
an estate, or te poor man @o @orks itQ 000 5e
increase in rental is e8idence o! a p%blic disaster0L
BDu M7canisime de la Soci7t7 en 'rance et en
+ngleterre, by M0 )%bicon, <nd ed0, ,aris, 183>, p0
1=10C
&ll%strations o! rent representing ded%ctions, on te one and, !rom a8erage pro!it and, on te
oter, !rom a8erage @ages:
Morton, /6ere Marx D%otes Pon 'ockart Morton0 I 0d01 real estate agent and agric%lt%ral
mecanic @o @as pre8io%sly D%oted, states tat it as been obser8ed in many localities tat rent
!or large estates is lo@er tan !or small ones beca%se
Kte competition is %s%ally greater !or te latter tan
!or te !ormer, and as !e@ small !armers are able to
t%rn teir attention to any oter b%siness tan tat o!
!arming, teir anxiety to get a s%itable occ%pation
leads tem in many instances to gi8e more rent tan
teir H%dgement can appro8e o!0L BPon '0 Morton,
4he 9esources of 0states, 'ondon, 18+8, p0 1160C
6o@e8er, tis di!!erence is s%pposed to be grad%ally disappearing in England# tis e attrib%tes
largely to te emigration precisely o! te class o! small tenants0 5e same Morton ill%strates @it
an example in @ic clearly te @age o! te tenant imsel!, and e8en more s%rely tat o! is
labo%rers, s%!!ers a ded%ction !or gro%nd-rent0 5is takes place in te case o! leaseolds @it less
tan >= to 8= acres B3=-32 a0C @ere a t@o-orse plo%g cannot be maintained0
K(nless te tenant @orks @it is o@n ands as
laborio%sly as any labo%rer, is !arm @ill not keep
im0 &! e entr%sts te per!ormance o! is @ork to
@orkmen @ile e contin%es merely to obser8e tem,
te cances are, tat at no distant period, e @ill !ind
e is %nable to pay is rentL B10 c0, p0 128C0 Morton
concl%des, tere!ore, tat %nless te tenants o! a
certain locality are 8ery poor, te leaseolds so%ld
not be smaller tan >= acres, so tat te tenants may
keep t@o or tree orses0
2+3 ;apter JJJ4&&
Extraordinary sagacity on te part o! Monsie%r 'Fonce de 'a8ergne, Membre de l5Dnstitut et de la
Soci7t7 Centrale d5+griculture. &n is Economie )%rale de l"?ngleterre BD%oted !rom te Englis
translation, 'ondon, 18++C, e makes te !ollo@ing comparison o! te ann%al ad8antage deri8ed
!rom cattle @ic is employed in France b%t not in England @ere it is replaced by orses Bp02<C:
F)?-;E Milk V2
million
E-:'?-7 Milk V16
million
Meat V16
million
Meat V<=
million
'abo%r V8
million
'abo%r I
535?': V<8
million
535?': V36
million
A%t te greater total !or England is obtained ere beca%se according to is o@n testimony milk is
t@ice as expensi8e in England as in France @ereas e ass%mes te same prices !or meat in bot
co%ntries Bp03+C# tere!ore, Englis milk prod%ction srinks to V8 million and te total to V<8
million, @ic is te same as in France0 &t is indeed rater too m%c @en Mr0 'a8ergne allo@s
te D%antities and price di!!erences to enter sim%ltaneo%sly into is calc%lations so tat @en
England prod%ces certain articles more dearly tan France I tis appears to be an ad8antage o!
Englis agric%lt%re, @ereas at best it signi!ies a larger pro!it !or te tenants and landlords0
5at Mr0 'a8ergne is not only !amiliar @it te economic acie8ements o! Englis agric%lt%re,
b%t also s%bscribes to te preH%dices o! te Englis tenants and landlords, is so@n on page 28:
K3ne great dra@back attends cereals generally 000 tey
exa%st te soil @ic bears tem0L
-ot only does Mr0 'a8ergne belie8e tat oter plants do not do so, b%t also belie8es tat !odder
crops and root crops enric te soil:
KForage plants deri8e !rom te atmospere te
principal elements o! teir gro@t, @ile tey gi8e to
te soil more tan tey take !rom it# t%s bot directly
and by teir con8ersion into animal man%re
contrib%ting in t@o @ays to repair te miscie! done
by cereals and exa%sting crops generally# one
principle, tere!ore, is tat tey so%ld at least
alternate @it tese crops# in tis consists te -or!olk
rotationL Bpp0 +=, +1C0
-o @onder tat Mr0 'a8ergne, @o belie8es tese Englis r%stic !airy-tales, also belie8es tat te
@ages o! Englis !arm labo%rers a8e lost teir !ormer abnormality since te d%ties on corn a8e
been li!ted0 B$ee @at as been pre8io%sly said on tis point0 A%c &, Kap0 JJ&&&, +, pp0>=2 to
><*0 /Englis edition: ;0 JJ4, +, pp0 6>3-*60 I 0d01 A%t let %s also listen to Mr0 Pon Arigt"s
speec in Airmingam, 7ecember 12, 186+0 ?!ter mentioning te + million !amilies entirely
%nrepresented in ,arliament, e contin%es:
2+2 ;apter JJJ4&&
K5ere is among tem one million, or rater more
tan one million, in te (nited Kingdom @o are
classed in te %n!ort%nate list o! pa%pers0 5ere is
anoter million H%st abo8e pa%perism, b%t al@ays in
peril lest tey so%ld become pa%pers0 5eir condition
and prospects are not more !a8o%rable tan tat0 -o@
look at te ignorant and lo@er strata o! tis portion o!
te comm%nity0 'ook to teir abHect condition, to teir
po8erty, to teir s%!!ering, to teir %tter opelessness
o! any good0 Wy, in te (nited $tates I e8en in te
$o%tern $tates d%ring te reign o! sla8ery e8ery
-egro ad an idea tat tere @as a day o! H%bilee !or
im0 A%t to tese people I to tis class o! te lo@est
strata in tis co%ntry I & am ere to state tat tere is
neiter te belie! o! anyting better nor scarcely an
aspiration a!ter it0 6a8e yo% read a paragrap @ic
lately appeared in te ne@spapers abo%t Pon ;ross, a
7orsetsire labo%rerQ 6e @orked six days in te
@eek, ad an excellent caracter !rom is employer
!or @om e ad @orked t@enty-!o%r years at te rate
o! eigt sillings per @eek0 Pon ;ross ad a !amily
o! se8en cildren to pro8ide !or o%t o! tese @ages in
is o8el I !or a !eeble @i!e and an in!ant cild0 6e
took I legally, & belie8e e stole I a @ooden %rdle o!
te 8al%e o! sixpence0 For tis o!!ence e @as tried
be!ore te magistrates and sentenced to 12 or <= days"
imprisonment0000 & can tell yo% tat many to%sands o!
cases like tat o! Pon ;ross are to be !o%nd
tro%go%t te co%ntry, and especially in te so%t,
and tat teir condition is s%c tat iterto te most
anxio%s in8estigator as been %nable to sol8e te
mystery as to o@ tey keep body and so%l togeter0
-o@ cast yo%r eye o8er te co%ntry and look at tese
!i8e million o! !amilies and te desperate condition o!
tis strata o! tem0 &s it not tr%e tat te
%nen!rancised nation may be said to toil and toil and
2++ ;apter JJJ4&&
kno@ing almost no restQ ;ompare it @it te r%ling
class I b%t i! & do & sall be carged @it
comm%nism0000 A%t compare tis great toiling and
%nen!rancised nation @it te section @o may be
considered te go8erning classes0 'ook at its @ealt#
look at its ostentation I look at its l%x%ry0 Aeold its
@eariness I !or tere is @eariness amongst tem, b%t
it is te @eariness o! satiety I and see o@ tey r%s
!rom place to place, as it @ere, to disco8er some ne@
pleas%re0L BMorning Star, 7ecember 12, 186+0C
&t is so@n in @at !ollo@s o@ s%rpl%s-labo%r, and conseD%ently s%rpl%s-prod%ct, is generally
con!%sed @it gro%nd-rent tat D%alitati8ely and D%antitati8ely speci!ically determined, at least on
te basis o! te capitalist mode o! prod%ction, part o! te s%rpl%s-prod%ct0 5e nat%ral basis o!
s%rpl%s-labo%r in general, tat is, a nat%ral prereD%isite @ito%t @ic s%c labo%r cannot be
per!ormed, is tat -at%re m%st s%pply I in te !orm o! animal or 8egetable prod%cts o! te land,
in !iseries, etc0 I te necessary means o! s%bsistence %nder conditions o! an expendit%re o!
labo%r @ic does not cons%me te entire @orking day0 5is nat%ral prod%cti8ity o! agric%lt%ral
labo%r B@ic incl%des ere te labo%r o! simple gatering, %nting, !ising and cattle-raisingC is
te basis o! all s%rpl%s-labo%r, as all labo%r is primarily and initially directed to@ard te
appropriation and prod%ction o! !ood0 B?nimals also s%pply at te same time skins !or @armt in
colder climates# also ca8e-d@ellings, etc0C
5e same con!%sion bet@een s%rpl%s-prod%ct and gro%nd-rent is !o%nd di!!erently expressed by
Mr0 7o8e0 /,0 7o8e, 4he 0lements of &olitical Science, Edinb%rg, 18+2, pp0<62, <>30 I 0d01
3riginally agric%lt%ral and ind%strial labo%r @ere not separated# te latter @as an adH%nct o! te
!ormer0 5e s%rpl%s-labo%r and te s%rpl%s-prod%ct o! te land-c%lti8ating tribe, o%se comm%ne,
or !amily incl%ded bot agric%lt%ral and ind%strial labo%r0 Aot @ent and in and0 6%nting,
!ising and agric%lt%re @ere impossible @ito%t s%itable tools0 Wea8ing, spinning, etc0, @ere !irst
carried on as an agrarian side line0
We a8e pre8io%sly so@n tat H%st as te labo%r o! an indi8id%al @orkman breaks %p into
necessary and s%rpl%s labo%r, te aggregate labo%r o! te @orking-class may be so di8ided tat
te portion @ic prod%ces te total means o! s%bsistence !or te @orking-class Bincl%ding te
means o! prod%ction reD%ired !or tis p%rposeC per!orms te necessary labo%r !or te @ole o!
society0 5e labo%r per!ormed by te remainder o! te @orking-class may ten be regarded as
s%rpl%s labo%r0 A%t te necessary labo%r consists by no means only o! agric%lt%ral labo%r, b%t also
o! tat labo%r @ic prod%ces all oter prod%cts necessarily incl%ded in te a8erage cons%mption
o! te labo%rer0 F%rtermore, !rom te social standpoint, some per!orm only necessary labo%r
beca%se oters per!orm only s%rpl%s labo%r, and 8ice 8ersa0 &t is b%t a di8ision o! labo%r bet@een
tem0 5e same olds !or te di8ision o! labo%r bet@een agric%lt%ral and ind%strial labo%rers in
general0 5e p%rely ind%strial caracter o! labo%r, on te one and, corresponds to te p%rely
agric%lt%ral caracter on te oter0 5is p%rely agric%lt%ral labo%r is by no means nat%ral, b%t is
rater a prod%ct I and a 8ery modern one at tat, @ic as not yet been acie8ed e8ery@ere I
o! social de8elopment and corresponds to a 8ery de!inite stage o! te de8elopment o! prod%ction0
P%st as a portion o! agric%lt%ral labo%r is materialised in prod%cts @ic eiter minister only to
l%x%ry or ser8e as ra@ materials in ind%stry, b%t by no means ser8e as !ood, let alone as !ood !or
te masses, so on te oter and a portion o! ind%strial labo%r is materialised in prod%cts @ic
ser8e as necessary means o! cons%mption !or bot agric%lt%ral and nonagric%lt%ral labo%rers0 &t is
2+6 ;apter JJJ4&&
a mistake, !rom a social point o! 8ie@, to regard tis ind%strial labo%r as s%rpl%s-labo%r0 &t is, in
part, as m%c necessary labo%r as te necessary portion o! te agric%lt%ral labo%r0 &t is also b%t a
!orm rendered independent o! a part o! ind%strial labo%r @ic @as !ormerly nat%rally connected
@it agric%lt%ral labo%r, a necessary m%t%al s%pplement to te speci!ically agric%lt%ral labo%r
no@ separated !rom it0 BFrom a p%rely material point o! 8ie@, +== mecanical @ea8ers, e0g0,
prod%ce s%rpl%s-!abrics to a !ar greater degree, tat is, more tan is reD%ired !or teir o@n
cloting0C
Finally, it so%ld be borne in mind in considering te 8ario%s !orms o! mani!estation o! gro%nd-
rent, tat is, te lease money paid %nder te eading o! gro%nd-rent to te landlord !or te %se o!
te land !or p%rposes o! prod%ction or cons%mption, tat te price o! tings @ic a8e in
temsel8es no 8al%e, i0e0, are not te prod%ct o! labo%r, s%c as land, or @ic at least cannot be
reprod%ced by labo%r, s%c as antiD%es and @orks o! art by certain masters, etc0, may be
determined by many !ort%ito%s combinations0 &n order to sell a ting, noting more is reD%ired
tan its capacity to be monopolised and alienated0
5ere are tree main errors to be a8oided in st%dying gro%nd-rent, and @ic obsc%re its analysis0
1C ;on!%sing te 8ario%s !orms o! rent pertaining to di!!erent stages o! de8elopment o! te social
prod%ction process0
Wate8er te speci!ic !orm o! rent may be, all types a8e tis in common: te appropriation o!
rent is tat economic !orm in @ic landed property is realised, and gro%nd-rent, in t%rn,
pres%pposes te existence o! landed property, te o@nersip o! certain portions o! o%r planet by
certain indi8id%als0 5e o@ner may be an indi8id%al representing te comm%nity, as in ?sia,
Egypt, etc0# or tis landed property may be merely incidental to te o@nersip o! te immediate
prod%cers temsel8es by some indi8id%al as %nder sla8ery or ser!dom# or it may be a p%rely
pri8ate o@nersip o! -at%re by non-prod%cers, a mere title to land# or, !inally, it may be a
relationsip to te land @ic, as in te case o! colonists and small peasants o@ning land, seems
to be directly incl%ded I in te isolated and not socially de8eloped labo%r I in te appropriation
and prod%ction o! te prod%cts o! partic%lar plots o! land by te direct prod%cers0
5is common element in te 8ario%s !orms o! rent, namely tat o! being te economic realisation
o! landed property, o! legal !iction by grace o! @ic certain indi8id%als a8e an excl%si8e rigt
to certain parts o! o%r planet I makes it possible !or te di!!erences to escape detection0
<C ?ll gro%nd-rent is s%rpl%s-8al%e, te prod%ct o! s%rpl%s-labo%r0 &n its %nde8eloped !orm as rent
in kind it is still directly te s%rpl%s-prod%ct itsel!0 6ence, te mistaken idea tat te rent
corresponding to te capitalist mode o! prod%ction I @ic is al@ays a s%rpl%s o8er and abo8e
pro!it, i0e0, abo8e a 8al%e portion o! commodities @ic itsel! consists o! s%rpl%s-8al%e Bs%rpl%s-
labo%rC I tat tis special and speci!ic component o! s%rpl%s-8al%e is explained by merely
explaining te general conditions !or te existence o! s%rpl%s-8al%e and pro!it in general0 5ese
conditions are: te direct prod%cers m%st @ork beyond te time necessary !or reprod%cing teir
o@n labo%r-po@er, !or teir o@n reprod%ction0 5ey m%st per!orm s%rpl%s-labo%r in general0 5is
is te s%bHecti8e condition0 5e obHecti8e condition is tat tey m%st be able to per!orm s%rpl%s-
labo%r0 5e nat%ral conditions m%st be s%c tat a part o! teir a8ailable labo%r-time s%!!ices !or
teir reprod%ction and sel!-maintenance as prod%cers, tat te prod%ction o! teir necessary
means o! s%bsistence sall not cons%me teir @ole labo%r-po@er0 5e !ertility o! -at%re
establises a limit ere, a starting-point, a basis0 3n te oter and, te de8elopment o! te social
prod%cti8e po@er o! teir labo%r !orms te oter limit0 Examined more closely, since te
prod%ction o! means o! s%bsistence is te 8ery !irst condition o! teir existence and o! all
prod%ction in general, labo%r %sed in tis prod%ction, tat is, agric%lt%ral labo%r in te broadest
economic sense, m%st be !r%it!%l eno%g so as not to absorb te entire a8ailable labo%r-time in te
prod%ction o! means o! s%bsistence !or te direct prod%cers, tat is, agric%lt%ral s%rpl%s-labo%r
and tere!ore agric%lt%ral s%rpl%s-prod%ct m%st be possible0 7e8eloped !%rter, te total
2+> ;apter JJJ4&&
agric%lt%ral labo%r, bot necessary and s%rpl%s labo%r, o! a segment o! society m%st s%!!ice to
prod%ce te necessary s%bsistence !or te @ole o! society, tat is, !or non-agric%lt%ral labo%rers
too0 5is means tere!ore tat te maHor di8ision o! labo%r bet@een agric%lt%ral and ind%strial
m%st be possible# and similarly bet@een tillers o! te soil prod%cing means o! s%bsistence and
tose prod%cing ra@ materials0 ?lto%g te labo%r o! te direct prod%cers o! means o!
s%bsistence breaks %p into necessary and s%rpl%s labo%r as !ar as tey temsel8es are concerned,
it represents !rom te social standpoint only te necessary labo%r reD%ired to prod%ce te means
o! s%bsistence0 &ncidentally, te same is tr%e !or all di8ision o! labo%r @itin society as a @ole,
as distinct !rom te di8ision o! labo%r @itin indi8id%al @orksops0 &t is te labo%r necessary !or
te prod%ction o! partic%lar articles, !or te satis!action o! some partic%lar need o! society !or
tese partic%lar articles0 &! tis di8ision is proportional, ten te prod%cts o! 8ario%s gro%ps are
sold at teir 8al%es Bat a later stage o! de8elopment tey are sold at teir prices o! prod%ctionC, or
at prices @ic are certain modi!ications o! tese 8al%es or prices o! prod%ction determined by
general la@s0 &t is indeed te e!!ect o! te la@ o! 8al%e, not @it re!erence to indi8id%al
commodities or articles, b%t to eac total prod%ct o! te partic%lar social speres o! prod%ction
made independent by te di8ision o! labo%r# so tat not only is no more tan te necessary
labo%r-time %sed %p !or eac speci!ic commodity, b%t only te necessary proportional D%antity o!
te total social labo%r-time is %sed %p in te 8ario%s gro%ps0 For te condition remains tat te
commodity represents %se-8al%e0 A%t i! te %se-8al%e o! indi8id%al commodities depends on
@eter tey satis!y a partic%lar need ten te %se-8al%e o! te mass o! te social prod%ct
depends on @eter it satis!ies te D%antitati8ely de!inite social need !or eac partic%lar kind o!
prod%ct in an adeD%ate manner, and @eter te labo%r is tere!ore proportionately distrib%ted
among te di!!erent speres in keeping @it tese social needs, @ic are D%antitati8ely
circ%mscribed0 B5is point is to be noted in te distrib%tion o! capital among te 8ario%s speres
o! prod%ction0C 5e social need, tat is, te %se-8al%e on a social scale, appears ere as a
determining !actor !or te amo%nt o! total social labo%r-time @ic is expended in 8ario%s
speci!ic speres o! prod%ction0 A%t it is merely te same la@ @ic is already applied in te case
o! single commodities, namely, tat te %se-8al%e o! a commodity is te basis o! its excange-
8al%e and t%s o! its 8al%e0 5is point as a bearing %pon te relationsip bet@een necessary and
s%rpl%s labo%r only in so !ar as a 8iolation o! tis proportion makes it impossible to realise te
8al%e o! te commodity and t%s te s%rpl%s-8al%e contained in it0 For instance# let %s ass%me tat
proportionally too m%c cotton goods a8e been prod%ced, alto%g only te labo%r-time
necessary %nder te pre8ailing conditions is incorporated in tis total clot prod%ction0 A%t in
general too m%c social labo%r as been expended in tis partic%lar line# in oter @ords, a portion
o! tis prod%ct is %seless0 &t is tere!ore sold solely as i! it ad been prod%ced in te necessary
proportion0 5is D%antitati8e limit to te D%ota o! social labo%r-time a8ailable !or te 8ario%s
partic%lar speres o! prod%ction is b%t a more de8eloped expression o! te la@ o! 8al%e in
general, alto%g te necessary labo%r-time ass%mes a di!!erent meaning ere0 3nly H%st so m%c
o! it is reD%ired !or te satis!action o! social needs0 5e limitation occ%rring ere is d%e to te %se
8al%e0 $ociety can %se only so m%c o! its total labo%r-time !or tis partic%lar kind o! prod%ct
%nder pre8ailing conditions o! prod%ction0 A%t te s%bHecti8e and obHecti8e conditions o! s%rpl%s
labo%r and s%rpl%s-8al%e in general a8e noting to do @it te partic%lar !orm o! eiter te pro!it
or te rent0 5ese conditions apply to s%rpl%s-8al%e as s%c, no matter @at special !orm it may
ass%me0 6ence tey do not explain gro%nd-rent0
3C &t is precisely in te economic realisation o! landed property, in te de8elopment o! gro%nd-
rent, tat te !ollo@ing caracteristic pec%liarity comes to te !ore, namely tat its amo%nt is by
no means determined by te actions o! its recipient, b%t is determined rater by te independent
de8elopment o! social labo%r in @ic te recipient takes no part0 &t may easily appen, tere!ore,
tat someting is regarded as a pec%liarity o! rent Band o! te prod%cts o! agric%lt%re in generalC,
@ic is really a common !eat%re o! all brances o! prod%ction and all teir prod%cts @ere te
2+8 ;apter JJJ4&&
basis is commodity-prod%ction I and, in partic%lar, capitalist prod%ction, @ic is in its entirety
commodity prod%ction0
5e amo%nt o! gro%nd-rent Band @it it te 8al%e o! landC gro@s @it social de8elopment as a
res%lt o! te total social labo%r0 3n te one and, tis leads to an expansion o! te market and o!
te demand !or prod%cts o! te soil, and, on te oter, it stim%lates te demand !or land itsel!,
@ic is a prereD%isite o! competiti8e prod%ction in all lines o! b%siness acti8ity, e8en tose
@ic are not agric%lt%ral0 More exactly I i! one considers only te act%al agric%lt%ral rent I rent,
and tereby te 8al%e o! te land, de8elops @it te market !or te prod%cts o! te soil, and t%s
@it te increase in te non-agric%lt%ral pop%lation, @it its need and demand !or means o!
s%bsistence and ra@ materials0 &t is in te nat%re o! capitalist prod%ction to contin%ally red%ce te
agric%lt%ral pop%lation as compared @it te non-agric%lt%ral, beca%se in ind%stry Bin te strict
senseC te increase o! constant capital in relation to 8ariable capital goes and in and @it an
absol%te increase, to%g relati8e decrease, in 8ariable capital# on te oter and, in agric%lt%re
te 8ariable capital reD%ired !or te exploitation o! a certain plot o! land decreases absol%tely# it
can t%s only increase to te extent tat ne@ land is taken into c%lti8ation, b%t tis again reD%ires
as a prereD%isite a still greater gro@t o! te non-agric%lt%ral pop%lation0
&n !act, @e are not dealing ere @it a caracteristic pec%liarity o! agric%lt%re and its prod%cts0 3n
te contrary, te same applies to all oter brances o! prod%ction and prod%cts @ere te basis is
commodity-prod%ction and its absol%te !orm, capitalist prod%ction0
5ese prod%cts are commodities, or %se-8al%es, @ic a8e an excange-8al%e tat is to be
realised, to be con8erted into money, only in so !ar as oter commodities !orm an eD%i8alent !or
tem, tat is, oter prod%cts con!ront tem as commodities and 8al%es# t%s, in so !ar as tey are
not prod%ced as immediate means o! s%bsistence !or te prod%cers temsel8es, b%t as
commodities, as prod%cts @ic become %se-8al%es only by teir trans!ormation into excange-
8al%es BmoneyC, by teir alienation0 5e market !or tese commodities de8elops tro%g te
social di8ision o! labo%r# te di8ision o! prod%cti8e labo%rs m%t%ally trans!orms teir respecti8e
prod%cts into commodities, into eD%i8alents !or eac oter, making tem m%t%ally ser8e as
markets0 5is is in no @ay pec%liar to agric%lt%ral prod%cts0
)ent can de8elop as money-rent only on te basis o! commodity prod%ction, in partic%lar
capitalist prod%ction, and it de8elops to te same extent tat agric%lt%ral prod%ction becomes
commodity prod%ction, tat is, to te same extent tat non-agric%lt%ral prod%ction de8elops
independently o! agric%lt%ral prod%ction, !or to tat degree te agric%lt%ral prod%ct becomes
commodity, excange-8al%e, and 8al%e0 &n so !ar as commodity-prod%ction and t%s te
prod%ction o! 8al%e de8elops @it capitalist prod%ction so does te prod%ction o! s%rpl%s-8al%e
and s%rpl%s prod%ct0 A%t in te same proportion as te latter de8elops, landed property acD%ires
te capacity o! capt%ring an e8er-increasing portion o! tis s%rpl%s-8al%e by means o! its land
monopoly and tereby, o! raising te 8al%e o! its rent and te price o! te land itsel!0 5e
capitalist still per!orms an acti8e !%nction in te de8elopment o! tis s%rpl%s-8al%e and s%rpl%s-
prod%ct0 A%t te lando@ner need only appropriate te gro@ing sare in te s%rpl%s-prod%ct and
te s%rpl%s-8al%e, @ito%t a8ing contrib%ted anyting to tis gro@t0 5is is te caracteristic
pec%liarity o! is position, and not te !act tat te 8al%e o! te prod%cts o! te land, and t%s o!
te land itsel!, increases to te degree tat te market !or tem expands, te demand gro@s and
@it it te @orld o! commodities @ic con!ronts te prod%cts o! te land I in oter @ords, te
mass o! non-agric%lt%ral commodity prod%cers and non-agric%lt%ral commodity-prod%ction0 A%t
since tis takes place @ito%t any action on is part, it appears to im as someting %niD%e tat
te mass o! 8al%e, te mass o! s%rpl%s-8al%e, and te trans!ormation o! a portion o! s%rpl%s 8al%e
into gro%nd-rent so%ld depend %pon te social prod%ction process, on te de8elopment o!
commodity-prod%ction in general0 For tis reason, 7o8e, !or instance, tries to e8ol8e rent !rom
tis0 6e says tat rent does not depend %pon te mass o! te agric%lt%ral prod%ct, b%t %pon its
8al%e, /,0 7o8e, 4he 0lements of &olitical Science, Edinb%rg, 18+2, p0<>*0 I 0d01 o@e8er, tis
2+* ;apter JJJ4&&
depends %pon te mass and prod%cti8ity o! te non-agric%lt%ral pop%lation0 A%t it is also tr%e o!
e8ery oter prod%ct tat it can only de8elop as a commodity partly as te mass and partly as te
8ariety o! oter commodities @ic !orm eD%i8alents !or its increase0 5is as already been
demonstrated in connection @it te general presentation o! 8al%e0 /Englis edition: 4ol0 &, p0 880
I 0d01 3n te one and, te excangeability o! a prod%ct in general depends on te m%ltiplicity o!
commodities existing in addition to it0 3n te oter and, on it depends in partic%lar te D%antity
in @ic tis prod%ct can be prod%ced as a commodity0
-o prod%cer, @eter ind%strial or agric%lt%ral, @en considered by imsel! alone, prod%ces
8al%e or commodities0 6is prod%ct becomes a 8al%e and a commodity only in te context o!
de!inite social interrelations0 &n te !irst place, in so !ar as it appears as te expression o! social
labo%r, ence in so !ar as te indi8id%al prod%cer"s labo%r-time co%nts as a part o! te social
labo%r-time in general# and, secondly, tis social caracter o! is labo%r appears impressed %pon
is prod%ct tro%g its pec%niary caracter and tro%g its general excangeability determined by
its price0
5ere!ore, i!, on te one and, s%rpl%s-8al%e or, still more narro@ly, te s%rpl%s-prod%ct in
general is explained instead o! rent, te mistake is made, on te oter and, o! ascribing
excl%si8ely to agric%lt%ral prod%cts a caracteristic @ic belongs to all prod%cts in teir capacity
as commodities and 8al%es0 5is is 8%lgarised still more by tose @o pass !rom te general
determination o! 8al%e o8er to te rea1isation o! te 8al%e o! a speci!ic commodity0 E8ery
commodity can realise its 8al%e only in te process o! circ%lation, and @eter it realises its
8al%e, or to @at extent it does so, depends on pre8ailing market conditions0
&t is not a sing%larity o! gro%nd-rent, ten, tat agric%lt%ral prod%cts de8elop into, and as, 8al%es,
i0e0, tat tey con!ront oter commodities as commodities, and tat non-agric%lt%ral prod%cts
con!ront tem as commodities# or tat tey de8elop as speci!ic expressions o! social labo%r0 5e
sing%larity o! gro%nd-rent is rater tat togeter @it te conditions in @ic agric%lt%ral
prod%cts de8elop as 8al%es BcommoditiesC, and togeter @it te conditions in @ic teir 8al%es
are realised, tere also gro@s te po@er o! landed property to appropriate an increasing portion o!
tese 8al%es, @ic @ere created @ito%t its assistance# and so an increasing portion o! s%rpl%s-
8al%e is trans!ormed into gro%nd-rent0
Chapter 38. Diferential Rent: General Remarks
&n te analysis o! gro%nd-rent @e sall begin @it te ass%mption tat prod%cts paying s%c a
rent, prod%cts in @ic a portion o! te s%rpl%s-8al%e, and tere!ore also a portion o! te total
price, resol8es itsel! into gro%nd-rent, i0e0, tat agric%lt%ral as @ell as mining prod%cts are sold at
teir prices o! prod%ction like all oter commodities0 B&t s%!!ices !or o%r p%rposes to con!ine
o%rsel8es to agric%lt%ral and mining prod%cts0C &n oter @ords, teir selling prices are made %p o!
te elements o! teir cost Bte 8al%e o! cons%med constant and 8ariable capitalC pl%s a pro!it
determined by te general rate o! pro!it and calc%lated on te total ad8anced capital, @eter
cons%med or not0 We ass%me, ten, tat a8erage selling prices o! tese prod%cts are eD%al to teir
prices o! prod%ction0 5e D%estion no@ arises o@ it is possible !or gro%nd-rent to de8elop %nder
tese conditions, i0e0, o@ it is possible !or a portion o! te pro!it to become trans!ormed into
gro%nd-rent, so tat a portion o! te commodity-price !alls to te landlord0
&n order to demonstrate te general caracter o! tis !orm o! gro%nd-rent, let %s ass%me tat most
o! te !actories o! a certain co%ntry deri8e teir po@er !rom steam-engines, @ile a smaller
n%mber deri8e it !rom nat%ral @ater!alls0 'et %s !%rter ass%me tat te price o! prod%ction in te
!ormer amo%nts to 11+ !or a D%antity o! commodities @ic a8e cons%med a capital o! 1==0 5e
1+T pro!it is calc%lated not solely on te cons%med capital o! 1==, b%t on te total capital
employed in te prod%ction o! tis commodity-8al%e0 We a8e pre8io%sly so@n tat tis price o!
prod%ction is not determined by te indi8id%al cost-price o! e8ery single ind%strial prod%cer, b%t
by te a8erage cost-price o! te commodity %nder a8erage conditions o! capital in te entire
spere o! prod%ction0 &t is, in !act, te market-price o! prod%ction, te a8erage market-price as
distinct !rom its oscillations0 &t is in general in te !orm o! te market-price, and, !%rtermore, in
te !orm o! te reg%lating market-price, or market-price o! prod%ction, tat te nat%re o! te 8al%e
o! commodities asserts itsel!, its determination not by te labo%r-time necessary in te case o! any
indi8id%al prod%cer !or te prod%ction o! a certain D%antity o! commodities, or o! some indi8id%al
commodity, b%t by te socially necessary labo%r-time# tat is, by te labo%r-time, reD%ired !or te
prod%ction o! te socially necessary total D%antity o! commodity 8arieties on te market %nder te
existing a8erage conditions o! social prod%ction
?s de!inite !ig%res are immaterial in tis case, @e sall ass%me !%rtermore tat te cost-price in
!actories r%n on @ater-po@er is only *= instead o! 1==0 $ince te reg%lating market-price o!
prod%ction o! tis D%antity o! commodities R 11+, @it a pro!it o! 1+T, te man%!act%rers @o
operate teir macines on @ater po@er @ill also sell teir commodities at 11+, i0e0, te a8erage
price reg%lating te market-price0 5eir pro!it @o%ld ten be <+ instead o! 1+# te reg%lating price
o! prod%ction @o%ld allo@ tem a s%rpl%s-pro!it o! 1=T not beca%se tey sell teir commodities
abo8e te price o! prod%ction, b%t beca%se tey sell tem at te price o! prod%ction, beca%se teir
commodities are prod%ced, or teir capital operates, %nder exceptionally !a8o%rable conditions,
i0e0, %nder conditions @ic are more !a8o%rable tan te a8erage pre8ailing in tis spere0
5@o tings become e8ident at once:
'irst, te s%rpl%s-pro!it o! te prod%cers @o %se a nat%ral @ater!all as moti8e po@er is to begin
@it in te same class @it all s%rpl%s-pro!it Band @e a8e already analysed tis category @en
disc%ssing prices o! prod%ctionC @ic is not te !ort%ito%s res%lt o! transactions in te circ%lation
process, o! te !ort%ito%s !l%ct%ations in market-prices0 5is s%rpl%s-pro!it, ten, is like@ise eD%al
to te di!!erence bet@een te indi8id%al price o! prod%ction o! tese !a8o%red prod%cers and te
general social price o! prod%ction reg%lating te market in tis entire prod%ction spere0 5is
di!!erence is eD%al to te excess o! te general price o! prod%ction o! te commodities o8er teir
indi8id%al price o! prod%ction0 5e t@o reg%lating limits o! tis excess are, on te one and, te
261 ;apter JJJ4&&&
indi8id%al cost-price, and t%s te indi8id%al price o! prod%ction, and, on te oter and, te
general price o! prod%ction0 5e 8al%e o! commodities prod%ced @it @ater-po@er is smaller
beca%se a smaller total D%antity o! labo%r is reD%ired !or teir prod%ction, i0e0, less labo%r I in
materialised !orm I enters into te constant capital as part o! te latter0
5e labo%r employed ere is more prod%cti8e, its indi8id%al prod%cti8e po@er is greater tan tat
employed in te maHority o! !actories o! te same kind0 &ts greater prod%cti8e po@er is so@n in
te !act tat in order to prod%ce te same D%antity o! commodities, it reD%ires a smaller D%antity
o! constant capital, a smaller D%antity o! materialised labo%r, tan te oters0 &t also reD%ires less
li8ing labo%r, beca%se te @ater-@eel need not be eated0 5is greater indi8id%al prod%cti8eness
o! employed labo%r red%ces te 8al%e, b%t also te cost-price and tereby te price o! prod%ction
o! te commodity0 For te indi8id%al ind%strial capitalist tis expresses itsel! in a lo@er cost-price
!or is commodities0 6e as to pay !or less materialised labo%r, and also less @ages !or less li8ing
labo%r-po@er employed0 $ince te cost-price o! is commodities is lo@er, is indi8id%al price o!
prod%ction is also lo@er0 6is cost-price is *= instead o! 1==0 6is indi8id%al price o! prod%ction
@o%ld tere!ore be only 1=3Z instead o! 11+ B1==:11+ R *=:1=3ZC 5e di!!erence bet@een is
indi8id%al price o! prod%ction and te general price o! prod%ction is limited by te di!!erence
bet@een is indi8id%al cost- price and te general cost-price0 5is is one o! te magnit%des @ic
!orm te limits to is s%rpl%s-pro!it0 5e oter is te magnit%de o! te general price o! prod%ction
into @ic te general rate o! pro!it enters as one o! te reg%lating !actors0 Were coal to become
ceaper, te di!!erence bet@een is indi8id%al cost-price and te general cost-price @o%ld
decrease, and @it it is s%rpl%s-pro!it0 $o%ld e be compelled to sell is commodities at teir
indi8id%al 8al%e, or at te price o! prod%ction determined by teir indi8id%al 8al%e, ten te
di!!erence @o%ld disappear0 &t is, on te one and, a res%lt o! te !act tat te commodities are
sold at teir general market-price, te price bro%gt abo%t by te eD%alisation o! indi8id%al prices
tro%g competition, and, on te oter, a res%lt o! te !act tat te greater indi8id%al prod%cti8ity
o! labo%r set in motion by im does not bene!it te labo%rer, b%t te employer, as does all
prod%cti8ity o! labo%r, tat it appears as te prod%cti8eness o! capital0
$ince te le8el o! te general price o! prod%ction is one o! te limits o! tis s%rpl%s-pro!it, te
le8el o! te general rate o! pro!it being one o! its !actors, tis s%rpl%s-pro!it can only arise !rom
te di!!erence bet@een te general and te indi8id%al price o! prod%ction, and conseD%ently !rom
te di!!erence bet@een te general and te indi8id%al rate o! pro!it0 ?n excess abo8e tis
di!!erence pres%pposes te sale o! prod%cts abo8e, not at, te price o! prod%ction reg%lated by te
market0
Secondly, t%s !ar, te s%rpl%s-pro!it o! te man%!act%rer %sing nat%ral @ater-po@er instead o!
steam does not di!!er in any @ay !rom any oter s%rpl%s-pro!it0 ?ll normal s%rpl%s-pro!it, tat is,
all s%rpl%s-pro!it not d%e to !ort%ito%s sales or market-price !l%ct%ations is determined by te
di!!erence bet@een te indi8id%al price o! prod%ction o! te commodities o! a partic%lar capital
and te general price o! prod%ction, @ic reg%lates te market-prices o! te commodities
prod%ced by te capital in tis spere o! prod%ction in general, or, in oter @ords, te market-
prices o! commodities o! te total capital in8ested in tis spere o! prod%ction0
A%t no@ @e come to te di!!erence0
5o @at circ%mstance does te ind%strial capitalist in te present case o@e is s%rpl%s-pro!it, te
s%rpl%s res%lting !or im personally !rom te price o! prod%ction reg%lated by te general rate o!
pro!itQ
6e o@es it in te !irst instance to a nat%ral !orce I te moti8e po@er o! te @ater!all I @ic is
!o%nd readily a8ailable in -at%re and is not itsel! a prod%ct o! labo%r like te coal @ic
trans!orms @ater into steam0 5e coal, tere!ore, as 8al%e, m%st be paid !or by an eD%i8alent,
and as a cost0 5e @ater!all is a nat%ral prod%ction agent in te prod%ction o! @ic no labo%r
enters0
26< ;apter JJJ4&&&
A%t tis is not all0 5e man%!act%rer @o operates @it steam also employs nat%ral !orces @ic
cost im noting yet make te labo%r more prod%cti8e and increase te s%rpl%s-8al%e and tereby
te pro!it, inasm%c as tey t%s ceapen te man%!act%re o! te means o! s%bsistence reD%ired
!or te labo%rers0 5ese nat%ral !orces are t%s D%ite as m%c monopolised by capital as te social
nat%ral !orces o! labo%r arising !rom co-operation, di8ision o! labo%r, etc0 5e man%!act%rer pays
!or coal, b%t not !or te capacity o! @ater to alter its pysical state, to t%rn into steam, not !or te
elasticity o! te steam, etc0 5is monopolisation o! nat%ral !orces, tat is, o! te increase in
labo%r-po@er prod%ced by tem, is common to all capital operating @it steam-engines0 &t may
increase tat portion o! te prod%ct o! labo%r @ic represents s%rpl%s-8al%e in relation to tat
portion @ic is trans!ormed into @ages0 &n so !ar as it does tis, it raises te general rate o!
pro!it, b%t it does not create any s%rpl%s-pro!it, !or tis consists o! te excess o! indi8id%al pro!it
o8er a8erage pro!it0 5e !act tat te application o! a nat%ral !orce, a @ater!all, creates s%rpl%s-
pro!it in tis case, cannot tere!ore be d%e solely to te circ%mstance tat te increased
prod%cti8ity o! labo%r ere res%lts !rom te application o! a nat%ral !orce0 3ter modi!ying
circ%mstances are necessary0
;on8ersely0 5e mere application o! nat%ral !orces in ind%stry may in!l%ence te le8el o! te
general rate o! pro!it beca%se it a!!ects te D%antity o! labo%r reD%ired to prod%ce te necessary
means o! s%bsistence0 A%t in itsel! it does not create any de8iation !rom te general rate o! pro!it,
and tis is precisely te point in @ic @e are interested ere0 F%rtermore, te s%rpl%s-pro!it
@ic some indi8id%al capital oter@ise realises in a partic%lar spere o! prod%ction I !or
de8iations o! te rates o! pro!it in 8ario%s speres o! prod%ction are contin%ally balanced o%t into
an a8erage rate I is d%e, aside !rom !ort%ito%s de8iations, to a red%ction in cost-price, in
prod%ction costs0 5is red%ction arises eiter !rom te !act tat capital is %sed in greater tan
a8erage D%antities, so tat fau frais o! prod%ction are red%ced, @ile te general ca%ses
increasing te prod%cti8eness o! labo%r Bcooperation, di8ision o! labo%r, etc0C can become
e!!ecti8e to a iger degree, @it more intensity, beca%se teir !ield o! acti8ity as become larger#
or it may arise !rom te !act tat, aside !rom te amo%nt o! !%nctioning capital, better metods o!
labo%r, ne@ in8entions, impro8ed macinery, cemical man%!act%ring secrets, etc0, in sort, ne@
and impro8ed, better tan a8erage means o! prod%ction and metods o! prod%ction are %sed0 5e
red%ction in cost-price and te s%rpl%s-pro!it arising !rom it are ere te res%lt o! te manner in
@ic te !%nctioning capital is in8ested0 5ey res%lt eiter !rom te !act tat te capital is
concentrated in te ands o! one person in extraordinarily large D%antities Ba condition tat is
cancelled o%t as soon as eD%al magnit%des o! capital are %sed on te a8erageC, or !rom te !act
tat a certain magnit%de o! capital !%nctions in a partic%larly prod%cti8e manner Ba condition tat
disappears as soon as te exceptional metod o! prod%ction becomes general or is s%rpassed by a
still more de8eloped oneC0
5e ca%se o! te s%rpl%s-pro!it, ten, arises ere !rom te capital itsel! B@ic incl%des te labo%r
set in motion by itC @eter it be d%e to te greater magnit%de o! capital employed or to its more
e!!icient application# and, as a matter o! !act, tere is no partic%lar reason @y all capital in te
same prod%ction spere so%ld not be in8ested in te same manner0 3n te contrary, te
competition bet@een capitals tends to cancel tese di!!erences more and more0 5e determination
o! 8al%e by te socially necessary labo%r-time asserts itsel! tro%g te ceapening o!
commodities and te comp%lsion to prod%ce commodities %nder te same !a8o%rable conditions0
A%t matters are di!!erent @it te s%rpl%s-pro!it o! an ind%strial capitalist @o makes %se o! te
@ater!all0 5e increased prod%cti8eness o! te labo%r %sed by im comes neiter !rom te capital
and labo%r itsel!, nor !rom te mere application o! some nat%ral !orce di!!erent !rom capital and
labo%r b%t incorporated in te capital0 &t arises !rom te greater nat%ral prod%cti8eness o! labo%r
bo%nd %p @it te application o! a !orce o! -at%re, b%t not a !orce o! -at%re tat is at te
command o! all capital in te same spere o! prod%ction, as !or example te elasticity o! steam0 &n
oter @ords, its application is not to be taken !or granted @ene8er capital is generally in8ested in
263 ;apter JJJ4&&&
tis spere o! prod%ction0 3n te contrary, it is a monopolisable !orce o! -at%re @ic, like te
@ater!all, is only at te command o! tose @o a8e at teir disposal partic%lar portions o! te
eart and its app%rtenances0 &t is by no means @itin te po@er o! capital to call into existence
tis nat%ral premise !or a greater prod%cti8ity o! labo%r in te same manner as any capital may
trans!orm @ater into steam0 &t is !o%nd only locally in -at%re and, @ere8er it does not exist, it
cannot be establised by a de!inite in8estment o! capital0 &t is not bo%nd to goods @ic labo%r
can prod%ce, s%c as macines and coal, b%t to speci!ic nat%ral conditions pre8ailing in certain
portions o! land0 5ose man%!act%rers @o o@n @ater!alls excl%de tose @o do not !rom %sing
tis nat%ral !orce, beca%se land, and partic%larly land endo@ed @it @ater-po@er, is scarce0 5is
does not pre8ent te amo%nt o! @ater-po@er a8ailable !or ind%strial p%rposes !rom being
increased, e8en to%g te n%mber o! nat%ral @ater!alls in a gi8en co%ntry is limited0 5e
@ater!all may be arnessed by man in order to !%lly exploit its moti8e !orce0 &! s%c exists, te
@ater-@eel may be impro8ed so as to make %se o! as m%c o! te @ater-po@er as possible#
@ere te ordinary @eel is not s%itable !or te @ater-s%pply, t%rbines may be %sed, etc0 5e
possession o! tis nat%ral !orce constit%tes a monopoly in te ands o! its o@ner# it is a condition
!or an increase in te prod%cti8eness o! te in8ested capital tat cannot be establised by te
prod%ction process o! te capital itsel!#
xlii
tis nat%ral !orce, @ic can be monopolised in tis
manner, is al@ays bo%nd to te land0 $%c a nat%ral !orce does not belong to te general
conditions o! te spere o! prod%ction in D%estion, nor to tose conditions o! te latter @ic may
be generally establised0
-o@ let %s ass%me tat te @ater!alls, along @it te land to @ic tey belong, are eld by
indi8id%als @o are regarded as o@ners o! tese portions o! te eart, i0e0, @o are lando@ners0
5ese o@ners pre8ent te in8estment o! capital in te @ater!alls and teir exploitation by capital0
5ey can permit or !orbid s%c %tilisation0 A%t a @ater!all cannot be created by capital o%t o!
itsel!0 5ere!ore, te s%rpl%s-pro!it @ic arises !rom te employment o! tis @ater!all is not d%e
to capital, b%t to te %tilisation o! a nat%ral !orce @ic can be monopolised, and as been
monopolised, by capital0 (nder tese circ%mstances, te s%rpl%s-pro!it is trans!ormed into
gro%nd-rent, tat is, it !alls into possession o! te o@ner o! a @ater!all0 &! te man%!act%rer pays
te o@ner o! a @ater!all V1= ann%ally, ten is pro!it is V1+, tat is, 1+T on te V1== @ic ten
make %p is cost o! prod%ction# and e is H%st as @ell or possibly better o!! tan all oter
capitalists in is spere o! prod%ction @o operate @it steam0 &t @o%ld not alter matters one bit i!
te capitalist imsel! so%ld be te o@ner o! a @ater!all0 6e @o%ld, in s%c a case, pocket as
be!ore te s%rpl%s-pro!it o! V1= in is capacity as @ater!all o@ner, and not in is capacity as
capitalist# and precisely beca%se tis s%rpl%s does not stem !rom is capital as s%c, b%t rater
!rom te control o! a limited nat%ral !orce distinct !rom is capital @ic can be monopolised, is
it trans!ormed into gro%nd-rent0
'irst, it is e8ident tat tis rent is al@ays a di!!erential rent, !or it does not enter as a determining
!actor into te general prod%ction price o! commodities, b%t rater is based on it0 &t in8ariably
arises !rom te di!!erence bet@een te indi8id%al prod%ction price o! a partic%lar capital a8ing
command o8er te monopolised nat%ral !orce, on te one and, and te general prod%ction price
o! te total capital in8ested in te spere o! prod%ction concerned, on te oter0
Secondly, tis gro%nd-rent does not arise !rom te absol%te increase in te prod%cti8eness o!
employed capital, or labo%r appropriated by it, since tis can only red%ce te 8al%e o!
commodities# it is d%e to te greater relati8e !r%it!%lness o! speci!ic separate capitals in8ested in a
certain prod%ction spere, as compared @it in8estments o! capital @ic are excl%ded !rom tese
exceptional and nat%ral conditions !a8o%ring prod%cti8eness0 For instance, i! te %se o! steam
so%ld o!!er o8er@elming ad8antages not o!!ered by te %se o! @ater-po@er, despite te !act tat
coal as 8al%e and te @ater-po@er as not, and i! tese ad8antages more tan compensated !or
te expense, ten, te @ater-po@er @o%ld not be %sed and co%ld not prod%ce any s%rpl%s-pro!it,
and tere!ore co%ld not prod%ce any rent0
262 ;apter JJJ4&&&
4hirdly, te nat%ral !orce is not te so%rce o! s%rpl%s-pro!it, b%t only its nat%ral basis, beca%se tis
nat%ral basis permits an exceptional increase in te prod%cti8eness o! labo%r0 &n te same @ay,
%se-8al%e is in general te bearer o! excange-8al%e, b%t not its ca%se0 &! te same %se-8al%e co%ld
be obtained @ito%t labo%r, it @o%ld a8e no excange-8al%e, yet it @o%ld retain, as be!ore, te
same nat%ral %se!%lness as %se-8al%e0 3n te oter and, noting can a8e excange-8al%e %nless
it as %se-8al%e, i0e0, %nless it is a nat%ral bearer o! labo%r0 Were it not !or te !act tat te 8ario%s
8al%es are a8eraged o%t into prices o! prod%ction, and te 8ario%s indi8id%al prices o! prod%ction
into a general price o! prod%ction reg%lating te market, te mere increase in prod%cti8ity o!
labo%r tro%g %tilisation o! te @ater!all @o%ld merely lo@er te price o! commodities prod%ced
@it te aid o! tis @ater!all, @ito%t increasing te sare o! pro!it contained in tese
commodities0 $imilarly, on te oter and, tis increased prod%cti8ity o! labo%r itsel! @o%ld not
be con8erted into s%rpl%s-8al%e @ere it not !or te !act tat capital appropriates te nat%ral and
social prod%cti8ity o! te labo%r %sed by it as its o@n0
'ourthly, te pri8ate o@nersip o! te @ater!all in itsel! as noting to do @it te creation o! te
s%rpl%s-8al%e Bpro!itC portion, and tere!ore, o! te price o! te commodity in general, @ic is
prod%ced by means o! te @ater!all0 5is s%rpl%s-pro!it @o%ld also exist i! landed property did
not exist# !or instance, i! te land on @ic te @ater!all is sit%ated @ere %sed by te
man%!act%rer as %nclaimed land0 6ence landed property does not create te portion o! 8al%e
@ic is trans!ormed into s%rpl%s-pro!it, b%t merely enables te lando@ner, te o@ner o! te
@ater!all, to coax tis s%rpl%s-pro!it o%t o! te pocket o! te man%!act%rer and into is o@n0 &t is
not te ca%se o! te creation o! s%c s%rpl%s-pro!it, b%t is te ca%se o! its trans!ormation into te
!orm o! gro%nd-rent, and tere!ore o! te appropriation o! tis portion o! te pro!it, or
commodity-price, by te o@ner o! te land or @ater!all0
'ifthly, it is e8ident tat te price o! te @ater!all, tat is, te price @ic te lando@ner @o%ld
recei8e @ere e to sell it to a tird party or e8en to te man%!act%rer imsel!, does not
immediately enter into te prod%ction price o! te commodities, alto%g it does enter into te
indi8id%al cost-price o! te man%!act%rer# beca%se te rent arises ere !rom te price o!
prod%ction o! similar commodities prod%ced by steam macinery, and tis price is reg%lated
independently o! te @ater!all0 F%rtermore, tis price o! te @ater!all on te @ole is an
irrational expression, b%t beind it is idden a real economic relationsip0 5e @ater!all, like land
in general, and like any nat%ral !orce, as no 8al%e beca%se it does not represent any materialised
labo%r, and tere!ore, it as no price, @ic is normally no more tan te expression o! 8al%e in
money terms0 Were tere is no 8al%e, tere is also eo ipso noting to be expressed in money0
5is price is noting more tan te capitalised rent0 'ando@nersip enables te lando@ner to
appropriate te di!!erence bet@een te indi8id%al pro!it and a8erage pro!it0 5e pro!it t%s
acD%ired, @ic is rene@ed e8ery year, may be capitalised, and appears ten as te price o! te
nat%ral !orce itsel!0 &! te s%rpl%s-pro!it realised by te man%!act%rer %sing te @ater!all amo%nts
to V1= per year, and te a8erage interest is +T, ten tese V1= represent te ann%al interest on a
capital o! V<== and te capitalisation o! te ann%al V1= @ic te @ater!all enables its o@ner to
appropriate !rom te man%!act%rer, appears ten as te capital-8al%e o! te @ater!all itsel!0 5at it
is not te @ater!all itsel! @ic as 8al%e, b%t tat its price is a mere re!lection o! te appropriated
s%rpl%s-pro!it capitalistically calc%lated, becomes at once e8ident !rom te !act tat te price o!
V<== represents merely te prod%ct obtained by m%ltiplying a s%rpl%s-pro!it o! V1= by <= years,
@ereas, oter conditions remaining eD%al, te same @ater!all @ill enable its o@ner to appropriate
tese V1= e8ery year !or an inde!inite n%mber o! years I 3= years, 1== years, or x years# and,
@ereas, on te oter and, so%ld some ne@ metod o! prod%ction not applicable @it @ater-
po@er red%ce te cost-price o! commodities prod%ced by steam macinery !rom V1== to V*=, te
s%rpl%s-pro!it, and tereby te rent, and t%s te price o! te @ater!all, @o%ld disappear0
26+ ;apter JJJ4&&&
-o@ tat @e a8e described te general concept o! di!!erential rent, @e sall pass on to its
consideration in agric%lt%re proper0 Wat applies to agric%lt%re @ill also apply on te @ole to
mining0
Chapter 39. First Form of Diferential Rent
(Diferential Rent I)
)icardo is D%ite rigt in te !ollo@ing obser8ations:
K)ent is al@ays te di!!erence bet@een te prod%ce
obtained by te employment o! t@o eD%al D%antities
o! capital and labo%rL B&rinciples, p0 +*C0
/6e means di!!erential rent, !or e ass%mes tat no oter rent b%t di!!erential rent exists01 6e
so%ld a8e added, Kon eD%al areas o! landL in so !ar as it is a matter o! gro%nd-rent and not
s%rpl%s-pro!it in general0
&n oter @ords, s%rpl%s-pro!it, i! normal and not d%e to accidental occ%rrences in te circ%lation
process, is al@ays prod%ced as a di!!erence bet@een te prod%cts o! t@o eD%al D%antities o!
capital and labo%r, and tis s%rpl%s-pro!it is trans!ormed into gro%nd-rent @en t@o eD%al
D%antities o! capital and labo%r are employed on eD%al areas o! land @it %neD%al res%lts0
Moreo8er, it is by no means absol%tely necessary !or tis s%rpl%s-pro!it to arise !rom te %neD%al
res%lts o! eD%al D%antities o! in8ested capital0 5e 8ario%s in8estments may also employ %neD%al
D%antities o! capital0 &ndeed, tis is generally te case0 A%t eD%al proportions, !or instance V1== o!
eac, prod%ce %neD%al res%lts# tat is, teir rates o! pro!it are di!!erent0 5is is te general
prereD%isite !or te existence o! s%rpl%s-pro!it in any spere o! capital in8estment0 5e second
prereD%isite is te trans!ormation o! tis s%rpl%s-pro!it into te !orm o! gro%nd-rent Bo! rent in
general as a !orm distinct !rom pro!itC# it m%st be in8estigated in eac case @en, o@, %nder
@at conditions tis trans!ormation takes place0
)icardo is also rigt in te !ollo@ing obser8ation, pro8ided it is limited to di!!erential rent:
KWate8er diminises te ineD%ality in te prod%ce
obtained on te same or on ne@ land, tends to lo@er
rent, and @ate8er increases tat ineD%ality,
necessarily prod%ces an opposite e!!ect and tends to
raise itL Bp0>2C0
6o@e8er, among tese ca%ses are not merely te general ones B!ertility and locationC, b%t also 1C
te distrib%tion o! taxes, depending on @eter it operates %ni!ormly or not# te latter is al@ays
te case @en, as in England, it is not centralised and @en te tax is le8ied on land, not on rent#
<C te ineD%alities arising !rom a di!!erence in agric%lt%ral de8elopment in di!!erent parts o! te
co%ntry, since tis line o! prod%ction, o@ing to its traditional caracter, e8ens o%t @it more
di!!ic%lty tan man%!act%re# and 3C te ineD%ality in distrib%tion o! capital among capitalist
tenants0 $ince te in8asion o! agric%lt%re by te capitalist mode o! prod%ction, trans!ormation o!
independently prod%cing peasants into @age-@orkers, is in !act te last conD%est o! tis mode o!
prod%ction, tese ineD%alities are greater ere tan in any oter line o! prod%ction0
6a8ing made tese preliminary remarks, & @ill !irst present a brie! s%mmary o! te caracteristic
!eat%res o! my analysis in contradistinction to tat o! )icardo, etc0
26> ;apter JJJ&J
We sall !irst consider te %neD%al res%lts o! eD%al D%antities o! capital applied to di!!erent plots
o! land o! eD%al siEe# or, in te case o! %neD%al siEe, res%lts calc%lated on te basis o! eD%al areas0
5e t@o general ca%ses o! tese %neD%al res%lts I D%ite independent o! capital I are: 1C 'ertility0
BWit re!erence to tis !irst point, it @ill be necessary to disc%ss @at is meant by nat%ral !ertility
o! land and @at !actors are in8ol8ed0C <C 5e location o! te land0 5is is a decisi8e !actor in te
case o! colonies and in general determines te seD%ence in @ic plots o! land can be c%lti8ated0
F%rtermore, it is e8ident tat tese t@o di!!erent ca%ses o! di!!erential rent I !ertility and location
I may @ork in opposite directions0 ? certain plot o! land may be 8ery !a8o%rably located and yet
be 8ery poor in !ertility, and 8ice 8ersa0 5is circ%mstance is important, !or it explains o@ it is
possible tat bringing into c%lti8ation te land o! a certain co%ntry may eD%ally @ell proceed !rom
te better to te @orse land as 8ice 8ersa0 Finally, it is clear tat te progress o! social prod%ction
in general as, on te one and, te e!!ect o! e8ening o%t di!!erences arising !rom location as a
ca%se o! gro%nd-rent, by creating local markets and impro8ing locations by establising
comm%nication and transportation !acilities# on te oter and, it increases te di!!erences in
indi8id%al locations o! plots o! land by separating agric%lt%re !rom man%!act%ring and !orming
large centres o! prod%ction, on te one and, @ile relati8ely isolating agric%lt%ral districts, on
te oter0
For te present, o@e8er, @e sall lea8e tis point concerning location o%t o! consideration and
con!ine o%rsel8es to nat%ral !ertility0 ?side !rom climatic !actors, etc0, te di!!erence in nat%ral
!ertility depends on te cemical composition o! te top soil, tat is, on its di!!erent plant
n%trition content0 6o@e8er, ass%ming te cemical composition and nat%ral !ertility in tis
respect to be te same !or t@o plots o! land, te act%al e!!ecti8e !ertility di!!ers depending on
@eter tese elements o! plant n%trition are in a !orm @ic may be more or less easily
assimilated and immediately %tilised !or no%rising te crops0 6ence, it @ill depend partly %pon
cemical and partly %pon mecanical de8elopments in agric%lt%re to @at extent te same nat%ral
!ertility may be made a8ailable on plots o! land o! similar nat%ral !ertility0 Fertility, alto%g an
obHecti8e property o! te soil, al@ays implies an economic relation, a relation to te existing
cemical and mecanical le8el o! de8elopment in agric%lt%re, and, tere!ore, canges @it tis
le8el o! de8elopment0 Weter by cemical means Bs%c as te %se o! certain liD%id !ertilisers on
sti!! clay soil and calcination o! ea8y clayey soilsC or mecanical means Bs%c as special plo%gs
!or ea8y soilsC, te obstacles @ic made a soil o! eD%al !ertility act%ally less !ertile can be
eliminated Bdrainage also belongs %nder tis eadC0 3r e8en te seD%ence in types o! soils taken
%nder c%lti8ation may be canged tereby, as @as te case, !or instance, @it ligt sandy soil and
ea8y clayey soil at a certain period o! de8elopment in Englis agric%lt%re0 5is so@s once
again tat istorically, in te seD%ence o! soils taken %nder c%lti8ation, one may pass o8er !rom
more !ertile to less !ertile soils as @ell as 8ice 8ersa0 5e same res%lts may be obtained by an
arti!icially created impro8ement in soil composition or by a mere cange in agric%lt%ral metods0
Finally, te same res%lt may be bro%gt abo%t by a cange in te ierarcical arrangement o! te
soil types d%e to di!!erent conditions o! te s%bsoil, as soon as te latter like@ise begins to be
tilled and t%rned o8er into top layers0 5is is in part dependent on te employment o! ne@
agric%lt%ral metods Bs%c as te c%lti8ation o! !odder-grassC and in part on te employment o!
mecanical means @ic eiter t%rn te s%bsoil o8er into top layers, mix it @it top soil, or
c%lti8ate te s%bsoil @ito%t t%rning it %p0
?ll tese in!l%ences %pon te di!!erential !ertility o! 8ario%s plots o! land are s%c tat !rom te
standpoint o! economic !ertility, te le8el o! labo%r prod%cti8ity, in tis case te capacity o!
agric%lt%re to make te nat%ral soil !ertility immediately exploitable I a capacity @ic di!!ers in
8ario%s periods o! de8elopment I is as m%c a !actor in so-called nat%ral soil !ertility as its
cemical composition and oter nat%ral properties0
We ass%me, ten, te existence o! a partic%lar stage o! de8elopment in agric%lt%re0 We ass%me
!%rtermore tat te ierarcical arrangement o! soil types accords @it tis stage o!
268 ;apter JJJ&J
de8elopment, as is, o! co%rse, al@ays te case !or sim%ltaneo%s capital in8estments on di!!erent
plots o! land0 7i!!erential rent may ten !orm eiter an ascending or a descending seD%ence, !or
alto%g te seD%ence is gi8en !or te totality o! act%ally c%lti8ated plots o! land, a series o!
mo8ements leading to its !ormation as in8ariably taken place0
'et %s ass%me te existence o! !o%r kinds o! soil: ?, A, ;, 70 'et %s !%rtermore ass%me te price
o! one D%arter o! @eat R V3, or 6= sillings0 $ince te rent is solely di!!erential rent, tis price o!
6= sillings per D%arter !or te @orst soil is eD%al to te price o! prod%ction, tat is, eD%al to te
capital pl%s a8erage pro!it0 'et ? be tis @orst soil, @ic yields 1 D%arter R 6= sillings !or eac
+= sillings spent# ence te pro!it amo%nts to 1= sillings, or <=T0
'et A yield < D%arters R 1<= sillings !or te same expendit%re0 5is @o%ld mean >= sillings o!
pro!it, or a s%rpl%s-pro!it o! 6= sillings0
'et ; yield 3 D%arters R 18= sillings !or te same expendit%re# total pro!it R 13= sillings#
s%rpl%s-pro!it R 1<= sillings0
'et 7 yield 2 D%arters R <2= sillings R 18= sillings o! s%rpl%s-pro!it0
We @o%ld ten a8e te !ollo@ing seD%ence:
TABLE I
5ype o! $oil
,rod%ct
;apital
?d8anced
,ro!it )ent
M%arters $illings M%arters $illings M%arters $illings
?
A
;
7
1
<
3
2
6=
1<=
18=
<2=
+=
+=
+=
+=
1N6
1 1N6
< 1N6
3 1N6
1=
>=
13=
1*=
I
1
<
3
I
6=
1<=
18=
5otal000 1= Drs 6==s0 6 Drs 36=s0
5e respecti8e rents are: 7 R 1*=s0 I 1=s0, or te di!!erence bet@een 7 and ?# ; R 13=s0 I
1=s0, or te di!!erence bet@een ; and ?# A R >=s0 I 1=s0, or te di!!erence bet@een A and ?#
and te total rent !or A, ;, 7 R 6 D%arters R 36= sillings, eD%al to te s%m o! te di!!erences
bet@een 7 and ?, ; and ?, A and ?0
5is seD%ence, @ic represents a gi8en prod%ct in a gi8en condition may, considered abstractly
B@e a8e already o!!ered te reasons @y tis may be te case in realityC, descend !rom 7 to ?,
!rom !ertile to less and less !ertile soil, or rise !rom ? to 7, !rom relati8ely poor to more and more
!ertile soil, or, !inally, may !l%ct%ate, i0e0, no@ rising, no@ descending I !or instance !rom 7 to ;,
!rom ; to ?, and !rom ? to A0
5e process in te case o! a descending seD%ence @as as !ollo@s: 5e price o! a D%arter o! @eat
rose grad%ally !rom, say, 1+ sillings to 6= sillings0 ?s soon as te 2 D%arters prod%ced by 7 B@e
may consider tese 2 D%arters as so many million D%artersC no longer s%!!iced, te price o! @eat
rose to a point @ere te s%pply sortage co%ld be prod%ced by ;0 5at is to say, te price o!
@eat m%st a8e risen to <= sillings per D%arter0 Wen it ad risen to 3= sillings per D%arter, A
co%ld be taken %nder c%lti8ation, and @en it reaced 6= sillings ? co%ld be taken %nder
c%lti8ation# and te capital in8ested did not a8e to content itsel! @it a rate o! pro!it lo@er tan
<=T0 &n tis manner, a rent @as establised !or 7, !irst o! + sillings per D%arter R <= sillings !or
te 2 D%arters prod%ced by it# ten o! 1+ sillings per D%arter R 6= sillings, ten o! 2+ sillings
per D%arter R 18= sillings !or 2 D%arters0
&! te rate o! pro!it o! 7 originally @as similarly R <= T, ten its total pro!it on 2 D%arters o!
@eat @as also b%t 1= sillings, b%t tis represented more grain @en te price @as 1+ sillings
26* ;apter JJJ&J
tan it does @en te price is 6= sillings0 A%t since te grain enters into te reprod%ction o!
labo%r-po@er, and part o! eac D%arter as to make good some portion o! @ages and anoter
constant capital, te s%rpl%s-8al%e %nder tese conditions @as iger, and t%s oter tings being
eD%al te rate o! pro!it too0 B5e matter o! rate o! pro!it @ill a8e to be specially analysed, and in
greater detail0C
3n te oter and, i! te seD%ence @ere in te re8erse order, tat is, i! te process initiated !rom
?, ten te price o! @eat at !irst @o%ld rise abo8e 6= sillings per D%arter @en ne@ land @o%ld
a8e to be taken %nder c%lti8ation0 A%t since te necessary s%pply @o%ld be prod%ced by A, a
s%pply o! < D%arters, te price @o%ld !all to 6= sillings again, !or A prod%ced @eat at a cost o!
3= sillings per D%arter, b%t sold it at 6= sillings beca%se te s%pply H%st s%!!iced to co8er te
demand0 5%s a rent @as !ormed, !irst o! 6= sillings !or A, and in te same @ay !or ; and 7# it is
ass%med tro%go%t tat te market-price remained at 6= sillings, alto%g ; and 7 prod%ced
@eat a8ing an act%al 8al%e o! <= and 1+ sillings per D%arter respecti8ely, beca%se te s%pply
o! te one D%arter prod%ced by ? @as needed as m%c as e8er to satis!y te total demand0 &n tis
case, te increase in demand abo8e s%pply, @ic @as !irst satis!ied by ?, ten by ? and A, @o%ld
not a8e made it possible to c%lti8ate A, ; and 7 s%ccessi8ely, b%t @o%ld merely a8e ca%sed a
general extension o! te spere o! c%lti8ation, and te more !ertile lands migt only later come
%nder c%lti8ation0
&n te !irst seD%ence, an increase in price @o%ld raise te rent and decrease te rate o! pro!it0 $%c
a decrease migt be entirely or partially cecked by co%nteracting circ%mstances0 5is point @ill
a8e to be treated later in more detail0 &t so%ld not be !orgotten tat te general rate o! pro!it is
not determined %ni!ormly in all speres o! prod%ction by te s%rpl%s-8al%e0 &t is not te
agric%lt%ral pro!it @ic determines ind%strial pro!it, b%t 8ice 8ersa0 A%t o! tis more anon0
&n te second seD%ence te rate o! pro!it on in8ested capital @o%ld remain te same0 5e amo%nt
o! pro!it @o%ld be represented by less grain# b%t te relati8e price o! grain, compared @it tat o!
oter commodities, @o%ld a8e risen0 6o@e8er, te increase in pro!it @ere8er s%c an increase
takes place, becomes separated !rom te pro!it in te !orm o! rent, instead o! !lo@ing into te
pockets o! te capitalist tenant !armer and appearing as a gro@ing pro!it0 5e price o! grain,
o@e8er, co%ld remain %ncanged %nder te conditions ass%med ere0
5e de8elopment and gro@t o! di!!erential rent @o%ld remain te same !or !ixed as @ell as !or
increasing prices, and !or a contin%o%s progression !rom @orse to better soils as @ell as !or a
contin%o%s retrogression !rom better to @orse soils0
5%s !ar @e a8e ass%med: 1C tat te price rises in one seD%ence and remains stationary in te
oter# <C tat tere is a contin%o%s progression !rom better to @orse soil, or !rom @orse to better
soil0
A%t no@ let %s ass%me tat te demand !or grain rises !rom its original !ig%re o! 1= to 1> D%arters#
!%rtermore, tat te @orst soil ? is displaced by anoter soil ?, @ic prod%ces 1 X D%arters at a
price o! prod%ction o! 6= sillings B+=s0 cost pl%s 1=s0 !or <=T pro!itC, so tat its price o!
prod%ction per D%arter R 2+ sillings# or, peraps, te old soil ? may a8e impro8ed tro%g
contin%o%s rational c%lti8ation, or be c%lti8ated more prod%cti8ely at te same cost, !or instance
tro%g te introd%ction o! clo8er, etc0, so tat its o%tp%t @it te same in8estment o! capital rises
to 1 X D%arters0 'et %s also ass%me tat soil types A, ; and 7 yield te same o%tp%t as pre8io%sly,
b%t tat ne@ soil types a8e been introd%ced, !or instance, ?" @it a !ertility lying bet@een ? and
A, and also A" and AL @it a !ertility bet@een A and ;0 We so%ld ten obser8e te !ollo@ing
penomena:
'irstI 5e price o! prod%ction o! a D%arter o! @eat, or its reg%lating market-price, !alls !rom 6=
sillings to 2+ sillings, or by <+T0
SecondI 5e c%lti8ation proceeds sim%ltaneo%sly !rom more !ertile to less !ertile soil, and !rom
less !ertile to more !ertile soil0 $oil ?" is more !ertile tan ?, b%t less !ertile tan te iterto
2>= ;apter JJJ&J
c%lti8ated soils A, ; and 70 A" and AL are more !ertile tan ?, ?" and A, b%t less !ertile tan ; and
70 5e seD%ence t%s proceeds in crisscross !asion0 ;%lti8ation does not proceed to soil
absol%tely less !ertile tan ?, etc0, b%t to relati8ely less !ertile soil @it respect to te iterto
most !ertile soil types ; and on te oter and, c%lti8ation does not proceed to soil absol%tely
more !ertile, b%t to relati8ely more !ertile soil @it respect to te iterto least !ertile soil ?, or ?
and A0
4hirdlyI 5e rent on A !alls# like@ise te rent on ; and 7# b%t te total rental in grain rises !rom 6
D%arters to > W te amo%nt o! c%lti8ated and rent-yielding land increases, and te amo%nt o!
prod%ce rises !rom 1= D%arters to 1>0 5e pro!it, alto%g it remains te same !or ?, rises i!
expressed in grain, b%t te rate o! pro!it itsel! migt rise, beca%se te relati8e s%rpl%s-8al%e does0
&n tis case, te @age, i0e0, te in8estment o! 8ariable capital and tere!ore te total o%tlay, is
red%ced beca%se o! te ceapening o! means o! s%bsistence0 5is total rental expressed in money
!alls !rom 36= sillings to 32+ sillings0
TABLE II
5ype o!
$oil
,rod%ct
;apital
&n8ested
,ro!it )ent ,rice o!
,rod%ction
per M%arter M%arters $illings M%arters $illings M%arters $illings
?
?"
A
A"
AL
;
7
1X
1W
<
<X
<W
3
2
6=
>+
*=
1=+
1<=
13+
18=
+=
+=
+=
+=
+=
+=
+=
<N*
+N*
8N*
1 <N*
1 +N*
1 8N*
< 8N*
1=
<+
2=
++
>=
8+
13=
I
X
W
1
1X
1W
<W
I
1+
3=
2+
6=
>+
1<=
2+ s0
36 s0
3= s0
<+ +N>k s0
<<Z s0
<= s0
1+ s0
5otal000 1> >W 32+
Bk &n te :erman 18*2 edition tis reads: <+ <N>0 I 0d0C
'et %s dra@ %p te ne@ seD%ence0 /$ee p0 6++ I 0d01
Finally, i! only soil types ?, A, ; and 7 @ere c%lti8ated as be!ore, b%t teir prod%cti8eness rose in
s%c a @ay tat ? prod%ced < D%arters instead o! 1 D%arter, A I 2 D%arters instead o! <, ; I >
D%arters instead o! 3, and 7 I 1= D%arters instead o! 2, so tat te same ca%ses a!!ect te 8ario%s
types o! soil di!!erently, te total prod%ction increases !rom 1= D%arters to <30 ?ss%ming tat
demand absorbs tese <3 D%arters tro%g an increase in pop%lation and a !all in prices, @e
so%ld obtain te !ollo@ing res%lt:
TABLE III
5ype o!
$oil
,rod%ct
;apital
&n8ested
,rice o!
,rod%ction
per M%arter
,ro!it )ent
M%arters $illings M%arters $illings M%arters $illings
?
A
;
7
<
2
>
1=
6=
1<=
<1=
3==
+=
+=
+=
+=
3=
1+
8 2N>
6
X
<X
+X
8X
1=
>=
16=
<+=
=
<
+
8
=
6=
1+=
<2=
5otal000 <3 1+ 2+=
2>1 ;apter JJJ&J
5e n%merical proportions in tis and in oter tables are cosen at random b%t te ass%mptions
are D%ite rational0
5e !irst and principal ass%mption is tat an impro8ement in agric%lt%re acts di!!erently %pon
di!!erent soils, and in tis case a!!ects te best types o! soil, ; and 7, more tan types ? and A0
Experience as so@n tat tis is generally te case, alto%g te opposite may also take place0 &!
te impro8ement a!!ected te poorer soils more tan te better ones, rent on te latter @o%ld a8e
!allen instead o! risen0 A%t in o%r table, @e a8e ass%med tat te absol%te gro@t in !ertility o!
all soil types is sim%ltaneo%sly accompanied by an increase in greater relati8e !ertility o! te
better soil types, ; and 7# tis means an increase in te di!!erence bet@een te prod%ct at te
same capital in8estment, and t%s an increase in di!!erential rent0
5e second ass%mption is tat total demand keeps pace @it te increase in te total prod%ct0
'irst, one need not imagine s%c an increase coming abo%t abr%ptly, b%t rater grad%ally I %ntil
seD%ence &&& is establised0 Secondly, it is not tr%e tat te cons%mption o! necessities o! li!e does
not increase as tey become ceaper0 5e abolition o! te ;orn 'a@s in England pro8ed te
re8erse to be te case BF0 -e@man, ,ectures on &olitical 0conomy, 'ondon, 18+1, p01+80 I 0d0C#
te opposite 8ie@ stems solely !rom te !act tat large and s%dden di!!erences in ar8ests, @ic
are mere res%lts o! @eater, bring abo%t at one time an extraordinary !all, at anoter an
extraordinary rise, in grain prices0 Wile in s%c a case te s%dden and sort-li8ed red%ction in
price does not a8e time to exert its !%ll e!!ect %pon te extension o! cons%mption, te opposite is
tr%e @en a red%ction arises !rom te lo@ering o! te reg%lating price o! prod%ction itsel!, i0e0, is
o! a long-term nat%re0 4hirdly, a part o! te grain may be cons%med in te !orm o! brandy or beer#
and te increasing cons%mption o! bot o! tese items is by no means con!ined @itin narro@
limits0 'ourthly, te matter depends in part %pon te increase in pop%lation and in part on te !act
tat te co%ntry may be grain-exporting, as England still @as long a!ter te middle o! te 18t
cent%ry, so tat te demand is not solely reg%lated @itin te con!ines o! national cons%mption0
'inally, te increase and price red%ction in @eat prod%ction may res%lt in making @eat, instead
o! rye or oats, te principal article o! cons%mption !or te masses, so tat te demand !or it may
gro@ i! only !or tis reason, H%st as te opposite may take place @en prod%ction decreases and
prices rise0 5%s, %nder tese ass%mptions, and @it te pre8io%sly selected ratios, seD%ence &&&
yields te res%lt tat te price per D%arter !alls !rom 6= to 3= sillings, tat is, by +=T# tat
prod%ction, compared to seD%ence &, increases !rom 1= to <3 D%arters, i0e0, by 13=T# tat te rent
remains !ixed !or soil A, increases by <+T B&n te :erman 18*2 edition tis reads: do%bles0I 0d0C
!or ;, and by 33XT BDbid.p <<0I 0d0C !or 7# and tat te total rental increases !rom V18 to V<<Z,
BDbid. <<0 I 0d0C, by <+T0 BDbid.: << 1N*T I 0d0C
? comparison o! tese tree tables B@ereby seD%ence & is to be taken t@ice, rising !rom ? to 7,
and descending !rom 7 to ?C, @ic may be considered eiter as gi8en gradations %nder some
stage o! society, !or instance, as existing side by side in tree di!!erent co%ntries, or as s%cceeding
one anoter in di!!erent periods o! de8elopment @itin te same co%ntry, so@s:
1C 5e seD%ence, @en complete, @ate8er te co%rse o! its !ormati8e process may a8e been,
in8ariably appears as being in a descending line# !or @en analysing rent te point o! depart%re
@ill al@ays be land yielding te maxim%m rent, and only !inally do @e come to land yielding no
rent0
<C 5e price o! prod%ction on te @orst soil, i0e0, @ic yields no rent, is al@ays te one
reg%lating te market-price, alto%g te latter in 5able &, i! its seD%ence @ere !ormed in an
ascending line, only remained !ixed beca%se better and better soil @as constantly dra@n into
c%lti8ation0 &n s%c a case, te price o! grain prod%ced on te best soil is a reg%lating one ill so !ar
as it depends %pon te D%antity prod%ced on s%c soil to @at extent soil type ? remains te
reg%lator0 &! A, ; and 7 so%ld prod%ce more tan demand reD%ires, ? @o%ld cease to be te
reg%lator0 $torc as tis point aEily in mind @en e adopts te best soil type as te reg%lating
one0 B60 $torc, Cours d57conomie politi3ue, ou 0position des principes 3ui determinent la
2>< ;apter JJJ&J
prosp7rit7 des nations, 5ome &&, $t0-,etersbo%rg, 181+, pp0 >8->*0 I Ed0C &n tis manner, te
?merican price o! grain reg%lates te Englis price0
3C 7i!!erential rent arises !rom di!!erences in te nat%ral !ertility o! te soil @ic is gi8en !or
e8ery gi8en stage o! agric%lt%ral de8elopment Blea8ing aside !or te present te D%estion o!
locationC# in oter @ords, !rom te limited area o! te best land, and !rom te circ%mstance tat
eD%al amo%nts o! capital m%st be in8ested on %neD%al types o! soil, so tat an %neD%al prod%ct
res%lts !rom te same amo%nt o! capital0
2C 5e existence o! a di!!erential rent and o! a grad%ated di!!erential rent can de8elop eD%ally @ell
in a descending seD%ence, @ic proceeds !rom better to @orse soils, as in an ascending one,
@ic progresses in te opposite direction !rom @orse to better soils# or it may be bro%gt abo%t
in ceckered !asion by alternating mo8ements0 B$eD%ence & may be !ormed by proceeding !rom
7 to ?, or !rom ? to 7# seD%ence && comprises bot types o! mo8ement0C
+C 7epending on its mode o! !ormation, di!!erential rent may de8elop along @it a stationary,
rising or !alling price o! te prod%cts o! te land0 &n te case o! a !alling price, total prod%ction
and total rental may rise, and rent may de8elop on iterto rentless land, e8en to%g te @orst
soil ? may a8e been displaced by a better one or may itsel! a8e impro8ed, and e8en to%g te
rent may decrease on oter land @ic is better, or e8en te best B5able &&C# tis process may also
be connected @it a !all in total rent Bin moneyC0 Finally, at a time @en prices !all on acco%nt o!
a general impro8ement in c%lti8ation, so tat te prod%ct o! te @orst soil and its price decrease,
te rent on some o! te better soils may remain te same, or may !all, @ile it may rise on te best
ones0 -e8erteless, te di!!erential rent o! e8ery soil, compared @it te @orst soil, depends, i!
te di!!erence in D%antity o! prod%cts is gi8en, %pon te price, say, o! a D%arter o! @eat0 A%t
@en te price is gi8en, di!!erential rent depends %pon te magnit%de o! te di!!erence in D%antity
o! prod%cts, and i! @it an increasing absol%te !ertility o! all soils tat o! te better ones gro@s
relati8ely more tan tat o! te @orse ones, te magnit%de o! tis di!!erence gro@s
proportionately0 &n tis @ay Bsee 5able &C, @en te price is 6= sillings, te rent on 7 is
determined by its di!!erential prod%ct as compared @it ?# in oter @ords, by te s%rpl%s o! 3
D%arters0 5e rent is tere!ore R 3 \ 6= R l8= sillings0 A%t in 5able &&&, @ere te price R 3=
sillings, te rent is determined by te D%antity o! s%rpl%s-prod%ct o! 7 as compared @it ? R 8
D%arters# @e tere!ore obtain 8 \ 3= R <2= sillings0
5is takes care o! te !irst !alse ass%mption regarding di!!erential rent I still !o%nd among West,
Malt%s, and )icardo I namely, tat it necessarily pres%pposes a mo8ement to@ard @orse and
@orse soil, or an e8er-decreasing !ertility o! te soil0 B/West1 0ssay on the +pplication :f Capital
to ,and, 'ondon, 181+0 Malt%s, ,rinciples o! ,olitical Economy, 'ondon, 18360 Malt%s, +n
Dn3uiry into the $ature and &rogress of 9ent, and the &rinciples by which it is regulated, 'ondon,
181+0 )icardo, :n the &rinciples of &olitical 0conomy, and 4aation, 5ird edition, 'ondon,
28<2, ;ap0 110 I0d.C &t can be !ormed, as @e a8e seen, @it a mo8ement to@ard better and
better soil# it can be !ormed @en a better soil takes te lo@est position tat @as !ormerly
occ%pied by te @orst soil# it can be connected @it a progressi8e impro8ement in agric%lt%re0
5e precondition is merely te ineD%ality o! di!!erent kinds o! soil0 $o !ar as te increase in
prod%cti8ity is concerned, it ass%mes tat te increase in absol%te !ertility o! te total area does
not eliminate tis ineD%ality, b%t eiter increases it, lea8es it %ncanged, or merely red%ces it0
From te beginning to te middle o! te 18t cent%ry, England"s grain prices constantly !ell in
spite o! te !alling prices o! gold and sil8er, @ile at te same time B8ie@ing tis entire period as
a @oleC tere @as an increase in rent, in te o8er-all amo%nt o! rent, in te area o! c%lti8ated
land, in agric%lt%ral prod%ction, and in pop%lation0 5is corresponds to 5able & taken in
conH%nction @it 5able && in an ascending line, b%t in s%c a @ay tat te @orst land ? is eiter
impro8ed or eliminated !rom te grain-prod%cing area# o@e8er, tis does not mean tat it @as
not %sed !or oter agric%lt%ral or ind%strial p%rposes0
2>3 ;apter JJJ&J
From te early 1*t cent%ry Bdate to be speci!ied more preciselyC %ntil 181+ tere is a constant
rise in grain prices, accompanied by a steady increase in rent, in te o8er-all amo%nt o! rent, in
te area o! c%lti8ated land, in agric%lt%ral prod%ction, and in pop%lation0 5is corresponds to
5able & in a descending line0 B;ite some so%rces ere on te c%lti8ation o! in!erior land in tat
period0C
&n ,etty"s and 7a8enant"s time, !armers and lando@ners complained abo%t impro8ements and te
bringing into c%lti8ation o! ne@ land# te rent on better lands decreased, and te total amo%nt o!
rent increased tro%g te extension o! te area o! land yielding rent0
B5ese tree points so%ld be ill%strated later by D%otations# like@ise !or te di!!erence in !ertility
o! 8ario%s c%lti8ated sections o! land in a partic%lar co%ntry0C
)egarding di!!erential rent in general, it is to be noted tat te market-8al%e is al@ays abo8e te
total price o! prod%ction o! te total D%antity o! prod%cts0 ?s an example, let %s take 5able &0 5en
D%arters o! total prod%ct are sold !or 6== sillings beca%se te market-price is determined by te
price o! prod%ction o! ?, @ic amo%nts to 6= sillings per D%arter0 A%t te act%al price o!
prod%ction is:
? 1 Dr R 6= s0 1 Dr R 6= s0
A < Drs R 6= s0 1 Dr R 3= s0
; 3 Drs R 6= s0 1 Dr R <= s
7 2 Drs R 6= s0 1 Dr R 1+ s0
1& <rs = 14& sh. %verage 1 <r = 14 sh.
5e act%al price o! prod%ction o! tese 1= D%arters is <2= sillings# b%t tey are sold !or 6==
sillings, i0e0, at <+=T o! te price o! prod%ction0 5e act%al a8erage price !or 1 D%arter is <2
sillings# te market-price is 6= sillings, i0e0, also <+=T o! te prod%ction price0
5is is determination by market-8al%e as it asserts itsel! on te basis o! capitalist prod%ction
tro%g competition# te latter creates a !alse social 8al%e0 5is arises !rom te la@ o! market-
8al%e, to @ic te prod%cts o! te soil are s%bHect0 5e determination o! te market-8al%e o!
prod%cts, incl%ding tere!ore agric%lt%ral prod%cts, is a social act, albeit a socially %nconscio%s
and %nintentional one0 &t is based necessarily %pon te excange-8al%e o! te prod%ct, not %pon
te soil and te di!!erences in its !ertility0 &! @e s%ppose te capitalist !orm o! society to be
abolised and society organised as a conscio%s and planned association, ten te 1= D%arters
@o%ld represent a D%antity o! independent labo%r-time eD%al to tat contained in <2= sillings0
$ociety @o%ld not ten b%y tis agric%lt%ral prod%ct at t@o and a al! times te act%al labo%r-time
embodied in it and te basis !or a class o! lando@ners @o%ld t%s be destroyed0 5is @o%ld a8e
te same e!!ect as a red%ction in price o! te prod%ct to te same amo%nt res%lting !rom !oreign
imports0 Wile it is, tere!ore, tr%e tat, by retaining te present mode o! prod%ction, b%t
ass%ming tat te di!!erential rent is paid to te state, prices o! agric%lt%ral prod%cts @o%ld,
e8eryting else being eD%al, remain te same, it is eD%ally @rong to say tat te 8al%e o! te
prod%cts @o%ld remain te same i! capitalist prod%ction @ere s%perseded by association0 5e
identity o! te market-price !or commodities o! te same kind is te manner @ereby te social
caracter o! 8al%e asserts itsel! on te basis o! capitalist prod%ction and, in general, any
prod%ction based on te excange o! commodities bet@een indi8id%als0 Wat society o8erpays
!or agric%lt%ral prod%cts in its capacity o! cons%mer, @at is a min%s in te realisation o! its
labo%r-time in agric%lt%ral prod%ction, is no@ a pl%s !or a portion o! society, !or te landlords0
2>2 ;apter JJJ&J
? second circ%mstance, important !or te analysis to be gi8en %nder && o! te next capter, is te
!ollo@ing:
&t is not merely a matter o! rent per acre, or per ectare, nor generally o! a di!!erence bet@een te
price o! prod%ction and market-price, nor bet@een te indi8id%al and te general price o!
prod%ction per acre, b%t it is also a D%estion o! o@ many acres o! eac type o! soil are %nder
c%lti8ation0 5e point o! importance ere relates directly only to te magnit%de o! te rental, tat
is, te total rent o! te entire c%lti8ated area# b%t it ser8es %s at te same time as a stepping-stone
to te consideration o! a rise in te rate of rent alto%g tere is no rise in prices, nor increase in
te di!!erences in relati8e !ertility o! te 8ario%s types o! soil i! prices !all0
We ad abo8e:
TABLE I
5ype o! $oil ?cres ,rice o! ,rod%ction ,rod%ct )ent in :rain )ent in Money
?
A
;
7
1
1
1
1
V3
V3
V3
V3
1 Drs
< Drs
3 Drs
2 Drs
=
1 Drs
< Drs
3Drs
=
V3
V6
V*
5otal000 2 acres 1= Drs 6 Drs V18
-o@ let %s ass%me tat te n%mber o! c%lti8ated acres is do%bled in e8ery category0 We ten
a8e:
TABLE Ia
5ype o! $oil ?cres ,rice o! ,rod%ction ,rod%ct )ent in :rain )ent in Money
?
A
;
7
<
<
<
<
V6
V6
V6
V6
< Drs
2 Drs
6 Drs
8 Drs
=
< Drs
2 Drs
6Drs
=
V6
V1<
V18
5otal000 8 acres <= Drs 1< Drs V 36
'et %s ass%me t@o more cases0 $%ppose in te !irst case prod%ction expands on te t@o poorest
types o! soil in te !ollo@ing manner:
TABLE Ib
5ype o! $oil ?cres
,rice o! ,rod%ction
,rod%ct )ent in :rain )ent in Money
,er ?cre 5otal
?
A
;
7
2
2
<
<
V3
V3
V3
V3
V3
V6
V1+
V16
2 Dr
8 Drs
6 Drs
8 Drs
=
2 Drs
2 Drs
6 Drs
V=
V1<
V1<
V18
5otal000 1< acres V36 <6 Drs 12 Drs V2<
?nd, !inally, let %s ass%me an %neD%al expansion o! prod%ction and c%lti8ated area !or te !o%r
soil categories:
TABLE Ic
5ype o! $oil ?cres ,rice o! ,rod%ction ,rod%ct )ent in :rain )ent in Money
2>+ ;apter JJJ&J
,er ?cre 5otal
?
A
;
7
1
<
+
2
V3
V3
V3
V3
V3
V6
V1+
V1<
1 Dr
2 Drs
1+ Drs
16 Drs
=
< Drs
1= Drs
1< Drs
V=
V6
V3=
V18
5otal000 1< acres V 36 36 Drs <2 Drs V><
&n te !irst place, te rent per acre remains te same in all tese cases I &, &a, &b and &c I !or, in
!act, te res%lt o! te same in8estment o! capital per acre o! te same soil type as remained
%ncanged0 We a8e only ass%med @at is tr%e o! any co%ntry at any gi8en moment# namely, tat
8ario%s soil types exist in de!inite ratios to te total c%lti8ated area0 ?nd @e also ass%med @at is
al@ays tr%e o! any t@o co%ntries being compared, or o! te same co%ntry at di!!erent periods,
namely, tat te proportions in @ic te total c%lti8ated area is distrib%ted among te di!!erent
soil types 8ary0
&n comparing &a @it & @e see tat i! te c%lti8ation o! land in all !o%r categories increases in te
same proportion a do%bling o! te c%lti8ated acreage do%bles te total prod%ction, and tat te
same applies to te rent in grain and money0
6o@e8er, i! @e compare &b and ten &c @it &, @e see tat in bot cases a tripling o! te area
%nder c%lti8ation occ%rs0 &t increases in bot cases !rom 2 acres to 1<, b%t in &b classes ? and A
contrib%te most to te increase, @it ? yielding no rent and A yielding te smallest amo%nt o!
di!!erential rent0 5%s, o%t o! te 8 ne@ly c%lti8ated acres, ? and A acco%nt !or 3 eac, i0e0, 6
togeter, @ereas ; and 7 acco%nt !or & eac, i0e0, < togeter0 &n oter @ords, tree-D%arters o! te
increase is acco%nted !or by ? and A, and only one-D%arter by ; and 70 Wit tis premise, in &b
compared @it & te trebled area o! c%lti8ation does not res%lt in a trebled prod%ct, !or te prod%ct
does not increase !rom 1= to 3=, b%t only to <60 3n te oter and, since a considerable part o!
te increase concerns ?, @ic does not yield any rent, and since te maHor part o! te increase on
better soils concerns A, te rent in grain rises only !rom 6 to 12 D%arters, and te rent in money
!rom V18 to V2<0
A%t i! @e compare &c @it &, @ere te land yielding no rent does not increase in area and te land
yielding a minim%m rent increases b%t sligtly, @ile ; and 7 acco%nt !or te maHor part o! te
increase, @e !ind tat @en te c%lti8ated area is trebled prod%ction increases !rom 1= to 36
D%arters, i0e0, to more tan tree times its original amo%nt0 5e rent in grain increases !rom 6 to
<2 D%arters or to !o%r times its original amo%nt# and similarly money-rent, !rom V18 to V><0
&n all tese cases it is in te nat%re o! tings tat te price o! te agric%lt%ral prod%ct remains
%ncanged0 5e total rental increases in all cases @it te extension o! c%lti8ation, %nless it takes
place excl%si8ely on te @orst soil, @ic does not yield any rent0 A%t tis increase 8aries0 $o%ld
tis extension in8ol8e te better soil types and te total o%tp%t, conseD%ently, increase not merely
in proportion to te expansion o! te area, b%t rater more rapidly, ten te rent in grain and
money increases to te same extent0 $o%ld it be te @orst soil, and te types o! soil close to it,
tat are principally in8ol8ed in te expansion B@ereby it is ass%med tat te @orst soil represents
a constant typeC, te total rental does not increase in proportion to te extension o! c%lti8ation0
5%s, gi8en t@o co%ntries in @ic soil ?, yielding no rent, is o! te same D%ality, te rental is
in8ersely proportional to te aliD%ot part represented by te @orst soil and te in!erior soil types
in te total area %nder c%lti8ation, and tere!ore in8ersely proportional to te o%tp%t, ass%ming
eD%al capital in8estments on eD%al total land areas0 ? relationsip bet@een te D%antity o! te
@orst and te D%antity o! te better c%lti8ated land in te total land area o! a gi8en co%ntry t%s
as an opposite in!l%ence on te total rental tan te relationsip bet@een te D%ality o! te @orst
c%lti8ated land and te D%ality o! te better and best as on te rent per acre and I oter
2>6 ;apter JJJ&J
circ%mstances remaining te same I on te total rental0 ;on!%sion bet@een tese t@o points as
gi8en rise to all kinds o! erroneo%s obHections raised against di!!erential rent0
5e total rental, ten, increases by te mere extension o! c%lti8ation, and by te conseD%ent
greater in8estment o! capital and labo%r in te land0 A%t te most important point is tis:
?lto%g it is o%r ass%mption tat te ratio o! rents per acre !or te 8ario%s kinds o! soil remains
te same, and tere!ore also te rate o! rent considered @it re!erence to capital in8ested in eac
acre, yet te !ollo@ing is to be obser8ed: &! @e compare &a @it &, te case in @ic te n%mber o!
c%lti8ated acres and te capital in8ested in tem a8e been proportionately increased, @e !ind tat
as te total prod%ction as increased proportionately to te expanded c%lti8ated area, i0e0, as bot
a8e been do%bled, so as te rental0 &t as risen !rom V18 to V36, H%st as te n%mber o! acres as
risen !rom 2 to 80
&! @e take te total area o! 2 acres, @e !ind tat te total rental amo%nted to V18 and t%s te
a8erage rent, incl%ding te land @ic does not yield any rent, is V2Z0 $%c a calc%lation migt
be made, say, by a landlord o@ning all 2 acres# and in tis @ay te a8erage rent is statistically
comp%ted !or a @ole co%ntry0 5e total rental o! V18 is obtained by te in8estment o! a capital o!
V1=0 We call te ratio o! tese t@o !ig%res te rate o! rent# in te present case it is tere!ore 18=T0
5e same rate o! rent obtains in &a, @ere 8 instead o! 2 acres are c%lti8ated, b%t all types o! land
a8e contrib%ted to te increase in te same proportion0 5e total rental o! V36 yields !or 8 acres
and an in8ested capital o! V<= an a8erage rent o! V2Z per acre and a rate o! rent o! 18=T0
A%t i! @e consider &b, @ere te increase as taken place mainly %pon t@o in!erior categories o!
soil, @e obtain a rent o! V2< !or 1< acres, or an a8erage rent o! V3Z per acre0 5e total in8ested
capital is V3=, and tere!ore te rate o!" rent R 12=T0 5e a8erage rent per acre as t%s decreased
by V1, and te rate o! rent as !allen !rom 18= to 12=T0 6ere ten @e a8e a rise in te total
rental !rom V18 to V2<, b%t a drop in a8erage rent calc%lated per acre as @ell as on te basis o!
capital# te drop takes place parallel to an increase in prod%ction, b%t not proportionately0 5is
occ%rs e8en to%g te rent !or all types o! soil, calc%lated per acre as @ell as on te basis o!
capital o%tlay, remains te same0 5is occ%rs beca%se tree-D%arters o! te increase is acco%nted
!or by soil ?, @ic does not yield any rent, and soil A, @ic yields only minim%m rent0
&! te total expansion in ;ase &b ad taken place solely on soil ?, @e so%ld a8e * acres on ?, &
acre on A, & acre on ; and & acre on 70 5e total rental @o%ld be V18, te same as be!ore# te
a8erage rent !or te 1< acres tere!ore @o%ld be V1Z per acre# and a rent o! V18 on an in8ested
capital o! V3= @o%ld gi8e a rate o! rent o! 6=T0 5e a8erage rent, calc%lated per acre as @ell as
on te basis o! in8ested capital, @o%ld a8e greatly decreased, @ile te total rental @o%ld not
a8e increased0
Finally, let %s compare &c @it & and &b0 ;ompared @it &, te area as been trebled, and also te
in8ested capital0 5e total rental is V>< !or 1< acres, or V6 per acre I as against V2Z in ;ase &0 5e
rate o! rent on te in8ested capital BV><:V3=C is <2=T instead o! 18=T0 5e total o%tp%t as risen
!rom 1= to 36 D%arters0
;ompared @it &b, @ere te total n%mber o! c%lti8ated acres, te in8ested capital, and te
di!!erences bet@een te c%lti8ated soil types are te same, b%t te distrib%tion di!!erent, te
o%tp%t is 36 D%arters instead o! <6 D%arters, te a8erage rent per acre is V6 instead o! V3Z, and te
rate o! rent @it re!erence to te same in8ested total capital is <2=T instead o! 12=T0
-o matter @eter @e regard te 8ario%s conditions in tables &a, &b and &c as existing
sim%ltaneo%sly side by side in di!!erent co%ntries, or as existing s%ccessi8ely in te same co%ntry,
@e come to te !ollo@ing concl%sions: $o long as te price o! grain remains %ncanged beca%se
te yield on te @orst, rentless soil remains te same# so long as te di!!erence in te !ertility o!
te 8ario%s c%lti8ated types o! soil remains te same# so long as te respecti8e o%tp%ts remain te
same, ence, gi8en eD%al capital in8estments on eD%al aliD%ot parts BacresC o! c%lti8ated area in
e8ery type o! soil# so long as te ratio, tere!ore, bet@een te rents per acre on eac category o!
2>> ;apter JJJ&J
soil is constant, and te rate o! rent on te capital in8ested in eac plot o! te same kind o! soil is
constant: 'irst, te rental constantly increases @it te extension o! c%lti8ated area and @it te
conseD%ent increased capital in8estment, except !or te case @ere te entire increase is
acco%nted !or by rentless land0 Secondly, te a8erage rent per acre Btotal rental di8ided by te
total n%mber o! c%lti8ated acresC as @ell as te a8erage rate o! rent Btotal rental di8ided by te
in8ested total capitalC may 8ary 8ery considerably# and, indeed, bot cange in te same
direction, b%t in di!!erent proportions to eac oter0 &! @e lea8e o%t o! consideration te case in
@ic te expansion takes place only on te rentless soil ?, @e !ind tat te a8erage rent per acre
and te a8erage rate o! rent on te capital in8ested in agric%lt%re depend on te proportions @ic
te 8ario%s classes o! soil constit%te in te total c%lti8ated area# or, @at amo%nts to te same
ting, on te distrib%tion o! te total employed capital among te kinds o! soil o! 8arying !ertility0
Weter m%c or little land is c%lti8ated, and @eter te total rental is tere!ore larger or smaller
B@it te exception o! te case in @ic te expansion is con!ined to ?C, te a8erage rent per acre,
or te a8erage rate o! rent on in8ested capital, remains te same as long as te proportions o! te
8ario%s categories o! soil in te total c%lti8ated area remain %ncanged0 &n spite o! an increase,
e8en a 8ery considerable one, in te total rental @it te extension o! c%lti8ation and expansion o!
capital in8estment, te a8erage rent per acre and te a8erage rate o! rent on capital decrease @en
te extension o! rentless land, and land yielding only little di!!erential rent, is greater tan te
extension o! te s%perior one yielding greater rent0 ;on8ersely, te a8erage rent per acre and te
a8erage rate o! rent on capital increase proportionately to te extent tat better land constit%tes a
relati8ely greater part o! te total area and tere!ore employs a relati8ely greater sare o! te
in8ested capital0
6ence, i! @e consider te a8erage rent per acre, or ectare, o! te total c%lti8ated land as is
generally done in statistical @orks, in comparing eiter di!!erent co%ntries in te same period, or
di!!erent periods in te same co%ntry, @e !ind tat te a8erage le8el o! rent per acre, and
conseD%ently total rental, corresponds to a certain extent Balto%g by no means identical, b%t
rater a more rapidly increasing extentC to te absol%te, not to te relati8e, !ertility o! te soil in a
gi8en co%ntry# tat is, to te a8erage amo%nt o! prod%ce @ic it yields !rom te same area0 For
te larger te sare o! s%perior soils in te total c%lti8ated area, te greater te o%tp%t !or eD%al
capital in8estments on eD%ally large areas o! land# and te iger te a8erage rent per acre0 &n te
re8erse case te opposite takes place0 5%s, rent does not appear to be determined by te ratio o!
di!!erential !ertility, b%t by te absol%te !ertility, and te la@ o! di!!erential rent appears in8alid0
For tis reason certain penomena are disp%ted, or an attempt is made to explain tem by non-
existing di!!erences in a8erage prices o! grain and in te di!!erential !ertility o! c%lti8ated land,
@ereas s%c penomena are merely d%e to te !act tat te ratio o! total rental to total area o!
c%lti8ated land or to total capital in8ested in te land I as long as te !ertility o! te rentless soil
remains te same and tere!ore te prices o! prod%ction, and te di!!erences bet@een te 8ario%s
kinds o! soil remain %ncanged I is determined not merely by te rent per acre or te rate o! rent
on capital, b%t D%ite as m%c by te relati8e n%mber o! acres o! eac type o! soil in te total
n%mber o! c%lti8ated acres# or, @at amo%nts to te same ting, by te distrib%tion o! te total
in8ested capital among te 8ario%s types o! soil0 ;%rio%sly eno%g, tis !act as been completely
o8erlooked t%s !ar0 ?t any rate, @e see Band tis is important !or o%r !%rter analysisC tat te
relati8e le8el o! te a8erage rent per acre, and te a8erage rate o! rent Bor te ratio o! te total
rental to te total capital in8ested in te landC, may rise or !all by merely extensi8ely expanding
c%lti8ation, as long as prices remain te same, te di!!erential !ertilities o! te 8ario%s soils
remain %naltered, and te rent per acre, or rate o! rent !or capital in8ested per acre in e8ery type
o! soil act%ally yielding rent, i0e0, !or all capital act%ally yielding rent, remains %ncanged0
&t is necessary to make te !ollo@ing additional points @it re!erence to te !orm o! di!!erential
rent considered %nder eading &# tey also apply in part to di!!erential rent &&:
2>8 ;apter JJJ&J
'irst, it @as seen tat te a8erage rent per acre, or te a8erage rate o! rent on capital, may
increase @it an extension o! c%lti8ation @en prices are stationary and te di!!erential !ertility o!
te c%lti8ated plots o! land remains %naltered0 ?s soon as all te land in a gi8en co%ntry as been
appropriated, and in8estments o! capital in land, c%lti8ation, and pop%lation a8e reaced a
de!inite le8el I all gi8en conditions as soon as te capitalist mode o! prod%ction becomes te
pre8ailing one and also encompasses agric%lt%re I te price o! %nc%lti8ated land o! 8arying
D%ality Bmerely ass%ming di!!erential rent to existC is determined by te price o! te c%lti8ated
plots o! land o! te same D%ality and eD%i8alent location0 5e price is te same I a!ter ded%cting
te cost o! bringing te ne@ land into c%lti8ation I e8en to%g tis land does not yield any rent0
5e price o! te land is, indeed, noting b%t te capitalised rent0 A%t e8en in te case o! c%lti8ated
land, te price pays only !or !%t%re rents, as, !or instance, @en te pre8alent interest rate is +T
and te rent !or t@enty years is paid at one time in ad8ance0 Wen land is sold, it is sold as land
yielding rent, and te prospecti8e caracter o! te rent B@ic is ere considered as a prod%ct o!
te soil, b%t it only seems to be tatC does not disting%is te %nc%lti8ated !rom te c%lti8ated
land0 5e price o! te %nc%lti8ated land, like its rent te price o! @ic represents te contracted
!orm o! te latter is D%ite ill%sory as long as te land is not act%ally %sed0 A%t it is t%s determined
a priori and is realised as soon as a p%rcaser is !o%nd0 6ence, @ile te act%al a8erage rent in a
gi8en co%ntry is determined by its act%al a8erage ann%al rental and te relation o! te latter to te
total c%lti8ated area, te price o! te %nc%lti8ated land is determined by te price o! te c%lti8ated
land, and is tere!ore b%t a re!lection o! te capital in8ested in te c%lti8ated land and te res%lts
obtained tere!rom0 $ince all land @it te exception o! te @orst yields rent Band tis rent, as @e
sall see %nder te ead o! di!!erential rent &&, increases @it te D%antity o! capital and
corresponding intensity o! c%lti8ationC, te nominal price o! %nc%lti8ated plots o! land is t%s
!ormed, and tey t%s become commodities, a so%rce o! @ealt !or teir o@ners0 5is explains at
te same time, @y te price o! land increases in a @ole region, e8en in te %nc%lti8ated part
B3pdykeC0 'and spec%lation, !or instance, in te (nited $tates, is based solely on tis re!lection
tro@n by capital and labo%r on %nc%lti8ated land0
Secondly, progress in extending c%lti8ated land generally takes place eiter to@ard in!erior soil or
on te 8ario%s gi8en types o! soil in 8arying proportions, depending on te manner in @ic tey
are met0 Extension on in!erior soil is nat%rally ne8er made 8ol%ntarily, b%t can only res%lt !rom
rising prices, ass%ming a capitalist mode o! prod%ction, and can only res%lt !rom necessity %nder
any oter mode o! prod%ction0 6o@e8er, tis is not absol%tely so0 ,oor soil may be pre!erred to a
relati8ely better soil on acco%nt o! location, @ic is o! decisi8e importance !or e8ery extension
o! c%lti8ation in yo%ng co%ntries# !%rtermore, e8en to%g te soil !ormation in a certain region
may generally be classi!ied as !ertile, it may ne8erteless consist o! a motley con!%sion o! better
and @orse soils, so tat te in!erior soil may a8e to be c%lti8ated i! only beca%se it is !o%nd in
te immediate 8icinity o! te s%perior soil0 &! in!erior soil is s%rro%nded by s%perior soil, ten te
latter gi8es it te ad8antage o! location in comparison @it more !ertile soil @ic is not yet, or is
abo%t to become, part o! te c%lti8ated area0
5%s, te $tate o! Micigan @as one o! te !irst Western $tates to become an exporter o! grain0
.et its soil on te @ole is poor0 A%t its proximity to te $tate o! -e@ .ork and its @ater-@ays
8ia te 'akes and Erie ;anal initially ga8e it te ad8antage o8er te $tates endo@ed by -at%re
@it more !ertile soil, b%t sit%ated !arter to te West0 5e example o! tis $tate, as compared
@it te $tate o! -e@ .ork, also demonstrates te transition !rom s%perior to in!erior soil0 5e
soil o! te $tate o! -e@ .ork, partic%larly its @estern part, is incomparably more !ertile,
especially !or te c%lti8ation o! @eat0 5is !ertile soil @as trans!ormed into in!ertile soil by
rapacio%s metods o! c%lti8ation, and no@ te soil o! Micigan appeared as te more !ertile0
&n 1838, @eaten !lo%r @as sipped at A%!!alo !or te
West# and te @eat-region o! -e@ .ork, @it tat o!
2>* ;apter JJJ&J
(pper ;anada, @ere te main so%rces o! its s%pply0
-o@, a!ter only t@el8e years, an enormo%s s%pply o!
@eat and !lo%r is bro%gt !rom te West, along 'ake
Erie, and sipped %pon te Erie ;anal !or te East, at
A%!!alo and te adHoining port o! Alackrock000 5e
e!!ect o! tese large arri8als !rom te Western $tates I
@ic @ere %nnat%rally stim%lated d%ring te years o!
E%ropean !amine 000 as been to render @eat less
8al%able in @estern -e@ .ork, to make te @eat
c%lt%re less rem%nerati8e, and to t%rn te attention o!
te -e@ .ork !armers more to graEing and dairy
%sbandry, !r%it c%lt%re, and oter brances o! r%ral
economy, in @ic tey tink te -ort-West @ill be
%nable so directly to compete @it tem0L B&0 W0
Ponston, $otes on $orth +merica, 'ondon, 18+1, &,
pp0<<=-<30C
4hirdly, it is a mistaken ass%mption tat te land in colonies and, in general, in yo%ng co%ntries
@ic can export grain at ceaper prices, m%st o! necessity be o! greater nat%ral !ertility0 5e
grain is not only sold belo@ its 8al%e in s%c cases, b%t belo@ its price o! prod%ction, i0e0, belo@
te price o! prod%ction determined by te a8erage rate o! pro!it in te older co%ntries0
5e !act tat @e, as Ponston says Bp0<<3C,
Kare acc%stomed to attac te idea o! great nat%ral
prod%cti8eness and o! bo%ndless tracts o! ric land, to
tose ne@ $tates !rom @ic come te large s%pplies
o! @eat tat are ann%ally po%red into te port o!
A%!!alo,L
is primarily te res%lt o! economic conditions0 5e entire pop%lation o! s%c an area as Micigan,
!or instance, is at !irst almost excl%si8ely engaged in !arming, and partic%larly in prod%cing
agric%lt%ral mass prod%cts, @ic alone can be excanged !or ind%strial prod%cts and tropical
goods0 &ts entire s%rpl%s prod%ction appears, tere!ore, in te !orm o! grain0 5is !rom te o%tset
sets apart te colonial states !o%nded on te basis o! te modern @orld-market !rom tose o!
earlier, partic%larly ancient, times0 5ey recei8e tro%g te @orld-market !inised prod%cts, s%c
as cloting and tools @ic tey @o%ld a8e to prod%ce temsel8es %nder oter circ%mstances0
3nly on s%c a basis @ere te $o%tern $tates o! te (nion enabled to make cotton teir staple
crop0 5e di8ision o! labo%r on te @orld-market makes tis possible0 6ence, i! tey seem to a8e
a large s%rpl%s prod%ction considering teir yo%t and relati8ely small pop%lation, tis is not so
m%c d%e to te !ertility o! teir soil, nor te !r%it!%lness o! teir labo%r, b%t rater to te one-
sided !orm o! teir labo%r, and tere!ore o! te s%rpl%s-prod%ce in @ic s%c labo%r is
incorporated0
F%rtermore, a relati8ely in!erior soil @ic is ne@ly c%lti8ated and ne8er be!ore to%ced by
ci8ilisation pro8ided te climatic conditions are ten not completely %n!a8o%rable, as
28= ;apter JJJ&J
acc%m%lated a great deal o! plant !ood tat is easily assimilated I at least in te %pper layers o!
te soil I so tat it @ill yield crops !or a long time @ito%t te application o! !ertilisers and e8en
@it 8ery s%per!icial c%lti8ation0 5e @estern prairies a8e te additional ad8antage o! ardly
reD%iring any clearing expenses since -at%re as made tem arable0
xliii
&n less !ertile areas o! tis
kind, te s%rpl%s is not prod%ced as a res%lt o! te ig !ertility o! te soil, i0e0, te yield per acre,
b%t as a res%lt o! te large acreage @ic may be s%per!icially c%lti8ated, since s%c land costs te
c%lti8ator noting, or next to noting as compared @it older co%ntries0 5is is te case, !or
instance, @ere sare cropping exists, as in parts o! -e@ .ork, Micigan, ;anada, etc0 ? !amily
s%per!icially c%lti8ates, say, 1== acres, and alto%g te o%tp%t per acre is not large, te o%tp%t
!rom 1== acres yields a considerable s%rpl%s !or sale0 &n addition to tis, cattle may be graEed on
nat%ral past%res at almost no cost, @ito%t reD%iring arti!icial grass meado@s0 &t is te D%antity o!
te land, not its D%ality, @ic is decisi8e ere0 5e possibility o! s%c s%per!icial c%lti8ation is
nat%rally more or less rapidly exa%sted, namely, in in8erse proportion to te !ertility o! te ne@
soil and in direct proportion to te export o! its prod%cts0
K?nd yet s%c a co%ntry @ill gi8e excellent !irst
crops, e8en o! @eat, and @ill s%pply to tose @o
skim te !irst cream o!! te co%ntry, a large s%rpl%s o!
tis grain to send to marketL B1, c0, p0<<2C0
,roperty relations in co%ntries @it mat%rer ci8ilisations, @it teir determination o! te price o!
%nc%lti8ated soil by tat o! te c%lti8ated, etc0, make s%c an extensi8e economy impossible0
5at tis soil, tere!ore, need not be exceedingly ric, as )icardo imagines, nor tat soils o! eD%al
!ertility need be c%lti8ated, may be seen !rom te !ollo@ing0 &n te $tate o! Micigan 26+,*==
acres @ere planted in 1828 to @eat @ic yielded 2,>3*,3== b%sels, or an a8erage o! 1= 1N+
b%sels per acre a!ter ded%cting seed grain, tis lea8es less tan * b%sels per acre0 3! te <*
co%nties o! tis $tate, < prod%ced an a8erage o! > b%sels, 3 an a8erage o! 8 b%sels, <I*, >I1=,
6I11, 3I1<, 2I13 b%sels, and only one co%nty prod%ced an a8erage o! 16 b%sels, and anoter
18 b%sels per acre Bl0 c0, p0 <<+C0
For practical c%lti8ation iger soil !ertility coincides @it greater capability o! immediate
exploitation o! s%c !ertility0 5e latter may be greater in a nat%rally poor soil tan in a nat%rally
ric one# b%t it is te kind o! soil @ic a colonist @ill take %p !irst, and m%st take %p @en
capital is @anting0
'inally, te extension o! c%lti8ation to larger areas I aside !rom te case H%st mentioned, in @ic
reco%rse m%st be ad to soil in!erior tan tat c%lti8ated iterto I to te 8ario%s kinds o! soil
!rom ? to 7, t%s, !or instance, te c%lti8ation o! larger tracts o! A and ; does not by any means
pres%ppose a pre8io%s rise in grain prices any more tan te preceding ann%al expansion o! cotton
spinning, !or instance, reD%ires a constant rise in yarn prices0 ?lto%g considerable rise or !all in
market-prices a!!ects te 8ol%me o! prod%ction, regardless o! it tere is in agric%lt%re BH%st as in
all oter capitalistically operated lines o! prod%ctionC ne8erteless a contin%o%s relati8e o8er-
prod%ction, in itsel! identical @it acc%m%lation, e8en at tose a8erage prices @ose le8el as
neiter a retarding nor exceptionally stim%lating e!!ect on prod%ction0 (nder oter modes o!
prod%ction tis relati8e o8erprod%ction is e!!ected directly by te pop%lation increase, and in
colonies by steady immigration0 5e demand increases constantly, and, in anticipation o! tis ne@
capital is contin%ally in8ested in ne@ land, alto%g tis 8aries @it te circ%mstances !or
di!!erent agric%lt%ral prod%cts0 &t is te !ormation o! ne@ capitals @ic in itsel! brings tis abo%t0
A%t so !ar as te indi8id%al capitalist is concerned, e meas%res te 8ol%me o! is prod%ction by
tat o! is a8ailable capital, to te extent tat e can still control it imsel!0 6is aim is to capt%re
as big a portion as possible o! te market0 $o%ld tere be any o8er-prod%ction, e @ill not take
te blame %pon imsel!, b%t places it %pon is competitors0 5e indi8id%al capitalist may expand
281 ;apter JJJ&J
is prod%ction by appropriating a larger aliD%ot sare o! te existing market or by expanding te
market itsel!0
Chapter 40. Second Form of Diferential Rent
(Diferential Rent II)
5%s !ar @e a8e considered di!!erential rent only as te res%lt o! 8arying prod%cti8ity o! eD%al
amo%nts o! capital in8ested in eD%al areas o! land o! di!!erent !ertility, so tat di!!erential rent @as
determined by te di!!erence bet@een te yield !rom te capital in8ested in te @orst, rentless soil
and tat !rom te capital in8ested in s%perior soil0 We ad side by side capitals in8ested in
di!!erent plots o! land, so tat e8ery ne@ in8estment o! capital signi!ied a more extensi8e
c%lti8ation o! te soil, an expansion o! c%lti8ated area0 &n te last analysis, o@e8er, di!!erential
rent @as by its nat%re merely te res%lt o! te di!!erent prod%cti8ity o! eD%al capitals in8ested in
land0 A%t can it make any di!!erence i! capitals o! di!!erent prod%cti8ity are in8ested s%ccessi8ely
in te same plot o! land or side by side in di!!erent plots o! land, pro8ided te res%lts are te
sameQ
5o begin @it, tere is no denying tat, in so !ar as te !ormation o! s%rpl%s-pro!it is concerned, it
is immaterial @eter V3 in prod%ction price per acre o! ? yield 1 Dr, so tat V3 is te price o!
prod%ction and te reg%lating market-price o! 1 Dr, @ile V3 in prod%ction price per acre o! A
yield < Drs, and tereby V3 o! s%rpl%s-pro!it, similarly, V3 in prod%ction price per acre o! ; yield 3
Drs and V6 o! s%rpl%s-pro!it, and, !inally, V3 in prod%ction price per acre o! 7 yield 2 Drs and V*
o! s%rpl%s-pro!it# or @eter te same res%lt is acie8ed by applying tese V1< in prod%ction
price, or V1= o! capital, @it te same s%ccess in te same seD%ence %pon one and te same acre0
&t is in bot cases a capital o! V1=, @ose 8al%e portions o! V<Z eac are s%ccessi8ely in8ested I
@eter in !o%r acres o! 8arying !ertility side by side, or s%ccessi8ely in one and te same acre o!
land I and beca%se o! teir 8arying o%tp%ts, one portion yields no s%rpl%s-pro!it, @ereas te
oter portions yield s%rpl%s-pro!it proportionate to teir di!!erence in yield @it respect to
rentless in8estment0
5e s%rpl%s-pro!it and te 8ario%s rates o! s%rpl%s-pro!it !or te di!!erent 8al%e portions o! capital
are !ormed in te same manner in bot cases0 ?nd te rent is noting b%t a !orm o! tis s%rpl%s-
pro!it, @ic constit%tes its s%bstance0 A%t at any rate, in te second metod, tere are some
di!!ic%lties concerning te trans!ormation o! s%rpl%s-pro!it into rent, tis cange o! !orm, @ic
incl%des te trans!er o! s%rpl%s-pro!it !rom te capitalist tenant to te lando@ner0 5is acco%nts
!or te obstinate resistance o! Englis tenants to o!!icial agric%lt%ral statistics0 ?nd it acco%nts !or
teir str%ggle against te landlords o8er te determination o! act%al res%lts deri8ed !rom teir
capital in8estment BMortonC0 For rent is !ixed @en land is leased, and a!ter tat te s%rpl%s-pro!it
arising !rom s%ccessi8e in8estments o! capital !lo@s into te pockets o! te tenant as long as te
lease lasts0 5is is @y te tenants a8e !o%gt !or long leases, and, on te oter and, d%e to te
greater po@er o! te landlords, an increase in te n%mber o! tenancies at @ill as taken place, i0e0,
leases @ic can be cancelled ann%ally0
&t is tere!ore e8ident !rom te 8ery o%tset tat, e8en i! immaterial !or te la@ o! !ormation o!
s%rpl%s-pro!it, it makes a considerable di!!erence !or te trans!ormation o! s%rpl%s-pro!it into
gro%nd-rent @eter eD%al capitals are in8ested side by side in eD%al areas o! land @it %neD%al
res%lts, or @eter tey are in8ested s%ccessi8ely in te same land0 5e latter metod con!ines
tis trans!ormation, on te one and, @itin narro@er limits, on te oter and, @itin more
8ariable limits0 For tis reason, te @ork o! te tax-assessor, as Morton so@s in is )eso%rces o!
Estates, becomes a 8ery important, complicated and di!!ic%lt pro!ession in co%ntries practising
intensi8e c%lti8ation Band, economically speaking, @e mean noting more by intensi8e c%lti8ation
283 ;apter J'
tan te concentration o! capital %pon te same plot rater tan its distrib%tion among se8eral
adHoining pieces o! landC0 &! soil impro8ements are o! a more permanent nat%re te arti!icially
increased di!!erential !ertility o! te soil coincides @it its nat%ral di!!erential !ertility as soon as
te lease expires, and tere!ore te assessment o! te rent corresponds to te determination o! te
rent on plots o! di!!erent !ertilities in general0 3n te oter and, in so !ar as te !ormation o!
s%rpl%s-pro!it is determined by te magnit%de o! operating capital, te amo%nt o! rent !or a
certain amo%nt o! operating capital is added to te a8erage rent o! te co%ntry and t%s pro8ision
is made !or te ne@ tenant to command s%!!icient capital to contin%e c%lti8ation in te same
intensi8e manner0
&n te st%dy o! di!!erential rent &&, te !ollo@ing points are still to be empasised0
First, its basis and point o! depart%re, not H%st istorically, b%t also in so !ar as concerns its
mo8ements at any gi8en period o! time, is di!!erential rent &, tat is, te sim%ltaneo%s c%lti8ation
side by side o! soils o! %neD%al !ertility and location# in oter @ords, te sim%ltaneo%s
application, side by side, o! %neD%al portions o! te total agric%lt%ral capital %pon plots o! land o!
%neD%al D%ality0
6istorically tis is sel!-e8ident0 &n te colonies, colonists a8e b%t little capital to in8est# te
principal prod%ction agents are labo%r and land0 E8ery indi8id%al ead o! !amily seeks !or imsel!
and is kin an independent !ield o! employment alongside is !ello@-colonists0 5is m%st
generally be te case in agric%lt%re proper e8en %nder pre-capitalist modes o! prod%ction0 &n te
case o! seep-erding and cattle-raising, in general, as independent lines o! prod%ction,
exploitation o! te soil is more or less common and extensi8e !rom te 8ery o%tset0 5e capitalist
mode o! prod%ction as !or its point o! depart%re !ormer modes o! prod%ction in @ic te means
o! prod%ction @ere, in !act or legally, te property o! te tiller imsel!, in a @ord, !rom a
andicra!t-like p%rs%it o! agric%lt%re0 &t is in te nat%re o! tings tat te latter gi8es @ay b%t
grad%ally to te concentration o! means o! prod%ction and teir trans!ormation into capital, as
against direct prod%cers trans!ormed into @age-labo%rers0 &n so !ar as te capitalist mode o!
prod%ction is mani!ested ere typically, it occ%rs at !irst partic%larly in seep-erding and cattle-
raising0 A%t it is t%s not mani!ested in a concentration o! capital %pon a relati8ely small area o!
land, b%t in prod%ction on a larger scale, economising in te expense o! keeping orses, and in
oter prod%ction costs# b%t, in !act, not by in8esting more capital in te same land0 F%rtermore,
in accordance @it te nat%ral la@s o! !ield %sbandry, capital I %sed ere, at te same time, in
te sense o! means o! prod%ction already prod%ced I becomes te decisi8e element in soil
c%lti8ation @en c%lti8ation as reaced a certain le8el o! de8elopment and te soil as been
correspondingly exa%sted0 $o long as te tilled area is small in comparison @it te %ntilled, and
so long as te soil strengt as not been exa%sted Band tis is te case @en cattle-raising and
meat cons%mption pre8ail in te period be!ore agric%lt%re proper and plant n%trition a8e become
dominantC, te ne@ de8eloping mode o! prod%ction is opposed to peasant prod%ction mainly in
te extensi8eness o! te land being tilled !or a capitalist, in oter @ords, again in te extensi8e
application o! capital to larger areas o! land0 &t so%ld tere!ore be remembered !rom te o%tset
tat di!!erential rent & is te istorical basis @ic ser8es as a point o! depart%re0 3n te oter
and, te mo8ement o! di!!erential rent && at any gi8en moment occ%rs only @itin a spere @ic
is itsel! b%t te 8ariegated basis o! di!!erential rent &0
$econdly, in te di!!erential rent in !orm &&, te di!!erences in distrib%tion o! capital Band ability to
obtain creditC among tenants are added to te di!!erences in !ertility0 &n man%!act%ring proper,
eac line o! b%siness rapidly de8elops its o@n minim%m 8ol%me o! b%siness and a corresponding
minim%m o! capital, belo@ @ic no indi8id%al b%siness can be cond%cted s%ccess!%lly0 &n te
same @ay, eac line o! b%siness de8elops a normal a8erage amo%nt o! capital abo8e tis
minim%m, @ic te b%lk o! prod%cers so%ld, and do, command0 ? larger 8ol%me o! capital can
prod%ce extra pro!it# a smaller 8ol%me does not so m%c as yield te a8erage pro!it0 5e capitalist
mode o! prod%ction spreads in agric%lt%re b%t slo@ly and %ne8enly, as may be obser8ed in
282 ;apter J'
England, te classic land o! te capitalist mode o! prod%ction in agric%lt%re0 &n so !ar as te !ree
importation o! grain does not exist, or its e!!ect is b%t limited beca%se te 8ol%me is small,
prod%cers @orking in!erior soil, and t%s %nder @orse tan a8erage conditions o! prod%ction,
determine te market-price0 ? large portion o! te total mass o! capital in8ested in %sbandry, and
in general a8ailable to it, is in teir ands0
&t is tr%e tat te peasant, !or example, expends m%c labo%r on is small plot o! land0 A%t it is
labo%r isolated !rom obHecti8e social and material conditions o! prod%cti8ity, labo%r robbed and
stripped o! tese conditions0
5is circ%mstance enables te act%al capitalist tenants to appropriate a portion o! s%rpl%s-pro!it I
a !act @ic @o%ld not obtain, at least so !ar as tis point is concerned, i! te capitalist mode o!
prod%ction @ere as e8enly de8eloped in agric%lt%re as in man%!act%re0
'et %s !irst consider H%st te !ormation o! s%rpl%s-pro!it @it di!!erential rent &&, @ito%t !or te
present botering abo%t te conditions %nder @ic te trans!ormation o! tis s%rpl%s-pro!it into
gro%nd-rent may take place0
&t is ten e8ident tat di!!erential rent && is merely di!!erently expressed di!!erential rent &, b%t
identical to it in s%bstance0 5e 8ariation in !ertility o! 8ario%s soil types exerts its in!l%ence in te
case o! di!!erential rent & only in so !ar as %neD%al res%lts are attained by capitals in8ested in te
soil, i0e0, te amo%nt o! prod%cts obtained eiter @it respect to eD%al magnit%des o! capital, or
proportionate amo%nts0 Weter tis ineD%ality takes place !or 8ario%s capitals in8ested
s%ccessi8ely in te same land or !or capitals in8ested in se8eral plots o! di!!ering soil type I tis
can cange noting in te di!!erence in !ertility nor in its prod%ct and can tere!ore cange
noting in te !ormation o! di!!erential rent !or te more prod%cti8ely in8ested portions o! capital0
&t is still te soil @ic, no@ as be!ore, so@s di!!erent !ertility @it te same in8estment o!
capital, sa8e tat ere te same soil per!orms !or a capital s%ccessi8ely in8ested in di!!erent
portions @at 8ario%s kinds o! soil do in te case o! di!!erential rent & !or di!!erent eD%al portions
o! social capital in8ested in tem0
&! te same capital o! V1=, @ic is so@n in 5able & to be in8ested in te !orm o! independent
capitals o! V<Z eac by 8ario%s tenants in eac acre o! te !o%r soil types ?, A, ; and 7, @ere
instead s%ccessi8ely in8ested in one and te same acre 7, so tat te !irst in8estment yielded 2
Drs, te second 3, te tird <, and te !o%rt 1 Dr Bor in te re8erse orderC, ten te price o! te
D%arter !%rnised by te least prod%cti8e capital, namely R V3, @o%ld not yield any di!!erential
rent, b%t @o%ld determine te price o! prod%ction, so long as te s%pply o! @eat @ose price o!
prod%ction is V3 @ere needed0 ?nd since o%r ass%mption is tat te capitalist mode o! prod%ction
pre8ails, so tat te price o! V3 incl%des te a8erage pro!it made by a capital o! V<Z generally, te
oter tree portions o! V<Z eac @ill yield s%rpl%s-pro!it in accordance @it te di!!erence in
o%tp%t, since tis o%tp%t is not sold at its o@n price o! prod%ction, b%t at te price o! prod%ction o!
te least prod%cti8e in8estment o! V<Z# te latter in8estment does not yield any rent and te price
o! its prod%cts is determined by te general la@ o! prices o! prod%ction0 5e !ormation o! s%rpl%s-
pro!it @o%ld be te same as in 5able &0
3nce again it is seen ere tat di!!erential rent && pres%pposes di!!erential rent &0 5e minim%m
o%tp%t obtained !rom a capital o! V<Z, i0e0, !rom te @orst soil, is ere ass%med to be 2 Dr0
?ss%med, also, is tat aside !rom te V<Z @ic yield 2 Drs and !or @ic e pays a di!!erential
rent o! 3 Drs, te tenant operating @it soil type 7 in8ests in tis same soil V<Z @ic yield only
1 Dr, like te same capital %pon te @orst soil ?0 5is @o%ld be an in8estment o! capital @ic
does not yield rent, since it ret%rns to im only a8erage pro!it0 5ere @o%ld be no s%rpl%s-pro!it
@ic co%ld be trans!ormed into rent0 3n te oter and, tis decreasing yield o! te second
in8estment o! capital in 7 @o%ld a8e no in!l%ence on te rate o! pro!it0 &t @o%ld be te same as
to%g V<Z ad been in8ested ane@ in an additional acre o! soil type ?, a circ%mstance @ic
@o%ld in no @ay a!!ect te s%rpl%s-pro!it and, tere!ore, te di!!erential rent o! soils ?, A, ; and
28+ ;apter J'
70 A%t !or te tenant, tis additional in8estment o! V<Z in 7 @o%ld a8e been D%ite as pro!itable
as, in accordance @it o%r ass%mption, te in8estment o! te original V<Z per acre o! 7, alto%g
te latter yields 2 Drs0 F%rtermore, i! t@o oter in8estments o! V<Z eac so%ld yield an
additional o%tp%t o! 3 Drs and < Drs respecti8ely, a decrease @o%ld a8e taken place again
compared @it te o%tp%t !rom te !irst in8estment o! V<Z in 7, @ic yielded 2 Drs, i0e0, a
s%rpl%s-pro!it o! 3 Drs0 A%t it @o%ld be merely a decrease in te amo%nt o! s%rpl%s-pro!it, and
@o%ld not a!!ect eiter te a8erage pro!it or te reg%lating price o! prod%ction0 5e latter @o%ld
be te case only i! te additional prod%ction yielding tis decreasing s%rpl%s-pro!it made te
prod%ction %pon ? s%per!l%o%s, and tre@ acre ? o%t o! c%lti8ation0 &n s%c case, te decreasing
prod%cti8eness o! te additional in8estment o! capital in acre 7 @o%ld be accompanied by a !all
in te price o! prod%ction, !or instance, !rom V3 to V1Z, i! acre A @o%ld become te rentless soil
and reg%lator o! te market-price0
5e o%tp%t !rom 7 @o%ld no@ be R 2 U 1 U 3 U < R 1= Drs @ereas !ormerly it @as R 2 Drs0 A%t
te price per D%arter as reg%lated by A @o%ld a8e !allen to V1Z0 5e di!!erence bet@een 7 and A
@o%ld be R 1= - < R 8 Drs, at V1Z per D%arter R V1<, @ereas te money-rent !rom 7 @as
pre8io%sly R V*0 5is so%ld be noted0 ;alc%lated per acre, te magnit%de o! rent @o%ld a8e
risen by 33XT in spite o! te decreasing rate o! s%rpl%s-pro!it on te t@o additional capitals o!
V<Z eac0
We see !rom tis to @at igly complicated combinations di!!erential rent in general, and in
!orm && co%pled @it !orm &, in partic%lar, may gi8e rise, @ereas )icardo, !or instance, treats it
8ery one-sidedly and as to%g it @ere a simple matter0 ?s in te abo8e case, a !all in te
reg%lating market-price and at te same time rise in rent !rom !ertile soils may take place so tat
bot te absol%te prod%ct and te absol%te s%rpl%s-prod%ct increase0 B&n di!!erential rent &, in
descending order, te relati8e s%rpl%s-prod%ct and t%s te rent per acre may increase, alto%g
te absol%te s%rpl%s-prod%ct per acre remains constant or e8en decreases0C A%t at te same time,
prod%cti8eness o! te in8estments o! capital made s%ccessi8ely in te same soil decreases,
alto%g a large portion o! tem !alls to te more !ertile soils0 From a certain point o! 8ie@ I as
concerns bot o%tp%t and prices o! prod%ction I te prod%cti8ity o! labo%r as risen0 A%t !rom
anoter point o! 8ie@, it as decreased beca%se te rate o! s%rpl%s-pro!it and te s%rpl%s-prod%ct
per acre decrease !or te 8ario%s in8estments o! capital in te same land0
7i!!erential rent &&, @it decreasing prod%cti8eness o! s%ccessi8e in8estments o! capital, @o%ld
necessarily be accompanied by a rise in price o! prod%ction and an absol%te decrease in
prod%cti8ity only i! in8estments o! capital co%ld be made in none b%t te @orst soil ?0 &! an acre
o! ?, @ic @it an in8estment o! capital o! V<Z yielded 1 Dr at a price o! prod%ction o! V3,
so%ld only yield a total o! 1Z Drs @it an additional o%tlay o! V<Z, i0e0, a total in8estment o! V+,
ten te price o! prod%ction o! tis 1Z Drs R V6 or tat o! 1 Dr R V20 E8ery decrease in
prod%cti8ity @it a gro@ing in8estment o! capital @o%ld ere mean a relati8e decrease in o%tp%t
per acre, @ereas %pon s%perior soils it @o%ld only signi!y a decrease in te s%per!l%o%s s%rpl%s-
prod%ct0
A%t by te nat%re o! tings, @it te de8elopment o! intensi8e c%lti8ation, i0e0, @it s%ccessi8e
in8estments o! capital in te same soil, tis @ill take place more ad8antageo%sly, or to a greater
extent on better soils0 BWe are not re!erring to permanent impro8ements by @ic a iterto
%seless soil is con8erted into %se!%l soil0C 5e decreasing prod%cti8eness o! s%ccessi8e
in8estments o! capital m%st, tere!ore, a8e principally te e!!ect indicated abo8e0 5e better soil
is selected beca%se it a!!ords te best promise tat capital in8ested in it @ill be pro!itable, since it
contains te most nat%ral elements o! !ertility, @ic need b%t be %tilised0
Wen, a!ter te abolition o! te ;orn 'a@s, c%lti8ation in England became still more intensi8e, a
great deal o! !ormer @eat land @as de8oted to oter p%rposes, partic%larly cattle past%res, @ile
te !ertile land best s%ited !or @eat @as drained and oter@ise impro8ed0 5e capital !or @eat
c%lti8ation @as t%s concentrated in a more limited area0
286 ;apter J'
&n tis case I and all possible s%rpl%s rates bet@een te greatest s%rpl%s-prod%ct o! te best soil
and te o%tp%t o! rentless soil ? coincide ere @it an absol%te, rater tan a relati8e, increase in
s%rpl%s-prod%ct per acre I te ne@ly !ormed s%rpl%s-pro!it Bpotential rentC does not represent a
portion o! a !ormer a8erage pro!it trans!ormed into rent Ba portion o! te o%tp%t in @ic te
a8erage pro!it !ormerly @as expressedC b%t an additional s%rpl%s-pro!it, @ic is trans!ormed o%t
o! tis !orm into rent0
3n te oter and, only in s%c case @ere te demand !or grain increased to s%c an extent tat
te market-price rose abo8e te price o! prod%ction o! ?, so tat te s%rpl%s-prod%ct o! ?, A, or
any oter kind o! soil co%ld be s%pplied only at a price iger tan V3 @o%ld te decrease in yield
!rom an additional in8estment o! capital in any o! te soil types ?, A, ; and 7 be accompanied by
a rise in price o! prod%ction and te reg%lating market-price0 &n so !ar as tis lasted !or a lengty
period o! time @ito%t res%lting in te c%lti8ation o! additional soil ? Bo! at least te D%ality o! ?C,
or @ito%t a ceaper s%pply res%lting !rom oter circ%mstances, @ages @o%ld rise in conseD%ence
o! te increase in te price o! bread, e8eryting else being eD%al, and te rate o! pro!it @o%ld !all
accordingly0 &n tis case, it @o%ld be immaterial, @eter te increased demand @ere satis!ied by
bringing %nder c%lti8ation soil o! in!erior D%ality tan ?, or by additional in8estments o! capital,
in any o! te !o%r types o! soil0 7i!!erential rent @o%ld ten increase togeter @it a !alling rate o!
pro!it0
5is one case, in @ic te decreasing prod%cti8eness o! s%bseD%ent additional capitals in8ested
in already c%lti8ated soils may lead to an increase in price o! prod%ction, a !all in rate o! pro!it,
and te !ormation o! iger di!!erential rent I !or te latter @o%ld increase %nder te gi8en
circ%mstances %pon all kinds o! soil H%st as to%g soil o! in!erior D%ality tan ? @ere reg%lating
te market-price I as been labelled by )icardo as te only case, te normal case I to @ic e
red%ces te entire !ormation o! di!!erential rent &&0
5is @o%ld also be te case i! only type ? soil @ere c%lti8ated and s%ccessi8e in8estments o!
capital in it @ere not accompanied by a proportional increase in prod%ce0
6ere ten, in te case o! di!!erential rent &&, one completely loses sigt o! di!!erential rent &0
Except !or tis case, in @ic te s%pply !rom te c%lti8ated soils is eiter ins%!!icient and te
market-price t%s contin%ally iger tan te price o! prod%ction %ntil ne@ additional soil o!
in!erior D%ality is taken %nder c%lti8ation, or %ntil te total prod%ct !rom te additional capital
in8ested in 8ario%s kinds o! soil can be s%pplied only at a iger price o! prod%ction tan tat
iterto pre8ailing I sa8e !or tis case, te proportional drop in prod%cti8ity o! te additional
capitals lea8es te reg%lating price o! prod%ction and te rate o! pro!it %ncanged0 For te rest,
tree additional cases are possible:
aC &! te additional capital in8ested in any one o! te types o! soil ?, A, ; or 7 yields only te rate
o! pro!it determined by te price o! prod%ction o! ?, ten no s%rpl%s-pro!it, and tere!ore no
potential rent, is !ormed, any more tan tere @o%ld be i! additional type ? soil ad been
c%lti8ated0
bC &! te additional capital yields a larger prod%ct, ne@ s%rpl%s-pro!it Bpotential rentC is, o! co%rse,
!ormed pro8ided te reg%lating price remains te same0 5is is not necessarily te case# it is not
te case, in partic%lar, @en tis additional prod%ction tro@s soil ? o%t o! c%lti8ation and t%s
o%t o! te seD%ence o! competing soils0 &n tis case, te reg%lating price o! prod%ction !alls0 &! tis
@ere accompanied by a !all in @ages, or i! te ceaper prod%ct @ere to enter into te constant
capital as one o! its elements, te rate o! pro!it @o%ld rise0 &! te increased prod%cti8ity o! te
additional capital ad taken place %pon te best soils ; and 7, it @o%ld depend entirely %pon te
degree o! increased prod%cti8ity and te amo%nt o! additional ne@ capital to @at extent te
!ormation o! increased s%rpl%s-pro!it Band t%s increased rentC @o%ld be associated @it te !all
in prices and te rise in te rate o! pro!it0 5e latter may also rise @ito%t a !all in @ages, tro%g
a ceapening o! te elements o! constant capital0
28> ;apter J'
cC &! te additional in8estment o! capital takes place @it decreasing s%rpl%s-pro!it, b%t in s%c
manner tat te yield !rom te additional o%tlay still lea8es a s%rpl%s abo8e te yield !rom te
same capital in8ested in ?, a ne@ !ormation o! s%rpl%s-pro!it takes place %nder all circ%mstances,
%nless te increased s%pply excl%des soil ? !rom c%lti8ation0 5is may take place sim%ltaneo%sly
%pon 7, ;, A and ?0 A%t, on te oter and, i! te @orst soil ? is sD%eeEed o%t o! c%lti8ation, ten
te reg%lating price o! prod%ction !alls and it @ill depend %pon te relation bet@een te red%ced
price o! 1 Dr and te increased n%mber o! D%arters !orming s%rpl%s-pro!it @eter te s%rpl%s-
pro!it expressed in money, and conseD%ently te di!!erential rent, rises or !alls0 A%t at any rate, it
is note@orty ere tat @it decreasing s%rpl%s-pro!it !rom s%ccessi8e in8estments o! capital te
price o! prod%ction may !all, instead o! rising, @ic it seemingly so%ld do at !irst sigt0
5ese additional in8estments o! capital @it decreasing s%rpl%s yields correspond entirely to te
case in @ic, e0g0, !o%r ne@ independent capitals o! V<Z eac @o%ld be in8ested in soils @it
!ertility bet@een ? and A, A and ;, ; and 7, and yielding 1Z, <X, <W, and 3 Drs respecti8ely0
$%rpl%s-pro!it Bpotential rentC @o%ld take sape on all tese soils !or all !o%r additional capitals,
alto%g te rate o! s%rpl%s-pro!it, compared @it tat !or te same in8estment o! capital on te
correspondingly better soil, @o%ld a8e decreased0 ?nd it @o%ld be immaterial @eter tese !o%r
capitals @ere in8ested in 7, etc0, or distrib%ted bet@een 7 and ?0
We no@ come to an essential di!!erence bet@een te t@o !orms o! di!!erential rent0
(nder di!!erential rent &, @it constant price o! prod%ction and constant di!!erences, te a8erage
rent per acre, or te a8erage rate o! rent on capital, may increase togeter @it te rental0 A%t te
a8erage is a mere abstraction0 5e act%al amo%nt o! rent, calc%lated per acre or @it respect to
capital, remains te same ere0
3n te oter and, %nder te same conditions, te amo%nt o! rent calc%lated per acre may increase
alto%g te rate o! rent, meas%red relati8e to in8ested capital, remains te same0
'et %s ass%me tat prod%ction is do%bled by te in8estment o! V+ instead o! V<Z in eac o! te
soils ?, A, ; and 7, i0e0, a total o! V<= instead o! V1=, and tat te relati8e !ertility remains
%ncanged0 5is @o%ld be tantamo%nt to c%lti8ating < instead o! 1 acre o! eac o! tese kinds o!
soil at te same cost0 5e rate o! pro!it @o%ld remain te same# also its relation to s%rpl%s-pro!it
or rent0 A%t i! ? @ere no@ to yield < Drs, A I 2, ; I 6, and 7 I 8, te price o! prod%ction @o%ld
ne8erteless remain V3 per D%arter beca%se tis increase is not d%e to do%bled !ertility @it te
same capital, b%t to te same proportional !ertility @it a do%bled capital0 5e t@o D%arters o! ?
@o%ld no@ cost V6 H%st as 1 Dr cost V3 be!ore0 5e pro!it @o%ld a8e do%bled on all !o%r soils, b%t
only beca%se te in8ested capital @as do%bled0 &n te same proportion, o@e8er, te rent @o%ld
also a8e been do%bled# it @o%ld be < Drs !or A instead o! 1, 2 Drs !or ; instead o! <, and 6 !or 7
instead o! 3# and correspondingly, te money-rent !or A, ; and 7 @o%ld no@ be V6, V1<, and V18
respecti8ely0 'ike te yield per acre, te rent in money per acre @o%ld be do%bled, and,
conseD%ently, also te price o! te land @ereby tis money-rent is capitalised0 ;alc%lated in tis
manner, te amo%nt o! rent in grain and money increases, and t%s te price o! land, beca%se te
standard %sed in its comp%tation, i0e0, te acre, is an area o! constant magnit%de0 3n te oter
and, calc%lated as rate o! rent on in8ested capital, tere is no cange in te proportional amo%nt
o! rent0 5e total rental o! 36 is to te in8ested capital o! <= as te rental o! 18 is to te in8ested
capital o! 1=0 5e same olds tr%e !or te ratio o! money-rent !rom eac type o! soil to te capital
in8ested in it# !or instance, in ;, V1< rent is to V+ capital as V6 rent @as !ormerly to V<Z capital0
-o ne@ di!!erences arise ere bet@een te in8ested capitals, b%t ne@ s%rpl%s-pro!its do, merely
beca%se te additional capital is in8ested in one o! te rent-bearing soils, or in all o! tem, @it
te same proportional yield as pre8io%sly0 &! tis do%ble in8estment took place, !or example, only
in ;, te di!!erential rent bet@een ;, A and 7, calc%lated @it respect to capital, @o%ld remain
te same: !or @en te amo%nt o! rent obtained !rom ; is do%bled, so is te in8ested capital0
288 ;apter J'
5is so@s tat te amo%nt o! rent in prod%ce and money per acre, and tere!ore te price o!
land, may rise, @ile te price o! prod%ction, te rate o! pro!it, and te di!!erences remain
%ncanged Band tere!ore te rate o! s%rpl%s-pro!it or o! rent, calc%lated @it respect to capital,
remains %ncangedC0
5e same may take place @it decreasing rates o! s%rpl%s-pro!it, and tere!ore o! rent, tat is,
@it decreasing prod%cti8ity o! te additional o%tlays o! capital tat still yield rent0 &! te second
in8estments o! capital o! V<Z ad not do%bled te o%tp%t, b%t A ad yielded only 3Z Drs, ; I +
Drs, and 7 I > Drs, /&n te :erman 18*2 edition tis reads: 6 Drs0 I Ed01 ten te di!!erential rent
!or te second V<Z o! capital in A @o%ld be only Z Dr instead o! 1, on ; I 1 Dr instead o! < and
on 7 I < Drs instead o! 30 5e proportions bet@een rent and capital !or te t@o s%ccessi8e
in8estments @o%ld ten be as !ollo@s:

'irst Dnvestment Second Dnvestment
GI )ent V3, ;apital
V<Z
)ent
V1Z,
;apital
V<Z
CI K V6, K V<Z K V3, K V<Z
DI K V*, K V<Z K V6, K V<Z
&n spite o! tis decreased rate o! relati8e prod%cti8ity o! capital, and t%s o! te s%rpl%s-pro!it
calc%lated on capital, te rent in grain and money @o%ld a8e increased on A !rom 1 to 1Z Drs
B!rom V3 to V2ZC, on ; I !rom < to 3 Drs B!rom V6 to V*C, and on 7 I !rom 3 to + Drs B!rom V* to
V1+C0 &n tis case, te di!!erences !or te additional capitals, compared @it te capital in8ested in
?, @o%ld a8e decreased, te price o! prod%ction @o%ld a8e remained te same, b%t te rent per
acre, and conseD%ently te price o! land per acre, @o%ld a8e risen0 5e combinations o!
di!!erential rent &&, @ic pres%pposes di!!erential rent & as its basis, @ill no@ be taken %p0
Chapter 41. Diferential Rent II.
First Case: Constant Price of Production
5e ass%mption ere implies tat te market-price is reg%lated as be!ore by te capital in8ested in
te @orst soil ?0
&0 &! te additional capital in8ested in any one o! te rent-bearing soils I A, ;, 7 I prod%ces only
as m%c as te same capital %pon soil ?, i0e0, i! it yields only te a8erage pro!it at te reg%lating
price o! prod%ction, b%t no s%rpl%s-pro!it, ten te e!!ect %pon te rent is nil0 E8eryting remains
as be!ore0 &t is te same as to%g an arbitrary n%mber o! acres o! ? D%ality, i0e0, o! te @orst soil,
as been added to te c%lti8ated area0
&&0 5e additional capitals yield additional prod%ce proportional to teir magnit%de on e8ery one
o! te 8ario%s soils# in oter @ords, te 8ol%me o! prod%ction gro@s according to te speci!ic
!ertility o! eac soil type I in proportion to te magnit%de o! te additional capital0 &n ;apter
JJJ&J, @e started @it te !ollo@ing 5able &:
5?A'E &
5ype o!
soil
?cres
;apital
V
,ro!it
V
,rice o!
,rod0 V
3%tp%t
Mrs
$elling
price V
,roceeds
V
)ent
)ate o!
$%rpl%s pro!it
Mrs V
? 1 <Z Z 3 1 3 3 = = =
A 1 <Z Z 3 < 3 6 1 3 1<=T
; 1 <Z Z 3 3 3 * < 6 <2=T
7 1 <Z Z 3 2 3 1< 3 * 36=T
5otal 2 1= 1< 1= 3= 6 18
5is is no@ trans!ormed into:
5?A'E &&
5ype o!
soil
?cres ;apital V
,ro!it
V
,rice o!
,rod0
3%tp%t
Mrs
$elling
price V
,roceeds
V
)ent
$%rpl%s
pro!it
Mrs V
? 1
<Z U
<ZR+
1 6 < 3 6 = = =
A 1
<Z U
<ZR+
1 6 2 3 < < 6 1<=T
; 1
<Z U
<ZR+
1 6 6 3 18 2 1< <2=T
7 1
<Z U
<ZR+
1 6 8 3 <2 6 18 36=T
5otal 2 <= <= 6= 1< 36
2*= ;apter J'&
&t is not necessary in tis case tat te in8estment o! capital be do%bled in all soils, as in te table0
5e la@ is te same so long as additional capital is in8ested in one, or se8eral, o! te rent-bearing
soils, no matter in @at proportion0 &t is only necessary tat prod%ction so%ld increase %pon
e8ery soil in te same ratio as te capital0 5e rent increases ere merely in conseD%ence o! an
increased in8estment o! capital in te soil, and in proportion to tis increase0 5is increase in
prod%ce and rent in conseD%ence o!, and proportionately to, te increased o%tlay o! capital is H%st
te same as regards te D%antity o! prod%ce and rent, as @en te c%lti8ated area o! te rent-
bearing plots o! land o! te same D%ality ad been increased and taken %nder c%lti8ation @it te
same o%tlay o! capital as tat pre8io%sly in8ested in te same types o! soils0 &n te case o! 5able
&&, !or instance, te res%lt @o%ld remain te same, i! te additional capital o! V<Z per acre @ere
in8ested in an additional acre o! A, ; and 70
F%rtermore, tis ass%mption does not imply a more prod%cti8e in8estment o! capital, b%t only an
o%tlay o! more capital %pon te same area @it te same s%ccess as be!ore0
?ll relati8e proportions remain te same ere0 3! co%rse, i! @e do not consider te proportional
di!!erences, b%t consider te p%rely aritmetic ones, ten te di!!erential rent may cange %pon
te 8ario%s soils0 'et %s ass%me, !or instance, tat additional capital as been in8ested only in A
and 70 5e di!!erence bet@een 7 and ? is ten R > Drs @ereas pre8io%sly it @as R 3, te
di!!erence bet@een A and ? R 3 Drs, @ereas pre8io%sly it @as R 1# tat bet@een ; and A R -1,
@ereas pre8io%sly it @as R U1, etc0 A%t tis aritmetic di!!erence, @ic is decisi8e in
di!!erential rent & in so !ar as it expresses te di!!erence in prod%cti8ity @it eD%al o%tlays o!
capital, is ere D%ite immaterial, beca%se it is merely a conseD%ence o! di!!erent additional
in8estments o! capital, or o! no additional in8estment, @ile te di!!erence !or eac eD%al portion
o! capital %pon te 8ario%s plots o! land remains %ncanged0
&&&0 5e additional capitals yield s%rpl%s-prod%ce and t%s !orm s%rpl%s-pro!it, b%t at a decreasing
rate, not in proportion to teir increase0
5?A'E &&&
$oil ?cres ;apital V
,ro!it
V
,rice o!
,rod0 V
3%tp%t
Mrs
$elling
price V
,roceeds
V
)ent
)ate o!
$%rpl%s pro!it
Mrs V
? 1 <Z Z 3 1 3 3 = = =
A 1
<Z U <Z
R +
1 6
< U 1Z R
3Z
3 1=Z 1Z 2Z *=T
; 1
<Z U <Z
R +
1 6 3U<R+ 3 1+ 3 * 18=T
7 1
<Z U <Z
R +
1 6
2 U 3Z R
>Z
3 <<Z +Z 16Z 33=T
1>Z 3Z <1 1> +1 1= 3=
&n te case o! tis tird ass%mption, it is again immaterial @eter te additional second
in8estments o! capital are %ni!ormly distrib%ted among te 8ario%s soils or not# @eter te
decreasing prod%ction o! s%rpl%s-pro!it takes place proportionately or not# @eter te additional
in8estments o! capital are all in te same rent-bearing type o! soil, or @eter tey are distrib%ted
eD%ally or %neD%ally among rent-bearing plots o! land o! 8arying D%ality0 ?ll tese circ%mstances
are immaterial !or te la@ tat is to be de8eloped0 5e only ass%mption is tat additional
in8estments o! capital yield s%rpl%s-pro!it %pon any one o! te rent-bearing soils, b%t in
decreasing proportion to te amo%nt o! te increase in capital0 5e limits o! tis decrease, in te
table be!ore %s, are bet@een 2 D%arters R V1<, te o%tp%t !rom te !irst o%tlay o! capital on te
2*1 ;apter J'&
best soil 7, and 1 D%arter R V3, te o%tp%t !rom te same o%tlay o! capital in te @orst soil ?0 5e
o%tp%t !rom te best soil in case o! te in8estment o! capital & constit%tes te top limit, and te
o%tp%t !rom te same o%tlay o! capital in te @orst soil ?, @ic yields neiter rent nor s%rpl%s-
pro!it, is te bottom limit o! o%tp%t, @ic s%ccessi8e in8estments o! capital yield %pon any o! te
soil types prod%cing s%rpl%s-pro!it @it decreasing prod%cti8ity o! s%ccessi8e in8estments o!
capital0 P%st as ass%mption && corresponds to te case in @ic ne@ plots o! te same D%ality are
added !rom te better soils to te c%lti8ated area, in @ic te D%antity o! any one o! te
c%lti8ated soils is increased, so ass%mption &&& corresponds to te case in @ic additional plots
are c%lti8ated @ose 8ario%s degrees o! !ertility are distrib%ted among soils ranging !rom 7 to ?,
i0e0, !rom te best to te @orst soils0 &! te s%ccessi8e o%tlays o! capital are made excl%si8ely in
soil 7, tey may incl%de te existing di!!erences bet@een 7 and ?, ten di!!erences bet@een 7
and ;, and like@ise bet@een 7 and A0 &! tey are all made in soil ;, ten only di!!erences
bet@een ; and ?, and ; and A# i! excl%si8ely in A, ten only di!!erences bet@een A and ?0
A%t tis is te la@: 5e rent increases absol%tely %pon all tese soils, e8en i! not in proportion to
te additional capital in8ested0
5e rate o! s%rpl%s-pro!it, considering bot te additional capital and te total capital in8ested in
te soil, decreases# b%t te absol%te magnit%de o! te s%rpl%s-pro!it increases# H%st as te
decreasing rate o! pro!it on capital in general is, in te main, accompanied by an increase in te
absol%te amo%nt o! pro!it0 5%s te a8erage s%rpl%s-pro!it o! a capital in8ested in A R *=T on te
capital, @ereas it @as R 1<=T !or te !irst o%tlay o! capital0 A%t te total s%rpl%s-pro!it increases
!rom 1 Dr to 1Z Drs, or !rom V3 to V2Z0 5e total rent I considered by itsel! rater tan in relation
to te do%bled magnit%de o! te ad8anced capital I as risen absol%tely0 5e di!!erences in rents
!rom 8ario%s soils and teir relati8e proportions may 8ary ere# b%t tis 8ariation in di!!erences is
a conseD%ence, not ca%se, o! te increase in rents in relation to one anoter0
&40 5e case in @ic additional in8estments o! capital in te better soils yield more prod%ce tan
te original ones reD%ires no !%rter analysis0 &t goes @ito%t saying tat %nder tis ass%mption
te rent per acre @ill increase, and proportionately more tan te additional capital, no matter in
@ic kind o! soil te o%tlay as been made0 &n tis case, te additional in8estment o! capital is
accompanied by impro8ements0 5is incl%des te cases in @ic an additional o%tlay o! less
capital prod%ces te same or a greater e!!ect tan an additional o%tlay o! more capital did
!ormerly0 5is case is not D%ite identical @it te !ormer one, and te distinction is important in
all in8estments o! capital0 For instance, i! 2== yields a pro!it o! 2=, and <== employed in a certain
!orm yields a pro!it o! 2=, ten te pro!it as risen !rom 1=T to <=T, and to tat extent it is te
same as to%g += employed in a more e!!ecti8e !orm yields a pro!it o! 1= instead o! +0 We
ass%me ere tat te pro!it is associated @it a proportional increase in o%tp%t0 A%t te di!!erence
is tat & m%st do%ble te capital in te one case, @ereas in te oter, te e!!ect & prod%ce is
do%bled @it te capital employed iterto0 &t is by no means te same @eter & prod%ce: 1C te
same o%tp%t as be!ore @it al! as m%c li8ing and materialised labo%r, or <C t@ice te o%tp%t as
be!ore @it te same labo%r, or 3C !o%r times te !ormer o%tp%t @it t@ice te labo%r0 &n te !irst
case, labo%r I in a li8ing or materialised !orm I is released, and may be employed oter@ise# te
po@er to dispose o! capital and labo%r increases0 5e release o! capital Band labo%rC is in itsel! an
a%gmentation o! @ealt# it as exactly te same e!!ect as to%g tis additional capital as been
obtained by acc%m%lation, b%t it sa8es te labo%r o! acc%m%lation0
?ss%me tat a capital o! 1== as prod%ced an o%tp%t o! ten metres0 5e 1== incl%des constant
capital, li8ing labo%r and pro!it0 5%s a metre costs 1=0 -o@, i! & can prod%ce <= metres @it te
same capital o! 1==, ten a metre costs +0 &!, on te oter and, & can prod%ce 1= metres @it a
capital o! +=, ten a metre like@ise costs +, and so%ld te !ormer s%pply o! commodities s%!!ice
a capital o! += is released0 &! & a8e to in8est a capital o! <== in order to prod%ce 2= metres, ten a
metre also costs +0 5e determination o! 8al%e, and also te price, does not permit any di!!erence
to be discerned ere# no more tan te amo%nt o! o%tp%t proportional to te o%tlay o! capital0 A%t
2*< ;apter J'&
in te !irst case, additional capital is sa8ed /&n te :erman 18*2 edition tis reads: capital is
released0 I 0d01 to be %sed peraps to do%ble prod%ction i! necessary# in te second case, capital
is released, /Dbid.I additional capital is sa8ed0 I 0d01 in te tird case, te increased o%tp%t can
only be obtained by a%gmenting te in8ested capital, alto%g not in te same proportion as @en
te increased o%tp%t @as to a8e been s%pplied by te old prod%cti8e po@er0 B5is belongs in ,art
&0C
From te 8ie@point o! capitalist prod%ction, te employment o! constant capital is al@ays
ceaper tan tat o! 8ariable capital, not as regards increasing te s%rpl%s-8al%e, b%t rater as
regards red%cing te cost-price I and sa8ing o! costs e8en in te element creating s%rpl%s-8al%e,
in labo%r, per!orms tis ser8ice !or te capitalist and makes pro!it !or im so long as te
reg%lating price o! prod%ction remains te same0 5is pres%pposes, in !act, te de8elopment o!
credit and an ab%ndance o! loan capital corresponding to te capitalist mode o! prod%ction0 3n
te one and, & employ V1== additional constant capital, i! V1== is te o%tp%t o! !i8e labo%rers
d%ring te year# on te oter and, V1== in 8ariable capital0 &! te rate o! s%rpl%s-8al%e R 1==T,
ten te 8al%e created by te !i8e labo%rers R V<==# on te oter and, te 8al%e o! V1== constant
capital R V1== and as capital it is peraps R V1=+, i! te interest rate R +T0 5e same s%ms o!
money express 8ery di!!erent 8al%es, !rom te 8ie@point o! te o%tp%t tey prod%ce, depending
on @eter tey are ad8anced to prod%ction as magnit%des o! 8al%e o! constant or o! 8ariable
capital0 F%rtermore, as regards te cost o! te commodities !rom te 8ie@point o! te capitalist,
tere is also tis di!!erence, tat o! te V1== constant capital only te @ear and tear enters into te
8al%e o! te commodity in so !ar as tis money is in8ested in !ixed capital, @ereas te V1==
in8ested in @ages m%st be completely reprod%ced in te commodity0
&n te case o! colonists, and independent small prod%cers in general, @o a8e no access to
capital at all or only at ig interest rates, tat part o! te o%tp%t @ic represents @ages is teir
re8en%e, @ereas !or te capitalist it constit%tes an ad8ance o! capital0 5e !ormer, tere!ore,
regards tis expendit%re o! labo%r as te indispensable prereD%isite !or te labo%r-prod%ct, @ic
is te ting tat interests im abo8e all0 A%t, as regards is s%rpl%s-labo%r, a!ter ded%cting te
necessary labo%r, it is e8idently realised in te s%rpl%s-prod%ct# and as soon as e can sell te
latter, or %se it !or imsel!, e looks %pon it as someting tat cost im noting, beca%se it cost
im no materialised labo%r0 &t is only te expendit%re o! te latter @ic appears to im as
alienation o! @ealt0 3! co%rse, e tries to sell as ig as possible# b%t e8en a sale belo@ 8al%e
and belo@ te capitalist price o! prod%ction still appears to im as pro!it, %nless tis pro!it is
anticipated by debts, mortgages, etc0 For te capitalist, on te oter and, te in8estment o! bot
8ariable and constant capital represents an ad8ance o! capital0 5e relati8ely larger ad8ance o! te
latter red%ces te cost-price, and in !act te 8al%e o! te commodities, e8eryting else being
eD%al0 6ence, alto%g pro!it arises only !rom s%rpl%s-labo%r, conseD%ently only !rom te
employment o! 8ariable capital, it may still seem to te indi8id%al capitalist tat li8ing labo%r is
te most expensi8e element in is price o! prod%ction @ic so%ld be red%ced to a minim%m
be!ore all else0 5is is b%t a capitalistically distorted !orm o! te !act tat te relati8ely greater %se
o! congealed labo%r, as compared @it li8ing labo%r, signi!ies an increase in te prod%cti8ity o!
social labo%r and a greater social @ealt0 From te 8ie@point o! competition, e8eryting appears
t%s distorted and t%rned topsy-t%r8y0
?ss%ming prices o! prod%ction to remain %ncanged, te additional in8estments o! capital in te
better soils, tat is, in all soils !rom A %p@ard may be made @it %naltered, increasing, or
decreasing prod%cti8ity0 For soil ? tis @o%ld only be possible %nder te conditions ass%med by
%s, i! prod%cti8ity remains te same I @ereby te land contin%es to yield no rent I and also i!
prod%cti8ity increases# a portion o! te capital in8ested in ? @o%ld ten yield rent, @ile te
remainder @o%ld not0 A%t it @o%ld be impossible i! prod%cti8ity on ? @ere to decrease, !or ten
te price o! prod%ction @o%ld not remain %ncanged, b%t @o%ld rise0 .et in all tese cases, i0e0,
@eter te s%rpl%s-prod%ct yielded by te additional in8estments is proportional to te latter or
2*3 ;apter J'&
is greater or smaller tan tis proportion I @eter, tere!ore, te rate o! s%rpl%s-pro!it on te
capital remains constant, rises or !alls, @en tis capital increases, te s%rpl%s-prod%ct and te
corresponding s%rpl%s-pro!it per acre increases, and ence also te potential rent in grain and
money0 5e gro@t in te mere D%antity o! s%rpl%s-pro!it or rent, calc%lated per acre, tat is, an
increasing D%antity calc%lated on te basis o! some constant %nit I in te present case on a
de!inite D%antity o! land s%c as an acre or a ectare I expresses itsel! as an increasing ratio0
6ence te magnit%de o! te rent, calc%lated per acre, increases %nder s%c circ%mstances simply
in conseD%ence o! te increase in te capital in8ested in te land0 5is takes place, to be s%re,
ass%ming te prices o! prod%ction remain te same, and, on te oter and, regardless o! @eter
te prod%cti8ity o! te additional capital remains %naltered, or @eter it decreases or increases0
5e latter circ%mstances modi!y te range in @ic te magnit%de o! rent per acre increases b%t
not te existence o! tis increase itsel!0 5is is a penomenon pec%liar to di!!erential rent &&, and
disting%ising it !rom di!!erential rent &0 &! te additional in8estments o! capital @ere made
s%ccessi8ely in space, side by side in ne@ additional soil o! corresponding D%ality, rater tan
s%ccessi8ely in time in te same soil, te D%antity o! te rental @o%ld a8e increased, and, as
pre8io%sly so@n, so @o%ld te a8erage rent !rom te total c%lti8ated area, b%t not te magnit%de
o! te rent per acre0 :i8en te same res%lt so !ar as D%antity and 8al%e o! total prod%ction and
s%rpl%s-prod%ct are concerned, te concentration o! capital %pon a smaller area o! land increases
te amo%nt o! rent per acre, @ereas %nder te same conditions, its dispersion o8er a larger area,
all oter conditions being eD%al, does not prod%ce tis e!!ect0 A%t te more te capitalist mode o!
prod%ction de8elops, te more does te concentration o! capital %pon te same area o! land
de8elop, and, tere!ore, te more does te rent, calc%lated per acre, increase0 ;onseD%ently, gi8en
t@o co%ntries in @ic te prices o! prod%ction are identical, te di!!erences in soil type are
identical, and te same amo%nt o! capital is in8ested I b%t in te one co%ntry more in te !orm o!
s%ccessi8e o%tlays %pon a limited area o! land, @ereas in te oter more in te !orm o! co-
ordinated o%tlays %pon a larger area I ten te rent per acre, and tereby te price o! land, @o%ld
be iger in te !irst co%ntry and lo@er in te second, alto%g te total rent @o%ld be te same
!or bot co%ntries0 5e di!!erence in magnit%de o! rent co%ld t%s not be explained ere to be a
res%lt o! a di!!erence in te nat%ral !ertility o! te 8ario%s soils, nor a res%lt o! a di!!erence in te
D%antity o! employed labo%r, b%t solely a res%lt o! di!!erent @ays in @ic te capital is in8ested0
Wen @e re!er to s%rpl%s-prod%ct ere, tis so%ld al@ays be %nderstood to mean tat aliD%ot
part o! te o%tp%t @ic represents s%rpl%s-pro!it0 3rdinarily, @e mean by excess prod%ct or
s%rpl%s-prod%ct tat portion o! te o%tp%t @ic represents te total s%rpl%s-8al%e, or in some
cases tat portion @ic represents te a8erage pro!it0 5e speci!ic meaning @ic tis term
ass%mes in te case o! rent-bearing capital gi8es rise to mis%nderstanding, as pre8io%sly pointed
o%t0
Chapter 42. Diferential Rent II.
Second Case: Falling Price of Production
5e price o! prod%ction may !all @en additional in8estments o! capital take place @it an
%naltered, !alling, or rising rate o! prod%cti8ity0
I. Productivit# of the additional investment of
capital remains the same.
&n tis case, te ass%mption, tere!ore, is tat te o%tp%t increases proportionally to te capital
in8ested in te 8ario%s soils and in accordance @it teir respecti8e D%alities0 5is means !or
constant di!!erences in soils tat te s%rpl%s-prod%ct increases in proportion to te increased
in8estment o! capital0 5is case, ten, excl%des any additional in8estment o! capital in soil ?
@ic migt a!!ect te di!!erential rent0 For tis soil, te rate o! s%rpl%s-pro!it R =# t%s, it remains
R = since @e a8e ass%med tat te prod%cti8eness o! te additional capital, and tere!ore te rate
o! s%rpl%s-pro!it, remain te same0
A%t %nder tese conditions te reg%lating price o! prod%ction can only !all, beca%se it is te price
o! prod%ction o! te next best soil, o! A, or any better soil tan ?, rater tan tat o! ?, @ic
becomes te reg%lator# so tat te capital is @itdra@n !rom ?, or peraps !rom ? and A i! te
price o! prod%ction o! ; so%ld become te reg%lating one, and t%s all soils in!erior to ; @o%ld
be eliminated !rom te competition among grain-prod%cing soils0 5e prereD%isite !or tis is,
%nder te ass%med conditions, tat te additional yield !rom te additional in8estments o! capital
satis!y te demand, so tat te o%tp%t !rom te in!erior soil ?, etc0, become s%per!l%o%s !or te re-
establisment o! a !%ll s%pply0
5%s, let %s take, !or instance, 5able &&, b%t in s%c a @ay tat 18 Drs instead o! <= satis!y te
demand0 $oil ? @o%ld drop o%t# A k and its price o! prod%ction o! 3= sillings per D%arter @o%ld
become reg%lating0 5e di!!erential rent ten ass%mes te !ollo@ing !orm:
5?A'E &4
5ype o!
soil
?cres
;apital
V
,ro!it
V
,rice o!
,rod0
3%tp%t
Mrs
$elling
price per
Dr V
,roceeds
V
)ent
)ate o!
$%rpl%s
,ro!it
&n
:rain
Mrs
&n
Money
V
A 1 + 1 6 2 1Z 6 = = =T
; 1 + 1 6 6 1Z * < 3 6=T
7 1 + 1 6 8 1Z 1< 2 6 1<=T
5otal 3 1+ 3 18 18 <> 6 *
/k &n te :erman 18*2 edition tis reads: 70 I 0d01
;ompared @it 5able &&, te gro%nd-rent @o%ld ence a8e !allen !rom V36 to V*, and in grain
!rom 1< Drs to 6 Drs# total o%tp%t @o%ld a8e !allen only by < Drs, !rom <= to 180 5e rate o!
s%rpl%s-pro!it calc%lated on te capital @o%ld a8e !allen to one-tird, i0e0, !rom 18=T to 6=T0
2*+ ;apter J'&&
/Dbid.I one-al!, !rom 18=T to *=T0 I 0d.1 5%s, te !all in te price o! prod%ction is
accompanied ere by a decrease o! te rent in grain and money0
;ompared @it 5able &, tere is merely a decrease in money-rent# te rent in grain is in bot cases
6 Drs# b%t in te one case it R V18, and in te oter V*0 For soil ;, / Dbid.I !or soil ; and 70 I 0d01
te rent in grain, compared @it 5able &, as remained te same0 &n !act, it is o@ing to te
additional prod%ction res%lting !rom te %ni!ormly acting additional capital tat te yield !rom ?
as been excl%ded !rom te market, and tereby soil ? as been eliminated as a competing
prod%cing agent, and it is o@ing to tis !act tat a ne@ di!!erential rent & as been !ormed in
@ic te better soil A plays te same role as did !ormerly te in!erior soil ?0
;onseD%ently, on te one and, te rent !rom A as disappeared# on te oter and, noting as
been altered in te di!!erences bet@een A, ; and 7 by te in8estment o! additional capital I in
accordance @it o%r ass%mption0 For tis reason, tat part o! te o%tp%t @ic is trans!ormed into
rent is red%ced0
&! te abo8e res%lt I te satis!action o! te demand @it ? excl%ded I ad been accomplised,
percance, by te in8estment o! more tan do%ble te capital in ; or 7, or in bot, ten te
matter @o%ld ass%me a di!!erent aspect0 For example, i! te tird in8estment o! capital @ere made
in ;:
5?A'E &4a
5ype o!
soil
?cres
;apital
V
,ro!it
V
,rice o!
,rod0 V
3%tp%t
Mrs
$elling
price V
,roceeds
V
)ent
)ate o!
$%rpl%s
,ro!it
&n
:rain
Mrs
&n
Money
V
A 1 + 1 6 2 1Z 6 = = =T
; 1 >Z 1Z * * 1Z 13Z 3 2Z 6=T
7 1 + 1 6 8 1Z 1< 2 6 1<=Tk
5otal 3 1>Z 3Z <1 <1 31Z > 1=Z
&n tis case, compared @it 5able &4, te o%tp%t !rom ; as risen !rom 6 to * Drs, te s%rpl%s-
prod%ct !rom < to 3 Drs, and te money-rent !rom V3 to V2Z0 ;ompared @it 5able &&, @ere te
latter @as V1<, and 5able &, @ere it @as V6, te money-rent as, on te oter and, decreased0
5e total rental in grain R > Drs and as !allen compared @it 5able && B1< DrsC and risen
compared @it 5able & B6 DrsC# in money BV1=ZC it as !allen compared @it bot BV18 and V36C0
&! te tird in8estment o! capital o! V<Z ad been employed on soil A, it @o%ld indeed a8e
altered te D%antity o! prod%ction, b%t @o%ld not a8e a!!ected te rent, since, according to o%r
ass%mption, te s%ccessi8e in8estments do not prod%ce any di!!erences %pon te same soil and
soil A does not yield any rent0
&! @e ass%me, on te oter and, tat te tird in8estment o! capital takes place %pon 7 instead o!
;, @e a8e te !ollo@ing, 5able &4b:
5ype o!
soil
?cres
;apital
V
,ro!it
V
,rice o!
,rod0 V
3%tp%t
Mrs
$elling
price V
,roceeds
V
)ent
)ate o!
$%rpl%s
,ro!it
&n
:rain
Mr
&n
Money
V
A 1 + 1 6 2 1Z 6 = = =T
; 1 + 1 6 6 1Z * < 3 6=T
2*6 ;apter J'&&
7 1 >Z 1Z * 1< 1Z 18 6 * 1<=T
5otal 3 1>Z 3Z <1 << 33 8 1<
6ere te total prod%ct is << Drs, more tan do%ble tat o! 5able &, alto%g te in8ested capital is
only V1>Z as against V1=, tat is, not t@ice te amo%nt0 5e total prod%ct is also larger by < Drs
tan tat o! 5able &&, alto%g te in8ested capital in te latter is larger I namely, V<=0
;ompared @it 5able &, te rent in grain !rom soil 7 as increased !rom 3 /&n te :erman 18*2
edition tis reads: <0 I 0d.1 to 6 Drs, @ereas te money-rent, V*, as remained te same0
;ompared @it 5able &&, te grain-rent !rom 7 is te same, namely, 6 Drs, b%t te money-rent as
!allen !rom V18 to V*0
;omparing te total rents, te grain-rent !rom 5able &4b R 8 Drs is larger tan tat !rom 5able & R
6 Drs and tan tat !rom 5able &4a R > Drs# b%t it is smaller tan tat !rom 5able && R 1< Drs0 5e
money-rent !rom 5able &4b R V1< is larger tan tat !rom 5able &4a R V1=Z and smaller tan tat
!rom 5able 1 R V18 and tat !rom 5able && R V360
&n order tat te total rental may, %nder te conditions o! 5able &4b B@it te elimination o! rent
!rom AC, be eD%al to tat o! 5able &, @e need V6 more o! s%rpl%s-prod%ct, tat is, 2 Drs at V1Z,
@ic is te ne@ price o! prod%ction0 We ten a8e a total rental o! V18 again as in 5able &0 5e
magnit%de o! te reD%ired additional capital @ill 8ary according to @eter @e in8est it in ; or 7,
or di8ide it bet@een te t@o0
3n ;, V+ capital yields < Drs o! s%rpl%s-prod%ct# conseD%ently, V1= additional capital yields 2 Drs
o! additional s%rpl%s-prod%ct0 3n 7, V+ additional capital @o%ld s%!!ice to prod%ce 2 Drs o!
additional grain-rent %nder te conditions ass%med ere, namely tat te prod%cti8ity o! te
additional in8estments o! capital remains te same0 We so%ld ten obtain te !ollo@ing res%lts:
5?A'E &4c
5ype o!
soil
?cres
;apital
V
,ro!t
V
,rice o!
,rod0 V
3%tp%t
Mrs
$elling
price V
,roceeds
V
)ent
)ate o! $%rpl%s
,ro!it
Mrs V
A 1 + 1 6 2 1Z 6 = = =T
; 1 1+ 3 18 18 1Z <> 6 * 6=T
7 1 >Z 1Z * 1< 1Z 18 6 * 1<=T
5otal 3 <>Z +Z 33 32 +1 1< 18
5?A'E &4d
5ype o!
soil
?cres
;apital
V
,ro!t
V
,rice o!
,rod0 V
3%tp%t
Mrs
$elling
price V
,roceeds
V
)ent
)ate o! $%rpl%s
,ro!it
Mrs V
A 1 + 1 6 2 1Z 6 = = =T
; 1 + 1 6 6 1Z * < 3 6=T
7 1 1<Z <Z 1+ <= 1Z 3= 1= 1+ 1<=T
5otal 3 <<Z 2Z <> 3= 2+ 1< 18
5e total money rental @o%ld be exactly one-al! o! @at it @as in 5able &&, @ere te additional
capitals @ere in8ested at constant prices o! prod%ction0
2*> ;apter J'&&
5e most important ting is to compare te abo8e tables @it 5able &0
We !ind tat @ile te price o! prod%ction as !allen by one-al!, i0e0, !rom 6= sillings to 3=
sillings per D%arter, te total money rental as remained te same, namely R V18, and te grain-
rent as correspondingly do%bled !rom 6 to 1< Drs0 (pon A te rent as disappeared# %pon ; te
money-rent as risen by one-al! in &4c, b%t as !allen by one-al! in &4d# %pon 7 in &4c, it as
remained te same, R V*, and as risen !rom V* to V1+ in &4d0 5e prod%ction as risen !rom 1=
to 32 Drs in &4c, and to 3= Drs in &4d# te pro!it !rom V< to V+Z in &4c and to V2 in &4d0 5e total
in8estment o! capital as risen in te one case !rom V1= to V<>Z, and in te oter !rom V1= to
V<<Z# i0e0, in bot cases it as more tan do%bled0 5e rate o! rent, tat is, te rent calc%lated on
te in8ested capital, is in all tables !rom &4 to &4d e8ery@ere te same !or eac kind o! soil I
@ic @as already implied in te ass%mption tat te rate o! prod%cti8ity !or te t@o s%ccessi8e
in8estments o! capital remains te same !or eac soil type0 A%t compared @it 5able & tis rate
as !allen, bot !or te a8erage o! all kinds o! soil and !or eac one o! tem indi8id%ally0 &n 5able
& it @as R 18=T on an a8erage, @ereas in &4c it R B18N<>ZC \ 1== R 6+ +N11T and in &4d it R
B18N<<ZC \ 1== R 8=T0 5e a8erage money-rent per acre as risen0 Formerly, in 5able &, its
a8erage @as V2Z per acre !rom all !o%r acres, @ereas in &4c and &4d it is V6 per acre %pon te
tree acres0 &ts a8erage %pon te rent-bearing land @as !ormerly V6, @ereas no@ it is V* per acre0
6ence te money-8al%e o! te rent per acre as risen and no@ represents t@ice as m%c grain as it
did !ormerly# b%t te 1< Drs o! grain-rent are no@ less tan one-al! o! te total o%tp%t o! 32 and
3= /&n te :erman 18*2 edition tis reads: 33 and <>0 I 0d.1 Drs respecti8ely, @ereas in 5able &
te 6 Drs represent 3N+ o! te total o%tp%t o! 1= Drs0 ;onseD%ently, alto%g te rent as an aliD%ot
part o! te total o%tp%t as !allen, and as also !allen @en calc%lated on te in8ested capital, its
money-8al%e calc%lated per acre as risen, and still more its 8al%e as a prod%ct0 &! @e take soil 7
in 5able &4d, @e !ind tat te price o! prod%ction corresponding to te capital o%tlay ere R V1+,
o! @ic V1<Z is in8ested capital0 5e money-rent R V1+0 &n 5able &, !or te same soil 7, te
price o! prod%ction @as R V3, te in8ested capital R V<Z, and te money-rent R V*# tat is, te
latter @as tree times te price o! prod%ction and almost !o%r times te capital0 &n 5able &4d, te
money-rent !or 7, V1+, is exactly eD%al to te price o! prod%ction and larger tan te capital by
only 1N+0 -e8erteless, te money-rent per acre is W larger, namely, V1+ instead o! V*0 &n 5able &,
te grain-rent o! 3 Drs R ` o! te total prod%ct o! 2 Drs# in 5able &4d it is 1= Drs, or one-al! te
total prod%ct B<= DrsC per acre o! 70 5is so@s tat te money-8al%e and grain 8al%e o! te rent
per acre may rise, alto%g it constit%tes a smaller aliD%ot part o! te total yield and as !allen in
proportion to te in8ested capital0
5e 8al%e o! te total prod%ct in 5able & R V3=# te rent R V18, or more tan one-al! o! it0 5e
8al%e o! te total prod%ct in &4d R V2+, o! @ic te rent R V18, or less tan one-al!0
-o@, te reason @y in spite o! te !all in price by V1Z per D%arter, i0e0, a !all o! +=T, and in
spite o! te red%ction in competing soil !rom 2 to 3 acres, te total money-rent remains te same
and te total grain-rent is do%bled, @ile, calc%lated per acre, bot te grain-rent and money-rent
rise, is tat more D%arters o! s%rpl%s-prod%ct are prod%ced0 5e price o! grain !alls by +=T, and
te s%rpl%s-prod%ct increases by 1==T0 A%t in order to obtain tis res%lt, te total prod%ction
%nder te conditions ass%med by %s m%st be trebled, and te in8estment o! capital in te s%perior
soils m%st be more tan do%bled0 ?t @at rate te latter m%st increase depends in te !irst place
%pon te distrib%tion o! additional capital in8estments among te better and best soils, al@ays
ass%ming tat te prod%cti8ity o! te capital in8ested in eac soil type increases proportionately
to its magnit%de0
&! te !all in price o! prod%ction @ere smaller, less additional capital @o%ld be reD%ired to prod%ce
te same money-rent0 &! te s%pply reD%ired to tro@ soil ? o%t o! c%lti8ation I and tis depends
not merely %pon te o%tp%t per acre o! ?, b%t also %pon te sare eld by ? in te entire
c%lti8ated area I t%s, i! te s%pply reD%ired !or tis p%rpose @ere larger, and tereby also te
amo%nt o! additional in8ested capital reD%ired in soils better tan ?, ten, oter circ%mstances
2*8 ;apter J'&&
remaining te same, te money and grain rents @o%ld a8e increased still more, alto%g soil A
@o%ld a8e ceased yielding money and grain rents0 &! te capital eliminated !rom ? ad been R
V+, te tables to be compared !or tis case @o%ld be tables && and &4d0 5e total prod%ct @o%ld
a8e increased !rom <= to 3= Drs0 5e money-rent @o%ld be only al! as large, or V28 instead o!
V36# te grain-rent @o%ld be te same, namely R 1< Drs0
&! a total prod%ct o! 22 Drs R V66 co%ld be prod%ced %pon 7 @it a capital R V<>Z I
corresponding to te old rate !or 7, 2 Drs per V<Z capital I ten te total rental @o%ld once more
reac te le8el attained in 5able &&, and te table @o%ld appear as !ollo@s:
5ype o! $oil ;apital V 3%tp%t Mrs :rain-)ent Mrs Money-)ent V
A + 2 = =
; + 6 < 3
7 <>Z 22 << 33
5otal 3>Z +2 <2 36
5e total prod%ction @o%ld be +2 Drs as against <= Drs in 5able &&, and te money-rent @o%ld be
te same, R V360 A%t te total capital @o%ld be V3>Z, @ereas in 5able && it @as R <=0 5e total
in8ested capital @o%ld be do%ble almost, @ile prod%ction @o%ld be nearly treble# te grain-rent
@o%ld be do%ble and te money-rent @o%ld remain te same0 6ence, i! te price !alls I @ile
prod%cti8ity remains te same I as a res%lt o! te in8estment o! additional money-capital in te
better soils @ic yield rent, tat is, all soils better tan ?, ten te total capital as a tendency
not to increase at te same rate as prod%ction and grain-rent# t%s te increase in grain-rent may
compensate !or te loss in money-rent d%e to te !alling price0 5e same la@ also mani!ests itsel!
in tat te in8ested capital m%st be proportionately larger as more is in8ested in ; tan 7, i0e0, in
soils yielding less rent rater tan in soils yielding more rent0 5e point is simply tis: in order
tat te money-rent may remain te same or rise, a de!inite additional D%antity o! s%rpl%s-prod%ct
m%st be prod%ced, and te greater te !ertility o! te soils yielding s%rpl%s-prod%ct, te less
capital tis reD%ires0 &! te di!!erence bet@een A and ;, and ; and 7, @ere still greater, still less
additional capital @o%ld be reD%ired0 5e speci!ic proportion is determined by 1C te ratio o! !all
in price, in oter @ords, by te di!!erence bet@een soil A, @ic does not yield rent no@, and soil
?, @ic !ormerly @as te soil not yielding rent# <C te ratio o! te di!!erences bet@een te soils
better tan A %p@ards# 3C te amo%nt o! ne@ly in8ested additional capital, and 2C its distrib%tion
among te soils o! 8arying D%ality0
&n !act, @e see tat tis la@ merely expresses @at @as already ascertained in te !irst case: Wen
te price o! prod%ction is gi8en, no matter @at its magnit%de, te rent may increase as a res%lt o!
additional capital in8estment0 For o@ing to te elimination o! ?, @e no@ a8e a ne@ di!!erential
rent & @it A as te @orst soil and V1Z per D%arter as te ne@ price o! prod%ction0 5is applies to
5able &4 as @ell as to 5able &&0 &t is te same la@, except tat o%r point o! depart%re is soil A
instead o! ?, and o%r price o! prod%ction is taken as V1Z instead o! V30
5e important ting ere is tis: 5o te extent tat so m%c and so m%c additional capital @as
necessary in order to @itdra@ te capital !rom soil ? and create te s%pply @ito%t it, @e !ind
tat tis may be accompanied by an %naltered, rising, or !alling rent per acre, i! not !rom all plots
o! land ten at least !rom some, and so !ar as te a8erage o! te c%lti8ated plots is concerned0 We
a8e seen tat grain-rent and money-rent do not maintain a %ni!orm relation to one anoter0 &t is
merely d%e to tradition tat grain-rent is still o! any importance in economics0 3ne migt
demonstrate eD%ally @ell tat, e0g0, a man%!act%rer can b%y m%c more o! is yarn @it is pro!it
o! V+ tan e co%ld !ormerly @it a pro!it o! V1=0 &t so@s at any rate, tat messie%rs landlords,
@en tey are sim%ltaneo%sly o@ners or sareolders in man%!act%ring establisments, s%gar-
2** ;apter J'&&
re!ineries, distilleries, etc0, may in teir capacity as prod%cers o! teir o@n ra@ materials still
make a considerable pro!it @en te money-rent is !alling0
xli8

II. +ecreasing rate of productivit# of the
additional capital.
5is introd%ces noting ne@ into te problem, in so !ar as te price o! prod%ction may also !all in
tis case, as in te case H%st considered, only @en additional in8estments o! capital in better soils
tan ? render te o%tp%t !rom ? s%per!l%o%s and te capital is tere!ore @itdra@n !rom ?, or ? is
employed !or te prod%ction o! oter prod%cts0 5is case as been exa%sti8ely disc%ssed abo8e0
&t @as so@n tat te rent in grain and money per acre may increase, decrease, or remain
%ncanged0
For con8enience in making comparisons @e reprod%ce te !ollo@ing table:
4+G,0 DL
5ype o!
$oil
?cres
;apital
V
,ro!it
V
,rice o!
,rod%ction0per Mr
3%tp%t
Mrs
:rain-
)ent Mrs
Money-
)ent Mrs
)ate o!
$%rpl%s ,ro!it
? 1 <Z Z 3 1 = = =
A 1 <Z Z 1Z < 1 3 1<=T
; 1 <Z Z 1 3 < 6 <2=T
7 1 <Z Z ` 2 3 * 36=T
5otal 2 1= 1= 6 18 18=T a8erage
-o@ let %s ass%me tat a D%antity o! 16 Drs s%pplied by A, ;, and 7 at a decreasing rate o!
prod%cti8ity s%!!ices to excl%de ? !rom c%lti8ation0 &n s%c case, 5able &&& is trans!ormed into te
!ollo@ing:
4+G,0 L
5ype o!
$oil
?cres
&n8estment
o! ;apital V
,ro!it V 3%tp%t Mrs
$elling
price V
,roceeds V
:rain-)ent
Mrs
Money-
)ent V
)ate o!
$%rpl%s ,ro!it
A 1 <Z U <Z 1
< U 1Z R
3Z
1 +N> 6 = = =
; 1 <Z U <Z 1 3U<R+ 1 +N> 8 2N> 1Z < 2N> +1 3N>T
7 1 <Z U <Z 1
2 U 3Z R
>Z
1 +N> 1< 6N> 2 6 6N> 13> 1N>Tkk
5otal 3kkk 1+ 16 <> 3N> +Z * 3N>
*2 <N>T
a8eragekkkk
/k &n te :erman 18*2 edition tis reads +1 <N+0 I 0d.1
/kk Dbid. 13> 1N+ I 0d.1
/kkk Dbid.: 20 I 0d.1
/kkkk 6ere, as @ell as in tables 4&, 4&&, 4&& &, &J and J te land @ic yields no rent is le!t o%t
o! consideration0 I 0d.1
6ere, at a decreasing rate o! prod%cti8ity o! te additional capital, and a 8arying decrease !or te
8ario%s soil types, te reg%lating price o! prod%ction as !allen !rom V3 to V1 +N>0 5e in8estment
+== ;apter J'&&
o! capital as risen by one-al!-!rom V1= to V1+0 5e money-rent as !allen by almost one-al!-
!rom V18 to V* 3N>, b%t te grain-rent as !allen by only 1N1< I !rom 6 Drs to +Z Drs0 5e total
o%tp%t as risen !rom 1= to 16, or by 6=T0 5e grain-rent constit%tes a little more tan one-tird
o! te total prod%ct0 5e ad8anced capital is to te money-rent as 1+:* 3N>, @ereas !ormerly tis
ratio @as 1=:180
III. )ising rate of productivit# of the additional
capital.
5is di!!ers !rom 4ariant & at te beginning o! tis capter, @ere te price o! prod%ction !alls
@ile te rate o! prod%cti8ity remains te same, merely in tat @en a gi8en amo%nt o! additional
prod%ce is reD%ired to excl%de soil ? tis occ%rs ere more D%ickly0
5e e!!ect may 8ary in accordance @it te distrib%tion o! in8estments among te 8ario%s soils
!or a !alling, as @ell as an increasing, prod%cti8ity o! te additional capital in8estments0 &n so !ar
as tis 8arying e!!ect balances o%t te di!!erences, or accent%ates tem, te di!!erential rent o! te
better soils, and tereby te total rental too, @ill !all or rise, as @as already te case in di!!erential
rent &0 &n oter respects, e8eryting depends %pon te magnit%de o! te land area and capital
excl%ded togeter @it ?, and %pon te relati8e magnit%de o! ad8anced capital reD%ired @it a
rising prod%cti8ity in order to prod%ce te additional o%tp%t to meet te demand0
5e only point @ort@ile analysing ere, and @ic really takes %s back to te in8estigation o!
te @ay in @ic tis di!!erential pro!it is trans!ormed into di!!erential rent, is te !ollo@ing:
&n te !irst case, @ere te price o! prod%ction remains te same te additional capital @ic may
be in8ested in soil ? does not a!!ect te di!!erential rent as s%c, since soil ?, as be!ore, does not
yield any rent, te price o! its prod%ce remains te same, and it contin%es to reg%late te market0
&n te second case, 4ariant &, @ere te price o! prod%ction !alls @ile te rate o! prod%cti8ity
remains te same, soil ? @ill necessarily be excl%ded, and still more so in 4ariant && B!alling price
o! prod%ction @it !alling rate o! prod%cti8ityC, since oter@ise te additional capital in8ested in
soil ? @o%ld a8e ad to raise te price o! prod%ction0 A%t ere, in 4ariant &&& o! te second case,
@ere te price o! prod%ction !alls beca%se te prod%cti8ity o! te additional capital rises, tis
additional capital may %nder certain circ%mstances be in8ested in soil ? as @ell as in te better
soils0
'et %s ass%me tat @en in8ested in soil ? an additional capital o! V<Z prod%ces 1 1N+ Drs instead
o! 1 Dr0
4+G,0 LD
5ype
o! $oil
?cres
;apital
V
,ro!it
V
,rice o!
,rod%ction V
3%tp%t Mrs
$elling
price V
,roceeds
V
)ent )ate o!
$%rpl%s
,ro!it
Mrs V
? 1
<Z U
<Z R +
1 6 1 U 1 1N+ R< 1N+ < 8N11 6 = = =T
A 1
<Z U
<Z R +
1 6 < U < <N+ R 2 <N+ < 8N11 1<
<
1N+
6 1<=T
; 1
<Z U
<Z R +
1 6 3 U 3 3N+ R 6 3N+ < 8N11 18
2
<N+
1< <2=T
7 1
<Z U
<Z R +
1 6 2 U 2 2N+ R 8 2N+ < 8N11 <2
6
3N+
18 36=T
+=1 ;apter J'&&
2 <= 2 <2 << 6=
13
1N+
36 <2=T
?side !rom being compared @it te basic 5able &, tis table so%ld be compared @it 5able &&,
@ere a t@o-!old in8estment o! capital is associated @it a constant prod%cti8ity, proportional to
te in8estment o! capital0
&n accordance @it o%r ass%mption, te reg%lating price o! prod%ction !alls0 &! it @ere to remain
constant, R V3, ten te @orst soil ?, @ic %sed to yield no rent @it an in8estment o! only V<Z,
@o%ld no@ yield rent @ito%t @orse soil being bro%gt %nder c%lti8ation0 5is @o%ld a8e
occ%rred d%e to an increase in te prod%cti8ity o! tis soil, b%t only !or a part o! te capital, not
!or te original capital in8ested0 5e !irst V3 o! prod%ction price yield 1 Dr# te second yield 1 1N+#
Drs# b%t te entire o%tp%t o! < 1N+# Drs is no@ sold at its a8erage price0 $ince te rate ! prod%cti8ity
increases @it te additional in8estment o! capital, tis pres%pposes an impro8ement0 5e latter
may consist o! a general increase in capital in8ested per acre Bmore !ertiliser, more mecanised
labo%r, etc0C, or it may be tat only tro%g tis additional capital it is at all possible to bring
abo%t a D%alitati8ely di!!erent more prod%cti8e in8estment o! te capital0 &n bot cases, te
in8estment o! V+ o! capital per acre yields an o%tp%t o! < 1N+ Drs, @ereas te in8estment o! one-
al! o! tis capital, i0e0, V< 1N+, yields only 1 Dr o! prod%ce0 5e prod%ce !rom soil ? co%ld,
regardless o! transient market conditions, only contin%e to be sold at a iger price o! prod%ction
instead o! at te ne@ a8erage price, as long as a considerable area o! type ? soil contin%ed to be
c%lti8ated @it a capital o! only V<Z per acre0 A%t as soon as te ne@ relation o! V+ o! capital per
acre, and tereby te impro8ed management, becomes %ni8ersal, te reg%lating price o!
prod%ction @o%ld a8e to !all to V< 8N110 5e di!!erence bet@een te t@o portions o! capital
@o%ld disappear, and ten, in !act, te c%lti8ation o! an acre o! soil ? @it a capital o! only V<Z
@o%ld be abnormal, i0e0, @o%ld not correspond to te ne@ conditions o! prod%ction0 &t @o%ld ten
no longer be a di!!erence bet@een te yields !rom di!!erent portions o! capital in8ested in te
same acre, b%t bet@een a s%!!icient and an ins%!!icient total in8estment o! capital per acre0 5is
so@s, first of all, tat ins%!!icient capital in te ands o! a large n%mber o! tenant !armers Bit
m%st be a large n%mber, !or a small n%mber @o%ld simply be compelled to sell belo@ teir price
o! prod%ctionC prod%ces te same e!!ect as a di!!erentiation o! te soils temsel8es in a
descending line0 5e in!erior c%lti8ation o! in!erior soil increases te rent !rom s%perior soils# it
may e8en lead to rent being yielded !rom better c%lti8ated soil o! eD%ally poor D%ality, @ic
@o%ld oter@ise not be yielded0 &t so@s, secondly, tat di!!erential rent, in so !ar as it arises !rom
s%ccessi8e in8estments o! capital in te same total area, resol8es itsel! in reality into an a8erage,
in @ic te e!!ects o! te 8ario%s in8estments o! capital are no longer recognisable and
disting%isable, and tere!ore do not res%lt in rent being yielded !rom te @orst soil, b%t rater: 1C
make te a8erage price o! te total yield !or, say, an acre o! ?, te ne@ reg%lating price and <C
appear as alteration in te total D%antity o! capital per acre reD%ired %nder te ne@ conditions !or
te adeD%ate c%lti8ation o! te soil# and in @ic te indi8id%al s%ccessi8e in8estments o! capital,
as @ell as teir respecti8e e!!ects, @ill appear indisting%isably blended togeter0 &t is exactly te
same @it te indi8id%al di!!erential rents !rom te s%perior soils0 &n eac case, tey are
determined by te di!!erence bet@een te a8erage o%tp%t !rom te soil in D%estion and te o%tp%t
!rom te @orst soil at te increased capital in8estment I @ic as no@ become normal0
-o soil yields any prod%ce @ito%t an in8estment o! capital0 5is is te case e8en !or simple
di!!erential rent, di!!erential rent &# @en it is said tat one acre o! soil ?, @ic reg%lates te
price o! prod%ction, yields so m%c and so m%c prod%ce at s%c and s%c a price, and tat
s%perior soils A, ; and 7 yield so m%c di!!erential prod%ce, and tere!ore so m%c and so m%c
money-rent at te reg%lating price o! prod%ction, it is al@ays ass%med tat a de!inite amo%nt o!
capital is in8ested @ic, %nder te pre8ailing conditions o! prod%ction, is considered normal0 &n
+=< ;apter J'&&
te same @ay, a certain minim%m capital is reD%ired !or e8ery indi8id%al branc o! ind%stry in
order tat te commodities may be prod%ced at teir price o! prod%ction0
&! tis minim%m is altered as a res%lt o! s%ccessi8e in8estments o! capital associated @it
impro8ements on te same soil, it occ%rs grad%ally0 $o long as a certain n%mber o! acres, say, o!
?, do not recei8e tis additional @orking capital, a rent is prod%ced %pon te better c%lti8ated
acres o! ? d%e to te %naltered price o! prod%ction, and te rent !rom all s%perior soils, A, ; and
7, is increased0 A%t as soon as te ne@ metod o! c%lti8ation as become general eno%g to be
te normal one, te price o! prod%ction !alls# te rent !rom te s%perior plots declines again, and
tat portion o! soil ? tat does not possess te @orking capital, @ic as no@ become te
a8erage, m%st sell its prod%ce belo@ its indi8id%al price o! prod%ction, i0e0, belo@ te a8erage
pro!it0
&n te case o! a !alling price o! prod%ction, tis also occ%rs e8en @it decreasing prod%cti8ity o!
te additional capital I as soon as te reD%ired total prod%ct is s%pplied, in conseD%ence o!
increased in8estment o! capital, by te s%perior soils, and t%s, e0g0, te @orking capital is
@itdra@n !rom ?, i0e0, ? no longer competes in te prod%ction o! tis partic%lar prod%ct, e0g0,
@eat0 5e D%antity o! capital @ic is no@ reD%ired, on an a8erage, to be in8ested in te better
soil A, te ne@ reg%lator, no@ becomes normal: and @en one speaks o! te 8arying !ertility o!
plots o! land, it is ass%med tat tis ne@ normal D%antity o! capital per acre is employed0
3n te oter and, it is e8ident tat tis a8erage in8estment o! capital, say, in England, o! V8 per
acre prior to 1828, and V1< s%bseD%ent to tat year, @ill constit%te te standard in concl%ding
leases0 For te !armer expending more tan tis, te s%rpl%s-pro!it is not trans!ormed into rent !or
te d%ration o! te contract0 Weter tis takes place a!ter expiration o! te contract or not @ill
depend %pon te competition among te !armers @o are in a position to make te same extra
capital ad8ance0 We are not re!erring ere to s%c permanent soil impro8ements tat contin%e to
pro8ide te increased o%tp%t @it te same or e8en @it a decreasing o%tlay o! capital0 $%c
impro8ements, alto%g prod%cts o! capital, a8e te same e!!ect as nat%ral di!!erences in te
D%ality o! te land0
We see, ten, tat a !actor comes into consideration in te case o! di!!erential rent && @ic does
not appear in te case o! di!!erential rent & as s%c, since te latter can contin%e to exist
independently o! any cange in te normal in8estment o! capital per acre0 &t is, on te one and,
te bl%rring o! res%lts !rom 8ario%s in8estments, o! capital in reg%lating soil ?, @ose o%tp%t !lo@
simply appears as a normal a8erage o%tp%t per acre0 &t is, on te oter and, te cange in te
normal minim%m, or in te a8erage magnit%de o! in8ested capital per acre, so tat tis cange
appears as a property o! te soil0 &t is, !inally, te di!!erence in te manner o! trans!orming
s%rpl%s-pro!it into te !orm o! rent0
5able 4& so@s, !%rtermore, compared @it tables & and &&, tat te grain-rent as more tan
do%bled in relation to &, and as increased by 1 1N+ Drs in relation to &&# @ile te money-rent as
do%bled in relation to &, b%t as not canged in relation to &&0 &t @o%ld a8e increased
considerably i! Boter conditions remaining te sameC more o! te additional capital ad been
allocated to te s%perior soils, or i! on te oter and te e!!ect o! te additional capital on ? ad
been less appreciable, and t%s te reg%lating a8erage price per D%arter !rom ? ad been iger0
&! te increase in prod%cti8eness by means o! additional capital so%ld prod%ce 8arying res%lts !or
te 8ario%s soils, tis @o%ld prod%ce a cange in teir di!!erential rents0
&n any case, it as been so@n tat te rent per acre, !or instance @it a do%bled in8estment o!
capital, may not only do%ble, b%t may more tan do%ble I @ile te price o! prod%ction !alls in
conseD%ence o! an increased rate o! prod%cti8ity o! te additional capital in8ested, i0e0, @en tis
prod%cti8ity gro@s at a iger rate tan te ad8anced capital0 A%t it may also !all i! te price o!
prod%ction so%ld !all m%c lo@er as a res%lt o! a more rapid increase in prod%cti8eness o! soil ?0
+=3 ;apter J'&&
'et %s ass%me tat te additional in8estments o! capital, !or instance in A and ;, do not increase
te prod%cti8ity at te same rate as tey do !or ?, so tat te proportional di!!erences decrease !or
A and ; and te increase in o%tp%t does not make %p !or te !all in price0 5en, compared @it
5able &&, te /money1 rent !rom 7 @o%ld remain %ncanged, and tat !rom A and ; @o%ld !all0
4+G,0 LDa
5ype o!
$oil
?cres ;apital V
,ro!it
V
3%tp%t ,er ?cre
Mrs
$elling
price
,roceeds
V
:rain-)ent
Mrs
Money-)ent
V
? 1 <ZU<Z 1 1U3R2 1Z 6 = =
A 1
<Z U <Z
R +
1 < U <Z R 2Z 1Z 6` Z `
; 1
<Z U <Z
R +
1 3 U + R 8 1Z 1< 2 6
7 1
<Z U <Z
R +
1 2 U 1< R 16 1Z <2 1< 18
5otal 2 <= 3<Z 16Z <2`
Finally, te money-rent @o%ld rise i! more additional capital @ere in8ested in te s%perior soils
@it te same proportional increase in prod%cti8eness tan in ?, or i! te additional in8estments
o! capital in te s%perior soils @ere e!!ecti8e at an increasing rate o! prod%cti8ity0 &n bot cases
te di!!erences @o%ld increase0
5e money-rent !alls @en te impro8ement d%e to additional in8estment o! capital red%ces te
di!!erences completely, or in part, and a!!ects ? more tan A and ;0 5e smaller te increase in
prod%cti8ity o! te s%perior soils, te more it !alls0 &t depends %pon te extent o! ineD%ality
prod%ced, @eter te grain-rent sall rise, !all or remain stationary0
5e money-rent rises, and similarly te grain-rent, eiter @en I te proportional di!!erence in
additional !ertility o! te 8ario%s soils remaining %naltered I more capital is in8ested in te rent-
bearing soils tan in rentless soil ?, and more in soils yielding iger rent tan in tose yielding
lo@er rents# or @en te !ertility I te additional capital remaining eD%al I increases more on te
better and best soils tan on ?, i0e0, te money and grain rents rise in proportion to tis increase in
!ertility o! te better soils abo8e tat o! te poorer ones0
A%t %nder all circ%mstances, tere is a relati8e rise in rent @en increased prod%cti8e po@er is te
res%lt o! an addition o! capital, and not merely te res%lt o! increased !ertility @it %naltered
in8estment o! capital0 5is is te absol%te point o! 8ie@, @ic so@s tat ere, as in all !ormer
cases, te rent and increased rent per acre Bas in te case o! di!!erential rent & on te entire
c%lti8ated area I te magnit%de o! te a8erage rentalC are te res%lt o! an increased in8estment o!
capital in land, no matter @eter tis capital !%nctions @it a constant rate o! prod%cti8ity at
constant or decreasing prices or @it a decreasing rate o! prod%cti8ity at constant or !alling
prices, or @it an increasing rate o! prod%cti8ity at !alling prices0 For o%r ass%mption: constant
prices @it a constant, !alling, or rising rate o! prod%cti8ity o! te additional capital, and !alling
prices @it a constant, !alling, or rising rate o! prod%cti8ity, resol8es itsel! into: a constant rate o!
prod%cti8ity o! te additional capital at constant or !alling prices, a !alling rate o! prod%cti8ity at
constant or !alling prices, and a rising rate o! prod%cti8ity at constant and !alling prices0 ?lto%g
te rent may remain stationary, or may !all, in all tese cases, it @o%ld !all more i! te additional
in8estment o! capital, oter circ%mstances remaining te same, @ere not a prereD%isite !or te
increased prod%cti8eness0 5e additional capital, ten, is al@ays te ca%se !or te relati8ely ig
rent, alto%g absol%tely it may a8e decreased0
Chapter 43. Diferential Rent II.
Third Case: Rising Price of Production
/? rising price o! prod%ction pres%pposes tat te prod%cti8ity o! te poorest D%ality land yielding
no rent decreases0 5e ass%med reg%lating price o! prod%ction cannot rise abo8e V3 per D%arter
%nless te V<Z in8ested in soil ? prod%ce less tan 1 Dr, or te V+ I less tan < Drs, or %nless an
e8en poorer soil tan ? as to be taken %nder c%lti8ation0
For constant, or e8en increasing, prod%cti8ity o! te second in8estment o! capital tis @o%ld only
be possible i! te prod%cti8ity o! te !irst in8estment o! capital o! Z ad decreased0 5is case
occ%rs o!ten eno%g0 For instance, @en @it s%per!icial plo%ging te exa%sted top soil yields
e8er smaller crops, %nder te old metod o! c%lti8ation, and ten te s%bsoil, t%rned %p tro%g
deeper plo%ging, prod%ces better crops tan be!ore @it more rational c%lti8ation0 A%t, strictly
speaking, tis special case does not apply ere0 5e decrease in prod%cti8ity o! te !irst V<Z o!
in8ested capital signi!ies !or te s%perior soils, e8en @en te conditions are ass%med to be
analogo%s tere, a decrease in di!!erential rent &# yet ere @e are considering only di!!erential rent
&&0 A%t since tis special case cannot occ%r @ito%t pres%pposing te existence o! di!!erential rent
&&, and represents in !act te reaction o! a modi!ication o! di!!erential rent & %pon &&, @e sall gi8e
an ill%stration o! it /see 5able 4&& I 0d010
5e money-rent and proceeds are te same as in 5able &&0 5e increased reg%lating price o!
prod%ction makes good @at as been lost in D%antity o! prod%ce# since tis price and te
D%antity o! prod%ce are in8ersely proportional, it is e8ident tat teir matematical prod%ct @ill
remain te same0
5?A'E 4&&
5ype
o!
$oil
?cres
&n8ested
;apital
V
,ro!it
V
,rice
o!
,rod0
V
3%tp%t
Mrs
$ell-
ing
,rice
V
,ro-
ceeds
V
:rain-
)ent
Mrs
Money
-)ent
V
)ate
o!
)ent
? 1 <Z U <Z1 6
Z U
1[ R
1`
3 3N> 6 = = =T
A 1 <Z U <Z1 6
1 U <Z
R 3Z
3 3N> 1< 1` 6 1<=T
; 1 <Z U <Z1 6
1Z U
3` R
+[
3 3N> 18 3Z 1< <2=T
7 1 <Z U <Z1 6
< U + R
>
3 3N> <2 +[ 18 36=T
<= 1>Z 6= 1=Z 36 <2=T
&n te abo8e case, it @as ass%med tat te prod%cti8eness o! te second in8estment o! capital @as
greater tan te original prod%cti8ity o! te !irst in8estment0 -oting canges i! @e ass%me te
second in8estment to a8e only te same prod%cti8ity as te !irst, as so@n in te !ollo@ing table:
+=+ ;apter J'&&&
5?A'E 4&&&
)ent
5ype
o!
$oil
?cres
&n8ested
;apital
V
,ro!it
V
,rice
o!
,rod0
V
3%tp%t
Mrs
$ell-
ing
,rice
V
,ro-
ceeds
V
&n
:rain
Mrs
&n
Money
V
)ate o!
$%rpl%s-
,ro!it
? 1
<Z U <Z
R +
1 6
Z U
1Z R
<Z
2 6 = = =T
A 1
<Z U <Z
R +
1 6
1 U < R
3
2 1< 1Z 6 1<=T
; 1
<Z U <Z
R +
1 6
1Z U 3
R 2Z
2 18 3 1< <2=T
7 1
<Z U <Z
R +
1 6
< U 2 R
6
2 <2 2Z 18 36=T
<= 1+ 6= * 36 <2=T
6ere, too, te price o! prod%ction rising at te same rate compensates in !%ll !or te decrease in
prod%cti8ity in te case o! yield as @ell as money-rent0
5e tird case appears in its p%re !orm only @en te prod%cti8ity o! te second in8estment o!
capital declines, @ile tat o! te !irst remains constant I @ic @as al@ays ass%med in te !irst
and second cases0 6ere di!!erential rent & is not a!!ected, i0e0, te cange a!!ects only tat part
@ic arises !rom di!!erential rent &&0 We sall gi8e t@o ill%strations: in te !irst @e ass%me tat
te prod%cti8ity o! te second in8estment o! capital as been red%ced to Z, in te second to `0
5?A'E &J
)ent
5ype
o!
$oil
?cres
&n8ested
;apital
V
,ro!it
V
,rice
o!
,rod0
3%tp%t
Mrs
$ell-
ing
,rice
V
,ro-
ceeds
V
&n
:rain
Mrs
&n
Money
V
)ate
o!
)ent
? 1
<Z U <Z
R +
1 6
1 U Z
R 1Z
2 6 = = =
A 1
<Z U <Z
R +
1 6
< U 1 R
3
2 1< 1Z 6 1<=T
; 1
<Z U <Z
R +
1 6
3 U 1Z
R 2Z
2 18 3 1< <2=T
7 1
<Z U <Z
R +
1 6
2 U < R
6
2 <2 2Z 18 36=T
<= 1+ 6= * 36 <2=T
5able &J is te same as 5able 4&&&, except !or te !act tat te decrease in prod%cti8ity in 4&&&
occ%rs !or te !irst, and in &J !or te second in8estment o! capital0
+=6 ;apter J'&&&
5?A'E J
)ent
5ype
o!
$oil
?cres
&n8ested
;apital
V
,ro!it
V
,rice
o!
,rod0
3%tp%t
Mrs
$ell-
ing
,rice
V
,ro-
ceeds
V
&n
:rain
Mrs
&n
Money
V
)ate
o!
)ent
? 1
<Z U <Z
R +
1 6
1 U [
R 1[
2 2N+ 6 = = =T
A 1
<Z U <Z
R +
1 6
< U Z
R <Z
2 2N+ 1< 1[ 6 1<=T
; 1
<Z U <Z
R +
1 6
3 U `
R 3`
2 2N+ 18 <Z 1< <2=T
7 1
<Z U <Z
R +
1 6
2 U 1 R
+
2 2N+ <2 3` 18 36=T
<= <2 1<Z 6= >Z 36 <2=T
&n tis table, too, te total proceeds, te money-rent and rate o! rent remain te same as in tables
&&, 4&& and 4&&&, beca%se prod%ce and selling price are again in8ersely proportional, @ile te
in8ested capital remains te same0
A%t o@ do matters stand in te oter possible case @en te price o! prod%ction rises, namely, in
te case o! a poor D%ality soil not @ort c%lti8ating %ntil ten tat is taken %nder c%lti8ationQ
'et %s s%ppose tat a soil o! tis sort, @ic @e sall designate by a, enters into competition0
5en te iterto rentless soil ? @o%ld yield rent, and te !oregoing tables 4&&, 4&&& and J @o%ld
ass%me te !ollo@ing !orms:
5?A'E 4&&a
)ent
5ype
o!
$oil
?cres
&n8ested
;apital
V
,ro!it
V
,rice
o!
,rod0
3%tp%t
Mrs
$ell-
ing
,rice
V
,ro-
ceeds
V
&n
:rain
Mrs
&n
Money
V
&ncrease
a 1 + 1 6 1Z 2 6 = = =
? 1 <Z U <Z1 6
Z U
1[ R
1`
2 > [ 1 1
A 1 <Z U <Z1 6
1 U <Z
R 3Z
2 12 < 8 1 U >
; 1 <Z U <Z1 6
1Z U
3` R
+[
2 <1 3` 1+ 1 U < \ >
7 1 <Z U <Z1 6
< U + R
>
2 <8 +Z << 1 U 3 \ >
+=> ;apter J'&&&
3= 1* >6 11Z 26

5?A'E 4&&&a
)ent
5ype
o!
$oil
?cres
&n8ested
;apital
V
,ro!it
V
,rice
o!
,rod0
3%tp%t
Mrs
$ell-
ing
,rice
V
,ro-
ceeds
V
&n
:rain
Mrs
&n
Money
V
&ncrease
a 1 + 1 6 1[ 2 2N+ 6 = = =
? 1 <Z U <Z1 6
Z U 1
R 1Z
2 2N+ > 1N+ [ 1 1N+ 1 1N+
A 1 <Z U <Z1 6
1 U < R
3
2 2N+
12
<N+
1` 8 <N+
1 1N+ U >
1N+
; 1 <Z U <Z1 6
1Z U 3
R 2Z
2 2N+
<1
3N+
3[> 1+ 3N+
1 1N+ U <
\ > 1N+
7 1 <Z U <Z1 6
< U 2 R
6
2 2N+
<8
2N+
2` << 2N+
1 1N+ U 3
\ > 1N+
+ 3= 16[ >8 1=>> 28
/> &n te :erman 18*2 edition tis reads: <[0 I 0d01
/>> Dbid0: * I 0d01
5?A'E Ja
)ent
5ype
o!
$oil
?cres
&n8ested
;apital
V
,ro!it
V
,rice
o!
,rod0
3%tp%t
Mrs
$ell-
ing
,rice
V
,ro-
ceeds
V
&n
:rain
Mrs
&n
Money
V
&ncrease
a 1 + 1 6 1 1N8 +X 6 = = =
? 1 <Z U <Z1 6
1 U [
R 1[
+X 6W W W
A 1 <Z U <Z1 6
< U Z
R <Z
+X 13X 1 3N8 >X W U 6W
; 1 <Z U <Z1 6
3 U `
R 3`
+X <= < +N8 12
W U < \
6W
7 1 <Z U <Z1 6
2 U 1 R
+
+X <6W 3 >N8 <=W
W U 3 \
6W
3= 13 +N8 ><W 8 2<W
Ay interpolating soil a tere arises a ne@ di!!erential rent &# %pon tis ne@ basis, di!!erential rent
&& like@ise de8elops in an altered !orm0 $oil a as di!!erent !ertility in eac o! te abo8e tree
+=8 ;apter J'&&&
tables# te seD%ence o! proportionally increasing !ertilities begins only @it soil ?0 5e seD%ence
o! rising rents also bea8es similarly0 5e rent o! te @orst rent-bearing soil, pre8io%sly rentless,
is a constant @ic is simply added to all iger rents0 3nly a!ter ded%cting tis constant does te
seD%ence o! di!!erences clearly become e8ident !or te iger rents, and similarly its parallel in
te !ertility seD%ence o! te di!!erent soils0 &n all te tables, te !ertilities !rom ? to 7 are related
as 1 : < : 3 : 2, and correspondingly te rents:
in 4&&a, as 1 : B1 U >C : B1 U < \ >C : B1 U 3 \ >C,
in 4&&&a, as 1 1N+ : B1 1N+ U > 1N+C : B1 1N+ U < \ > 1N+C : B1 1N+ U 3 \ > 1N+C,
and in Ja, as W : BW U 6WC : BW U < \ 6WC : W U 3 \ 6WC0
&n brie!, i! te rent !rom ? R n, and te rent !rom te soil o! next iger !ertility R n U m, ten te
seD%ence is as !ollo@s: n : Bn U mC : Bn U <mC : Bn U 3mC, etc0 I '. 0.1
/$ince te !oregoing tird case ad not been elaborated in te man%script I only te title is tere I
it @as te task o! te editor to !ill in te gap, as abo8e, to te best o! is ability0 6o@e8er, in
addition, it still remains !or im to dra@ te general concl%sions !rom te entire !oregoing
analysis o! di!!erential rent &&, consisting o! tree principal cases and nine s%bcases0 5e
ill%strations presented in te man%script, o@e8er, do not s%it tis p%rpose 8ery @ell0 &n te !irst
place, tey compare plots o! land @ose yields !or eD%al areas are related as 1 : < : 3 : 2# i0e0,
di!!erences, @ic exaggerate greatly !rom te 8ery !irst, and @ic lead to %tterly monstro%s
n%merical 8al%es in te !%rter de8elopment o! te ass%mptions and calc%lations made %pon tis
basis0 $econdly, tey create a completely erroneo%s impression0 &! !or degrees o! !ertility related
as 1 : < : 3 : 2, etc0, rents are obtained in te seD%ence = : 1 : < : 3, etc0, one !eels tempted to deri8e
te second seD%ence !rom te !irst, and to explain te do%bling, tripling, etc0, o! rents by te
do%bling, tripling, etc0, o! te total yields0 A%t tis @o%ld be @olly incorrect0 5e rents are
related as = : 1 : < : 3 : 2 e8en @en te degrees o! !ertility are related as n : Bn U 1C : Bn U <C : Bn U
3C : Bn U 2C0 5e rents are not related as te degrees o! !ertility, b%t as te differences o! !ertility I
beginning @it te rentless soil as te Eero point0
5e original tables ad to be o!!ered to ill%strate te text0 A%t in order to obtain a percept%al basis
!or te !ollo@ing res%lts o! te in8estigation, & present belo@ a ne@ series o! tables in @ic te
yields are indicated in b%sels B1N8 D%arter, or 3603+ litresC and sillings B R marksC0
5e !irst o! tese, 5able J&, corresponds to te !ormer 5able &0 &t so@s te yields and rents !or
soils o! !i8e di!!erent D%alities, ? to E, @it a !irst capital in8estment o! += sillings, @ic added
to 1= sillings pro!it R 6= sillings total price o! prod%ction per acre0 5e yields in grain are made
lo@: 1=, 1<, 12, 16, 18 b%sels per acre0 5e res%lting reg%lating price o! prod%ction is 6 sillings
per b%sel0
5e !ollo@ing 13 tables correspond to te tree cases o! di!!erential rent && treated in tis and te
t@o preceding capters @it an additional in8ested capital o! += sillings per acre in te same soil
@it constant, !alling and rising prices o! prod%ction0 Eac o! tese cases, in t%rn, is presented as
it takes sape !or:
1C constant, <C !alling, and 3C rising prod%cti8ity o! te second in8estment o! capital in relation to
te !irst0 5is yields a !e@ oter 8ariants, @ic are especially %se!%l !or ill%stration p%rposes0
For case &: ;onstant price o! prod%ction I @e a8e:
4ariant
1:
,rod%cti8ity o! te second in8estment o! capital
remains te same B5able J&&C0
4ariant
<:
,rod%cti8ity declines0 5is can take place only
@en
no second in8estment o! capital is made in soil ?,
+=* ;apter J'&&&
i0e0, in
s%c a @ay tat aC soil A like@ise yields no rent
B5able J&&&C
or bC soil A does not become completely rentless
B5able J&4C0
4ariant
3:
,rod%cti8ity increases B5able J4C0 5is case
like@ise excl%des a second in8estment o! capital
in soil ?0
For case &&: Falling price o! prod%ction I @e a8e:
4ariant
1:
,rod%cti8ity o! te second in8estment o! capital
remains te same B5able J4&C0
I K I
<:
,rod%cti8ity declines B5able J4&&C0 5ese t@o
8ariants reD%ire tat soil ? be eliminated !rom
competition, and tat soil A become rentless and
reg%late te price o! prod%ction0
I K I
3:
,rod%cti8ity increases B5able J4&&&C0 6ere $oil ?
remains te reg%lator0
For case &&&: )ising price o! prod%ction I t@o e8ent%alities are possible: soil ? may remain
rentless and contin%e to reg%late te price, or poorer soil tan ? enters into competition and
reg%lates te price, in @ic case ? yields rent0
First e8ent%ality: $oil ? remains te reg%lator0
4ariant
1:
,rod%cti8ity o! te second in8estment remains te
same B5able J&JC0 5is is admissible %nder te
conditions ass%med by %s, pro8ided te
prod%cti8ity o! te !irst in8estment decreases0
I K I
<:
,rod%cti8ity o! te second in8estment decreases
B5able JJC0 5is does not excl%de te possibility
tat te !irst in8estment may retain te same
prod%cti8ity0
I K I
3:
,rod%cti8ity o! te second in8estment increases
B5able JJ&/&n te :erman 18*2 edition tis
reads: J&J0 I 0d01C0 5is, again, pres%pposes
!alling prod%cti8ity o! te !irst in8estment0
$econd e8ent%ality: ?n in!erior D%ality soil Bdesignated as aC enters into competition# soil ? yields
rent0
4ariant
1:
,rod%cti8ity o! te second in8estment remains te
same B5able JJ&&C0
4ariant
<:
,rod%cti8ity declines B5able JJ&&&C0
I K I 3: ,rod%cti8ity increases B5able JJ&4C0
5ese tree 8ariants con!orm to te general conditions o! te problem and reD%ire no !%rter
comment0
+1= ;apter J'&&&
5e tables no@ !ollo@:
5?A'E J&
5ype
o!
$oil
,rice o!
,rod%ction
$0
3%tp%t
A%sels
$elling
,rice
$0
,roceeds
$0
)ent
$0
)ent
&ncrease
? 6= 1= 6 6= = =
A 6= 1< 6 >< 1< 1<
; 6= 12 6 82 <2 < \ 1<
7 6= 16 6 *6 36 3 \ 1<
E 6= 18 6 1=8 28 2 \ 1<
1<= 1= \ 1<
For second capital in8ested in te same soil:
First ;ase: ,rice o! prod%ction remains %naltered0
4ariant 1: ,rod%cti8ity o! te second in8estment o! capital remains te same0
5?A'E J&&
5ype
o!
$oil
,rice o!
,rod%ction
$0
3%tp%t
A%sels
$elling
,rice
$0
,roceeds
$0
)ent
$0
)ent
&ncrease
?
6= U 6= R
1<=
1= U 1=
R <=
6 1<= = =
A
6= U 6= R
1<=
1< U 1<
R <2
6 122 <2 <2
;
6= U 6= R
1<=
12 U 12
R <8
6 168 28 < \ <2
7
6= U 6= R
1<=
16 U 16
R 3<
6 1*< >< 3 \ <2
E
6= U 6= R
1<=
18 U 18
R 36
6 <16 *6 2 \ <2
<2= 1= \ <2
4ariant <: ,rod%cti8ity o! te second in8estment o! capital declines# no second in8estment in soil
?0
1C $oil A ceases to yield rent0
5?A'E J&&&
5ype
o!
$oil
,rice o!
,rod%ction
$0
3%tp%t
A%sels
$elling
,rice
$0
,ro-
ceeds
$0
)ent
$0
)ent
&ncrease
? 6= 1= 6 6= = =
+11 ;apter J'&&&
A
6= U 6= R
1<=
1< U 8 R
<=
6 1<= = =
;
6= U 6= R
1<=
12 U *X R
<3X
6 12= <= <=
7
6= U 6= R
1<=
16 U 1=W
R <6W
6 16= 2= < \ <=
E
6= U 6= R
1<=
18 U 1< R
3=
6 18= 6= 3 \ <=
1<= 6 \ <=
/> &n te :erman 18*2 edition tis reads: <=0 I 0d01
<C $oil A does not become completely rentless0
5?A'E J&4
5ype
o!
$oil
,rice o!
,rod%ction
$0
3%tp%t
A%sels
$elling
,rice
$0
,roceeds
$0
)ent
$0
)ent
&ncrease
? 6= 1= 6 6= = =
A
6= U 6= R
1<=
1< U * R
<1
6 1<6 6 6
;
6= U 6= R
1<=
12 U
1=Z R
<2Z
6 12> <> 6 U <1
7
6= U 6= R
1<=
16 U 1<
R <8
6 168 28
6 U < \
<1
E
6= U 6= R
1<=
18 U
13Z R
31Z
6 18* 6*
6 U 3 \
<1
1+=
2 \ 6 U 6
\ <1
4ariant 3: ,rod%cti8ity o! te second in8estment o! capital increases# ere, too, no second
in8estment in $oil ?0
5?A'E J4
5ype
o!
$oil
,rice o!
,rod%ction
$0
3%tp%t
A%sels
$elling
,rice
$0
,roceeds
$0
)ent
$0
)ent
&ncrease
? 6= 1= 6 6= = =
A
6= U 6= R
1<=
1< U 1+
R <>
6 16< 2< 2<
; 6= U 6= R
1<=
12 U
1>Z R
6 18* 6* 2< U <>
+1< ;apter J'&&&
31Z
7
6= U 6= R
1<=
16 U <=
R 36
6 <16 *6
2< U < \
<>
E
6= U 6= R
1<=
18 U
<<Z R
2=Z
6 <23 1<3
2< U 3 \
<>
33=
2 \ 2< U
6 \ <>
$econd ;ase: ,rice o! prod%ction declines0
4ariant 1: ,rod%cti8ity o! te second in8estment o! capital remains te same0 $oil ? is excl%ded
!rom competition and soil A becomes rentless0
5?A'E J4&
5ype
o!
$oil
,rice o!
,rod%ction
$0
3%tp%t
A%sels
$elling
,rice
$0
,roceeds
$0
)ent
$0
)ent
&ncrease
A
6= U 6= R
1<=
1< U 1<
R <2
+ 1<= = =
;
6= U 6= R
1<=
12 U 12
R <8
+ 12= <= <=
7
6= U 6= R
1<=
16 U 16
R 3<
+ 16= 2= < \ <=
E
6= U 6= R
1<=
18 U 18
R 36
+ 18= 6= 3 \ <=
1<= 6 \ <=
4ariant <: ,rod%cti8ity o! te second in8estment o! capital declines# soil ? is excl%ded !rom
competition and soil A becomes rentless0
5?A'E J4&&
5ype
o!
$oil
,rice o!
,rod%ction
$0
3%tp%t
A%sels
$elling
,rice
$0
,roceeds
$0
)ent
$0
)ent
&ncrease
A
6= U 6= R
1<=
1< U * R
<1
+ +N> 1<= = =
;
6= U 6= R
1<=
12 U
1=Z R
<2Z
+ +N> 12= <= <=
7
6= U 6= R
1<=
16 U 1<
R <8
+ +N> 16= 2= < \ <=
E 6= U 6= R
1<=
18 U
13Z R
+ +N> 18= 6= 3 \ <=
+13 ;apter J'&&&
31Z
1<= 6 \ <=
4ariant 3: ,rod%cti8ity o! te second in8estment o! capital increases# soil ? remains in
competition# soil A yields rent0
5?A'E J4&&&
5ype
o!
$oil
,rice o!
,rod%ction
$0
3%tp%t
A%sels
$elling
,rice
$0
,roceeds
$0
)ent
$0
)ent
&ncrease
?
6= U 6= R
1<=
1= U 1+
R <+
2 2N+ 1<= = =
A
6= U 6= R
1<=
1< U 18
R 3=
2 2N+ 122 <2 <2
;
6= U 6= R
1<=
12 U <1
R 3+
2 2N+ 168 28 < \ <2
7
6= U 6= R
1<=
16 U <2
R 26
2 2N+ 1*< >< 3 \ <2
E
6= U 6= R
1<=
18 U <>
R 2+
2 2N+ <16 *6 2 \ <2
<2= 1= \ <2
;ase: ,rice o! prod%ction rises0
?C $oil ? remains rentless and contin%es to reg%late te price0
4ariant 1: ,rod%cti8ity o! te second in8estment o! capital remains te same: tis reD%ires
decreasing prod%cti8ity o! te !irst in8estment o! capital0
5?A'E J&J
5ype
o!
$oil
,rice o!
,rod%ction
$0
3%tp%t
A%sels
$elling
,rice
$0
,roceeds
$0
)ent
$0
)ent
&ncrease
?
6= U 6= R
1<=
>Z U 1=
R 1>Z
6 6N> 1<= = =
A
6= U 6= R
1<=
* U 1<
R <1
6 6N> 122 <2 <2
;
6= U 6= R
1<=
1=Z U
12 R
<2Z
6 6N> 168 28 < \ <2
7
6= U 6= R
1<=
1< U 16
R <8
6 6N> 1*< >< 3 \ <2
E
6= U 6= R
1<=
13Z U
18 R
31Z
6 6N> <16 *6 2 \ <2
+12 ;apter J'&&&
<2= 1= \ <2
4ariant <: ,rod%cti8ity o! te second in8estment o! capital decreases# @ic does not excl%de
constant prod%cti8ity o! te !irst in8estment0
5?A'E JJ&
5ype
o!
$oil
,rice o!
,rod%ction
$0
3%tp%t
A%sels
$elling
,rice
$0
,roceeds
$0
)ent
$0
)ent
&ncrease
?
6= U 6= R
1<=
+ U 1<Z
R 1>Z
6 6N> 1<= = =
A
6= U 6= R
1<=
6 U 1+
R <1
6 6N> 122 <2 <2
;
6= U 6= R
1<=
> U 1>Z
R <2Z
6 6N> 168 28 < \ <2
7
6= U 6= R
1<=
8 U <=
R <8
6 6N> 1*< >< 3 \ <2
E
6= U 6= R
1<=
* U <<Z
R 31Z
6 6N> <16 *6 2 \ <2
<2= 1= \ <2
AC ?n in!erior soil Bdesignated as aC becomes te price reg%lator and soil ? t%s yields rent0 5is
makes admissible !or all 8ariants constant prod%cti8ity o! te second in8estment0
4ariant 1: ,rod%cti8ity o! te second in8estment o! capital remains te same0
5?A'E JJ&&
5ype
o!
$oil
,rice o!
,rod%ction
$0
3%tp%t
A%sels
$elling
,rice
$0
,roceeds
$0
)ent
$0
)ent
&ncrease
a 1<= 16 >Z 1<= = =
?
6= U 6= R
1<=
1= U 1=
R <=
>Z 1+= 3= 3=
A
6= U 6= R
1<=
1< U 1<
R <2
>Z 18= 6= < \ 3=
;
6= U 6= R
1<=
12 U 12
R <8
>Z <1= *= 3 \ 3=
7
6= U 6= R
1<=
16 U 16
R 3<
>Z <2= 1<= 2 \ 3=
E
6= U 6= R
1<=
18 U 18
R 36
>Z <>= 1+= + \ 3=
2+= 1+ \ 3=
4ariant <: ,rod%cti8ity o! te second in8estment o! capital declines0
+1+ ;apter J'&&&
5?A'E JJ&&&
5ype
o!
$oil
,rice o!
,rod%ction
$0
3%tp%t
A%sels
$elling
,rice
$0
,roceeds
$0
)ent
$0
)ent
&ncrease
? 1<= 1+ 8 1<= = =
?
6= U 6= R
1<=
1= U >Z
R 1>Z
8 12= <= <=
A
6= U 6= R
1<=
1< U * R
<1
8 168 28 <= U <8
;
6= U 6= R
1<=
12 U
1=Z R
<2Z
8 1*6 >6
<= U < \
<8
7
6= U 6= R
1<=
16 U 1<
R <8
8 <<2 1=2
<= U 3 \
<8
E
6= U 6= R
1<=
18 U
13Z R
31Z
8 <+< 13<
<= U 2 \
<8
38=
+ \ <= U
1= \ <8
4ariant 3: ,rod%cti8ity o! te second in8estment increases0
5?A'E JJ&4
5ype
o!
$oil
,rice o!
,rod%ction
$0
3%tp%t
A%sels
$elling
,rice
$0
,roceeds
$0
)ent
$0
)ent
&ncrease
? 1<= 16 >Z 1<= = =
?
6= U 6= R
1<=
1= U
1<Z R
<1Z
>Z 168` 28` 1+ U 33`
A
6= U 6= R
1<=
1< U 1+
R <>
>Z <=<Z 8<Z
1+ U < \
33`
;
6= U 6= R
1<=
12 U
1>Z R
31Z
>Z <36[ 116[
1+ U 3 \
33`
7
6= U 6= R
1<=
16 U <=
R 36
>Z <>= 1+=
1+ U 2 \
33`
E
6= U 6= R
1<=
18 U
<<Z R
2=Z
>Z 3=3` 183`
1+ U + \
33`
+81[ + \ 1+ U
+16 ;apter J'&&&
1+ \ 33`
5ese tables lead to te !ollo@ing concl%sions:
&n te !irst place, te seD%ence o! rents bea8es exactly as te seD%ence o! !ertility di!!erences I
taking te rentless reg%lating soil as te Eero point0 &t is not te absol%te yield, b%t only te
di!!erences in yield @ic are te !actors determining rent0 Weter te 8ario%s soils yield 1, <, 3,
2, + b%sels, or @eter tey yield 11, 1<, 13, 12, 1+ b%sels per acre, te rents in bot cases !orm
te seD%ence =, 1, <, 3, 2 b%sels, or teir eD%i8alent in money0
A%t !ar more important is te res%lt @it respect to te total rent yields !or repeated in8estment o!
capital in te same land0
&n !i8e o%t o! te tirteen analysed cases, te total rent do%bles @en te in8estment o! capital is
do%bled# instead o! l=x1< sillings it becomes 1= \ <2 sillings R <2= sillings0 5ese cases are:
;ase &, constant price, 8ariant 1: constant prod%ction rise B5able J&&C0
;ase &&, !alling price, 8ariant 3: increasing prod%ction rise B5able J4&&&C0
;ase &&&, increasing price, !irst e8ent%ality B@ere soil ? remains te reg%latorC, in all tree
8ariants Btables J&J, JJ and JJ&C0
&n !o%r cases te rent more tan do%bles, namely:
;ase &, 8ariant 3, constant price, b%t increasing prod%ction rise B5able J4C 5e total rent climbs
to 33= sillings0
;ase &&&, second e8ent%ality B@ere soil ? yields rentC, in all tree 8ariants B5able JJ&&, rent R 1+
\ 3= R 2+= sillings# 5able JJ&&&, rent R + \ <= U 1= \ <8 R 38= sillings# 5able JJ&4, rent R + \
1+ U 1+ \ 33` R +81[ sillingsC0
&n one case te rent rises, b%t not to t@ice te amo%nt yielded by te !irst in8estment o! capital:
;ase &, constant price, 8ariant <: !alling prod%cti8ity o! te second in8estment, %nder conditions
@ereby A does not become completely rentless B5able J&4, rent R 2 \ 6 U 6 \ <1 R 1+=
sillingsC0
Finally, only in tree cases does te total rent remain at te same le8el @it a second in8estment I
!or all soils taken togeter I as @it te !irst in8estment B5able J&C# tese are te cases in @ic
soil ? is excl%ded !rom competition and A becomes te reg%lator and tereby rentless soil0 5%s,
te rent !or A not only 8anises b%t is also ded%cted !rom e8ery s%cceeding term o! te rent
seD%ence# te res%lt is t%s determined0 5ese cases are:
;ase &, 8ariant <, @en te conditions are s%c tat soil ? is excl%ded B5able J&&&C0 5e total rent
is 6 \ <=, or 1= \ 1< R 1<=, as in 5able J&0
;ase &&, 8ariants & and <0 6ere soil ? is necessarily excl%ded in accordance @it te ass%mptions
Btables J4& and J4&&C and te total rent is again 6 \ <= R 1= \ 1< R 1<= sillings0
5%s, tis means: &n te great maHority o! all possible cases te rent rises I per acre o! rent-
bearing land as @ell as partic%larly in its total amo%nt I as a res%lt o! an increased in8estment o!
capital in te land0 3nly in tree o%t o! te tirteen analysed cases does its total remain %naltered0
5ese are te cases in @ic te lo@est D%ality soil I iterto te reg%lator and rentless I is
eliminated !rom competition and te next D%ality soil takes its place, i0e0, becomes rentless0 A%t
e8en in tese cases, te rents %pon te s%perior soils rise in comparison @it te rents d%e to te
!irst capital in8estment# @en te rent !or ; !alls !rom <2 to <=, ten tose !or 7 and E rise !rom
36 and 28 to 2= and 6= sillings respecti8ely0
? !all in te total rents belo@ te le8el !or te !irst in8estment o! capital B5able J&C @o%ld be
possible only i! soil A as @ell as soil ? @ere to be excl%ded !rom competition and soil ; @ere to
become reg%lating and rentless0
+1> ;apter J'&&&
5%s, te more capital is in8ested in te land, and te iger te de8elopment o! agric%lt%re and
ci8ilisation in general in a gi8en co%ntry, te more rents rise per acre as @ell as in total amo%nt,
and te more immense becomes te trib%te paid by society to te big lando@ners in te !orm o!
s%rpl%s-pro!its I so long as te 8ario%s soils, once taken %nder c%lti8ation, are all able to contin%e
competing0
5is la@ acco%nts !or te amaEing 8itality o! te class o! big landlords0 -o social class li8es so
s%mpt%o%sly, no oter class claims te rigt it does to traditional l%x%ry in keeping @it its
Kestate,L regardless o! @ere te money !or tis p%rpose may be deri8ed, and no oter class piles
debt %pon debt so ligteartedly0 ?nd yet it al@ays lands again on its !eet I tanks to te capital
in8ested by oter people in te land, @ic yields it a rent, completely o%t o! proportion to te
pro!its reaped tere!rom by te capitalist0
6o@e8er, te same la@ also explains @y te 8itality o! te big landlord is grad%ally being
exa%sted0
Wen te Englis corn d%ties @ere abolised in 1826, te Englis man%!act%rers belie8ed tat
tey ad tereby t%rned te land-o@ning aristocracy into pa%pers0 &nstead, tey became ricer
tan e8er0 6o@ did tis occ%rQ 4ery simply0 &n te !irst place, te !armers @ere no@ compelled by
contract to in8est V1< per acre ann%ally instead o! V80 ?nd secondly, te landlords, being strongly
represented in te 'o@er 6o%se too, granted temsel8es a large go8ernment s%bsidy !or drainage
proHects and oter permanent impro8ements on teir land0 $ince no total displacement o! te
poorest soil took place, b%t rater, at @orst, it became employed !or oter p%rposes I and mostly
only temporarily I rents rose in proportion to te increased in8estment o! capital, and te landed
aristocracy conseD%ently @as better o!! tan e8er be!ore0
A%t e8eryting is transitory0 5ransoceanic steamsips and te rail@ays o! -ort and $o%t
?merica and &ndia enabled some 8ery sing%lar tracts o! land to compete in E%ropean grain
markets0 5ese @ere, on te one and, te -ort ?merican prairies and te ?rgentine pampas I
plains cleared !or te plo%g by -at%re itsel!, and 8irgin soil @ic o!!ered ric ar8ests !or years
to come e8en @it primiti8e c%lti8ation and @ito%t !ertilisers0 ?nd, on te oter and, tere @ere
te land oldings o! )%ssian and &ndian comm%nist comm%nities @ic ad to sell a portion o!
teir prod%ce, and a constantly increasing one at tat, !or te p%rpose o! obtaining money !or
taxes @r%ng !rom tem I !reD%ently by means o! tort%re I by a r%tless and despotic state0 5ese
prod%cts @ere sold @ito%t regard to price o! prod%ction, tey @ere sold at te price @ic te
dealer o!!ered, beca%se te peasant per!orce needed money @ito%t !ail @en taxes became d%e0
?nd in !ace o! tis competition I coming !rom 8irgin plains as @ell as !rom )%ssian and &ndian
peasants gro%nd do@n by taxation I te E%ropean tenant !armer and peasant co%ld not pre8ail at
te old rents0 ? portion o! te land in E%rope !ell decisi8ely o%t o! competition as regards grain
c%lti8ation, and rents !ell e8ery@ere# o%r second case, 8ariant < I !alling prices and !alling
prod%cti8ity o! te additional in8estment o! capital I became te r%le !or E%rope# and tere!ore
te lament o! landlords !rom $cotland to &taly and !rom so%tern France to East ,r%ssia0
Fort%nately, te plains are !ar !rom being entirely bro%gt %nder c%lti8ation# tere are eno%g le!t
to r%in all te big landlords o! E%rope and te small ones into te bargain I '.0.1
5e eadings %nder @ic rent so%ld be analysed are:
?0 7i!!erential rent0
1C ;onception o! di!!erential rent0 Water-po@er
as an ill%stration0 5ransition to agric%lt%ral rent
proper0
+18 ;apter J'&&&
<C 7i!!erential rent &, arising !rom te 8arying
!ertility o! 8ario%s plots o! land0
3C 7i!!erential rent &&, arising !rom s%ccessi8e
in8estments o! capital in te same land0
7i!!erential rent && so%ld be analysed:
aC @it a stationary,
bC !alling,
cC and rising price o! prod%ction0
?nd also
dC trans!ormation o! s%rpl%s-pro!it into rent0
2C &n!l%ence o! tis rent %pon te rate o! pro!it0
A0 ?bsol%te rent0
;0 5e price o! land0
70 Final remarks concerning gro%nd-rent0
38er-all concl%sions to be dra@n !rom te consideration o! di!!erential rent in general are te
!ollo@ing:
'irst, te !ormation o! s%rpl%s-pro!it may take place in 8ario%s @ays0 3n te one and, based on
di!!erential rent &, tat is, on te in8estment o! te entire agric%lt%ral capital in land consisting o!
soils o! 8arying !ertility0 3r, in te !orm o! di!!erential rent &&, based on te 8arying di!!erential
prod%cti8ity o! s%ccessi8e in8estments o! capital in te same land, i0e0, a greater prod%cti8ity I
expressed, e0g0, in D%arters o! @eat I tan is sec%red @it te same in8estment o! capital in te
@orst land I rentless, b%t @ic reg%lates te price o! prod%ction0 A%t no matter o@ tis s%rpl%s-
pro!it may arise, its trans!ormation into rent, i0e0, its trans!er !rom !armer to landlord, al@ays
pres%pposes tat te 8ario%s act%al indi8id%al prod%ction prices o! te partial o%tp%ts o! te
indi8id%al s%ccessi8e in8estments o! capital Bi0e0, independent o! te general price o! prod%ction
by @ic te market is reg%latedC a8e pre8io%sly been red%ced to an indi8id%al a8erage price o!
prod%ction0 5e excess o! te general reg%lating prod%ction price o! te o%tp%t per acre o8er tis
indi8id%al a8erage prod%ction price constit%tes and is a meas%re o! te rent per acre0 &n te case
o! di!!erential rent &, te di!!erential res%lts are in temsel8es disting%isable beca%se tey take
place %pon di!!erent portions o! land I distinct !rom one anoter and existing side by side I gi8en
an in8estment o! capital per acre and a degree o! c%lti8ation considered normal0 &n te case o!
di!!erential rent &&, tey m%st !irst be made disting%isable# tey m%st in !act be trans!ormed back
into di!!erential rent &, and tis can only take place in te indicated @ay0 For example, let %s take
5able &&&, $0 <<60
$oil A yields !or te !irst in8ested capital o! V<Z I < D%arters per acre, and !or te second
in8estment o! eD%al magnit%de I 1Z D%arters# togeter I 3Z D%arters !rom te same acre0 &t is not
possible to disting%is @ic part o! tese 3Z D%arters is a prod%ct o! in8ested capital & and
@ic part a prod%ct o! in8ested capital &&, !or it is all gro@n %pon te same soil0 &n !act, te 3Z
D%arters is te yield !rom te total capital o! V+# and te act%al !act o! te matter is simply tis: a
capital o! V<Z yielded < D%arters, and a capital o! V+ yielded 3Z D%arters rater tan 2 D%arters0
5e sit%ation @o%ld be H%st te same i! te V+ yielded 2 D%arters, i0e0, i! te yield !rom bot
in8estments o! capital @ere eD%al# similarly, i! te yield @ere e8en + D%arters, i0e0, i! te second
+1* ;apter J'&&&
in8estment o! capital @ere to yield a s%rpl%s o! 1 D%arter0 5e price o! prod%ction o! te !irst <
D%arters is V1Z per D%arter, and tat o! te second 1Z D%arters is V< per D%arter0 ;onseD%ently te
3Z D%arters togeter cost V60 5is is te indi8id%al price o! prod%ction o! te total prod%ct, and,
on te a8erage, amo%nts to V1 12 <N> s0 per D%arter, i0e0, approximately V1`0 Wit te general
price o! prod%ction determined by soil ?, namely V3, tis res%lts in a s%rpl%s-pro!it o! V1[ per
D%arter, and t%s !or te 3Z D%arters, a total o! V2 3N80 ?t te a8erage price o! prod%ction o! A tis
corresponds to abo%t 1Z D%arters0 &n oter @ords, te s%rpl%s-pro!it !rom A is represented by an
aliD%ot portion o! te o%tp%t !rom A, i0e0, by te 1Z D%arters, @ic express te rent in terms o!
grain, and @ic sell I in accordance @it te general price o! prod%ction I !or V2Z0 A%t on te
oter and, te excess prod%ct !rom an acre o! A o8er tat !rom an acre o! ? does not
a%tomatically represent s%rpl%s-pro!it, and tereby s%rpl%s-prod%ct0 ?ccording to o%r ass%mption,
an acre o! A yields 3Z D%arters, @ereas an acre o! ? yields only 1 D%arter0 Excess prod%ct !rom
A is, tere!ore, <Z D%arters b%t te s%rpl%s-prod%ct is only 1Z D%arters# !or te capital in8ested in
A is t@ice tat in8ested in ?, and t%s its price o! prod%ction is do%ble0 &! an in8estment o! V+
@ere also to take place in ?, and te rate o! prod%cti8ity @ere to remain te same, ten te o%tp%t
@o%ld be < D%arters instead o! 1 D%arter, and it @o%ld ten be seen tat te act%al s%rpl%s-prod%ct
is determined by comparing 3Z @it <, not 3Z @it 1# i0e0, it is only 1Z D%arters, not <Z D%arters0
F%rtermore, i! a tird in8estment o! capital, amo%nting to V<Z, @ere made in A, and tis @ere to
yield only 1 D%arter I tis D%arter @o%ld ten cost V3 as in ? I its selling price o! V3 @o%ld only
co8er te price o! prod%ction, @o%ld pro8ide only te a8erage pro!it, b%t no s%rpl%s-pro!it, and
@o%ld t%s yield noting tat co%ld be trans!ormed into rent0 5e comparison o! te o%tp%t per
acre !rom any gi8en soil type @it te o%tp%t per acre !rom soil ? does not so@ @eter it is te
o%tp%t !rom an eD%al or !rom a larger in8estment o! capital, nor @eter te additional o%tp%t
only co8ers te price o! prod%ction or is d%e to greater prod%cti8ity o! te additional capital0
Secondly, ass%ming a decreasing rate o! prod%cti8ity !or te additional in8estments o! capital
@ose limit, so !ar as te ne@ !ormation o! s%rpl%s-pro!it is concerned, is tat in8estment o!
capital @ic H%st co8ers te price o! prod%ction, i0e0, @ic prod%ces a D%arter as dearly as te
same in8estment o! capital in an acre o! soil ?, namely, at V3, according to o%r ass%mption I it
!ollo@s !rom @at as H%st been said: tat te limit, @ere te total in8estment o! capital in an
acre o! A @o%ld no longer yield any rent, is reaced @en te indi8id%al a8erage prod%ction price
o! o%tp%t per acre o! A @o%ld rise to te price o! prod%ction per acre o! ?0
&! only in8estments o! capital are made in A tat yield te price o! prod%ction, i0e0, yield no
s%rpl%s-pro!it nor ne@ rent, ten tis indeed raises te indi8id%al a8erage price o! prod%ction per
D%arter, b%t does not a!!ect te s%rpl%s-pro!it, and e8ent%ally te rent, !ormed by pre8io%s
in8estments o! capital0 For te a8erage price o! prod%ction al@ays remains belo@ tat o! ?, and
@en te price excess per D%arter decreases, te n%mber o! D%arters increases proportionately, so
tat te total excess in price remains %naltered0
&n te case ass%med, te !irst t@o in8estments o! capital in A amo%nting to V+ yield 3Z D%arters,
t%s according to o%r ass%mption 1Z D%arters o! rent R V2Z0 -o@, i! a tird in8estment o! V<Z is
made, b%t one @ic yields only an additional D%arter, ten te total price o! prod%ction
Bincl%ding <=T pro!itC o! te 2Z D%arters R V*# t%s te a8erage price per D%arter R V<0 5e
a8erage price o! prod%ction per D%arter %pon A as t%s risen !rom V1 +N> to V<, and te s%rpl%s-
pro!it per D%arter, compared @it te reg%lating price o! ?, as !allen !rom V1 <N> to V10 A%t 1 \
2Z R V2Z H%st as !ormerly 1 <N> \ 3Z R V2Z0
'et %s ass%me tat a !o%rt and !i!t additional in8estment o! capital, amo%nting to V<Z eac, are
made in A, @ic do no more tan prod%ce a D%arter at its general price o! prod%ction0 5e total
prod%ct per acre @o%ld ten be 6Z D%arters and teir price o! prod%ction V1+0 5e a8erage price
o! prod%ction per D%arter !or A @o%ld a8e risen again I !rom V< /&n te :erman 18*2 edition
tis reads: 10 I 0d01 to V< 2N13 I and te s%rpl%s-pro!it per D%arter, compared @it te reg%lating
price o! prod%ction o! ?, @o%ld a8e dropped again I !rom V1 to V *N130 A%t tese V*N13 @o%ld
+<= ;apter J'&&&
no@ a8e to be calc%lated %pon te basis o! 6Z D%arters instead o! 2Z D%arters0 ?nd *N13 \ 6Z R
1 \ 2Z R 2Z0
&t !ollo@s !rom tis, !irstly, tat no increase in te reg%lating price o! prod%ction is necessary
%nder tese circ%mstances, in order to make possible additional in8estments o! capital in te rent-
bearing soil I e8en to te point @ere te additional capital completely ceases to prod%ce s%rpl%s-
pro!it and contin%es to yield only te a8erage pro!it0 &t !ollo@s !%rtermore tat te total s%rpl%s-
pro!it per acre remains te same ere, no matter o@ m%c s%rpl%s-pro!it per D%arter may
decrease# tis decrease is al@ays balanced by a corresponding increase in te n%mber o! D%arters
prod%ced per acre0 &n order tat te a8erage price o! prod%ction migt reac te le8el o! te
general price o! prod%ction Bence V3 !or soil AC, it is necessary tat s%pplementary in8estments
be made @ose o%tp%t as a iger price o! prod%ction tan te reg%lating one o! V30 A%t @e sall
see tat tis alone does not s%!!ice @ito%t !%rter ado to raise te a8erage price o! prod%ction per
D%arter o! A to te general price o! prod%ction o! V30
'et %s ass%me tat soil A prod%ced:
1C 3Z D%arters @ose price o! prod%ction is, as be!ore, V6, i0e0, t@o in8estments o! capital
amo%nting to V<Z eac bot yielding s%rpl%s-pro!it, b%t o! decreasing amo%nt0
<C 1 D%arter at V3, an in8estment o! capital in @ic te indi8id%al price o! prod%ction is eD%al to
te reg%lating price o! prod%ction0
3C 1 D%arter at V2, an in8estment o! capital in @ic te indi8id%al price o! prod%ction is iger
by 33T tan te reg%lating price0
We so%ld ten a8e +Z D%arters per acre !or V13 @it an in8estment o! a capital o! V1= >N1=#
tis is !o%r times te original in8ested capital, b%t not D%ite tree times te o%tp%t o! te !irst
in8estment o! capital0
+Z D%arters at V13 gi8es an a8erage price o! prod%ction o! V< 2N11 per D%arter, i0e0, an excess o!
V>N11 per D%arter, ass%ming te reg%lating price o! prod%ction o! V30 5is excess may be
trans!ormed into rent0 +Z D%arters sold at te reg%lating price o! prod%ction o! V3 yield V16Z0
?!ter ded%cting te prod%ction price o! V13, a s%rpl%s-pro!it, or rent, o! V3Z remains, @ic,
calc%lated at te present a8erage price o! prod%ction per D%arter o! A, tat is, at V<2N11 per
D%arter, represents 1 <+N+< D%arters0 5e money-rent @o%ld be lo@er by V1 and te grain-rent by
abo%t Z D%arter, b%t in spite o! te !act tat te !o%rt additional in8estment o! capital in A not
only !ails to yield s%rpl%s-pro!it, b%t yields less tan te a8erage pro!it, s%rpl%s-pro!it, and rent
still contin%e to exist0 'et %s ass%me tat, in addition to in8estment 3C, in8estment <C also
prod%ces at a price exceeding te reg%lating price o! prod%ction0 5en te total prod%ction is: 3Z
D%arters !or V6 U < D%arters !or V8# total +Z D%arters !or V12 prod%ction price0 5e a8erage price
o! prod%ction per D%arter @o%ld be V< 6N11 and @o%ld lea8e an excess o! V+N110 5e +Z D%arters,
sold at V3, gi8e a total o! V16Z# ded%cting te V12 prod%ction price lea8es V<Z !or rent0 ?t te
present a8erage price o! prod%ction %pon A, tis @o%ld be eD%i8alent to ++N+6 o! a D%arter0 &n
oter @ords, rent is still yielded alto%g less tan be!ore0
5is so@s, at any rate, tat @it additional in8estments o! capital in te better soils @ose o%tp%t
costs more tan te reg%lating price o! prod%ction te rent does not disappear I at least not @itin
te bo%nds o! admissible practice I alto%g it m%st decrease0 &t @ill decrease in proportion, on
te one and, to te aliD%ot part !ormed by tis less prod%cti8e capital in te total in8estment o!
capital, and on te oter and, in proportion to te decrease in its prod%cti8eness0 5e a8erage
price o! its prod%ce @o%ld still lie belo@ te reg%lating price and @o%ld t%s still permit s%rpl%s-
pro!it to be !ormed tat co%ld be trans!ormed into rent0
'et %s no@ ass%me tat, as a res%lt o! !o%r s%ccessi8e in8estments o! capital BV<Z, V<Z, V+ and
V+C @it decreasing prod%cti8ity, te a8erage price per D%arter o! A coincides @it te general
price o! prod%ction0
+<1 ;apter J'&&&
,rice o! ,rod%ction $%rpl%s !or )ent
;apital
V
,ro!it
V
3%t-
p%t
Mrs
,er Mr
V
5otal
V
$elling
,rice
V
,ro-
ceeds
V
Mrs V
1C <Z Z < 1Z 3 3 6 1 3
<C <Z Z 1Z < 3 3 2Z Z 1Z
3C + 1 1Z 2 6 3 2Z -Z -1Z
2C + 1 1 6 6 3 3 -1 -3
1+ 3 6 18 18 = =
5e !armer, in tis case, sells e8ery D%arter at its indi8id%al price o! prod%ction, and conseD%ently
te total n%mber o! D%arters at teir a8erage price o! prod%ction per D%arter, @ic coincides @it
te reg%lating price o! V30 6ence e still makes a pro!it o! <=T R V3 %pon is capital o! V1+0 A%t
te rent is gone0 Wat as become o! te excess in tis eD%alisation o! te indi8id%al prices o!
prod%ction per D%arter @it te general price o! prod%ctionQ
5e s%rpl%s-pro!it !rom te !irst V<Z @as V3, !rom te second V<Z it @as V1Z# total s%rpl%s-
pro!it !rom X o! te in8ested capital, tat is, !rom V+ R V2Z R *=T0
&n te case o! in8estment 3C, te V+ not only !ails to yield s%rpl%s-pro!it, b%t its o%tp%t o! 1Z
D%arters, sold at te general price o! prod%ction, gi8es a de!icit o! V1Z0 Finally, in te case o!
in8estment 2C, @ic like@ise amo%nts to V+ its o%tp%t o! & D%arter, sold at te general price o!
prod%ction, gi8es a de!icit o! V30 Aot in8estments o! capital togeter t%s gi8e a de!icit o! V2Z,
@ic is eD%al to te s%rpl%s-pro!it o! V2Z, realised !rom in8estments 2C and <C0
5e s%rpl%s-pro!it and de!icit balance o%t0 5ere!ore te rent disappears0 &n !act, tis is possible
only beca%se te elements o! s%rpl%s-8al%e, @ic !ormed s%rpl%s-pro!it or rent, no@ enter into
te !ormation o! te a8erage pro!it0 5e !armers makes tis a8erage pro!it o! V3 on V1+, or <=T,
at te expense o! te rent0
5e eD%alisation o! te indi8id%al a8erage price o! prod%ction o! A to te general price o!
prod%ction o! ?, @ic reg%lates te market-price, pres%pposes tat te di!!erence o! te
indi8id%al price o! te prod%ce !rom te !irst in8estments o! capital belo@ te reg%lating price is
more and more compensated and !inally balanced o%t by te di!!erence o! te price o! te prod%ce
!rom te s%bseD%ent in8estments o! capital abo8e te reg%lating price0 Wat appears as s%rpl%s-
pro!it, so long as te prod%ce !rom te !irst in8estments o! capital is sold by itsel!, t%s grad%ally
becomes part o! its a8erage price o! prod%ction, and tereby enters into te !ormation o! te
a8erage pro!it, %ntil it is !inally completely absorbed by it0
&! only V+ are in8ested in A instead o! V1+ and te additional <Z D%arters o! te last table are
prod%ced by taking <Z ne@ acres o! ? %nder c%lti8ation @it an in8estment o! V<Z per acre, ten
te additional in8ested capital @o%ld amo%nt to only V6[, i0e0, te total in8estment in ? and A !or
te prod%ction o! tese 6 D%arters @o%ld be only V11[, instead o! V1+, and teir total price o!
prod%ction, incl%ding pro!it, V13Z0 5e 6 D%arters @o%ld still be sold !or V18, b%t te in8estment
o! capital @o%ld a8e decreased by V3`, and te rent !rom A @o%ld be V2Z per acre, as be!ore0 &t
@o%ld be di!!erent i! te prod%ction o! te additional <Z D%arters reD%ired tat a soil in!erior to ?,
!or instance, ?-1 and ?-<, be taken %nder c%lti8ation# so tat te price o! prod%ction per D%arter
@o%ld be: !or 1Z D%arters on soil ?-1 R V2, and !or te last D%arter on soil ?-< R V60 &n tis case, V6
@o%ld be te reg%lating price o! prod%ction per D%arter0 5e 3Z D%arters !rom A @o%ld ten be
sold !or V<1 instead o! V1=Z, @ic @o%ld mean a rent o! V1+ instead o! V2Z, or, a rent in grain
+<< ;apter J'&&&
o! <Z D%arters instead o! 1Z D%arters0 $imilarly, a D%arter on ? @o%ld no@ yield a rent o! V3 R Z
D%arter0
Ae!ore disc%ssing tis point !%rter, anoter obser8ation:
5e a8erage price o! a D%arter !rom A is eD%alised, i0e0, coincides @it te general prod%ction
price o! V3 per D%arter, reg%lated by ?, as soon as tat portion o! te total capital @ic prod%ces
te excess o! 1Z D%arters is balanced by tat portion o! te total capital @ic prod%ces te
de!icit o! 1Z D%arters0 6o@ soon tis eD%alisation is e!!ected, or o@ m%c capital @it %nder-
prod%cti8eness m%st be in8ested in A !or tis p%rpose, @ill depend, ass%ming te s%rpl%s-
prod%cti8ity o! te !irst in8estments o! capital to be gi8en, %pon te relati8e %nder-prod%cti8eness
o! te later in8estments compared @it an in8estment o! te same amo%nt in te @orst, reg%lating
soil ?, or %pon te indi8id%al price o! prod%ction o! teir prod%ce, compared @it te reg%lating
price0
5e !ollo@ing concl%sions can no@ be dra@n !rom te !oregoing:
'irst: $o long as te additional capitals are in8ested in te same land @it s%rpl%s-prod%cti8ity,
e8en i! te s%rpl%s-prod%cti8ity is decreasing, te absol%te rent per acre in grain and money
increases, alto%g it decreases relati8ely, in proportion to te ad8anced capital Bin oter @ords,
te rate o! s%rpl%s-pro!it or rentC0 5e limit is establised ere by tat additional capital @ic
yields only te a8erage pro!it, or !or @ose prod%ce te indi8id%al price o! prod%ction coincides
@it te general price o! prod%ction0 5e price o! prod%ction remains te same %nder tese
circ%mstances, %nless te prod%ction !rom te poorer soils becomes s%per!l%o%s as a res%lt o!
increased s%pply0 E8en @en te price is !alling, tese additional capitals may @itin certain
limits still prod%ce s%rpl%s-pro!it, to%g less o! it0
Secondly: 5e in8estment o! additional capital yielding only te a8erage pro!it, @ose s%rpl%s-
prod%cti8ity tere!ore R =, does not alter in any @ay te amo%nt o! te existing s%rpl%s-pro!it, and
conseD%ently o! rent0 5e indi8id%al a8erage price per D%arter increases tereby %pon te s%perior
soils# te excess per D%arter decreases, b%t te n%mber o! D%arters @ic contain tis decreased
excess increases, so tat te matematical prod%ct remains te same0
4hirdly: ?dditional in8estments o! capital, te prod%ce o! @ic as an indi8id%al price o!
prod%ction exceeding te reg%lating price I te s%rpl%s-prod%cti8ity is tere!ore not merely R =,
b%t less tan Eero, or a negati8e D%antity, tat is, less tan te prod%cti8ity o! an eD%al in8estment
o! capital in te reg%lating soil ? I bring te indi8id%al a8erage price o! prod%ction o! te total
o%tp%t !rom te s%perior soil closer and closer to te general price o! prod%ction, i0e0, red%ce more
and more te di!!erence bet@een tem @ic constit%tes te s%rpl%s-pro!it, or rent0 ?n
increasingly greater part o! @at constit%ted s%rpl%s-pro!it or rent enters into te !ormation o! te
a8erage pro!it0 A%t ne8erteless, te total capital in8ested in an acre o! A contin%es to yield
s%rpl%s-pro!it, alto%g te latter decreases as te amo%nt o! capital @it %nder-prod%cti8eness
increases and to te extent o! tis %nder-prod%cti8eness0 5e rent, @it increasing capital and
increasing prod%ction, in tis case decreases absol%tely per acre, not merely relati8ely @it
re!erence to te increasing magnit%de o! te in8ested capital, as in te second case0
5e rent can be eliminated only @en te indi8id%al a8erage price o! prod%ction o! te total
o%tp%t !rom te better soil A coincides @it te reg%lating price, so tat te entire s%rpl%s-pro!it
!rom te !irst more prod%cti8e in8estments o! capital is cons%med in te !ormation o! a8erage
pro!it0
5e minim%m limit o! te drop in rent per acre is tat point at @ic it disappears0 A%t tis point
does not occ%r as soon as te additional in8estments o! capital are %nder-prod%cti8e, b%t rater as
soon as te additional in8estment o! %nder-prod%cti8e capital becomes so large in magnit%de tat
its e!!ect is to cancel te o8er-prod%cti8eness o! te !irst in8estments o! capital, so tat te
+<3 ;apter J'&&&
prod%cti8eness o! te total in8ested capital becomes te same as tat o! te capital in8ested in ?,
and te indi8id%al a8erage price per D%arter o! A becomes tere!ore te same as tat per D%arter
o! ?0
&n tis case too, te reg%lating price o! prod%ction, V3 per D%arter, @o%ld remain te same,
alto%g te rent ad disappeared0 3nly beyond tis point @o%ld te price o! prod%ction a8e to
rise in conseD%ence o! an increase eiter in te extent o! %nder-prod%cti8eness o! te additional
capital or in te magnit%de o! te additional capital o! eD%al %nder-prod%cti8eness0 For instance,
i!, in te abo8e table <Z D%arters @ere prod%ced instead o! 1Z D%arters %pon te same soil at V2
per D%arter, @e @o%ld a8e ad a total o! > D%arters !or V<< price o! prod%ction# a D%arter @o%ld
a8e cost V3 1N> it @o%ld t%s be V1N> abo8e te general price o! prod%ction, and te latter @o%ld
tere!ore a8e to rise0
For a long time, ten, additional capital @it %nder-prod%cti8eness, or e8en increasing %nder-
prod%cti8eness, migt be in8ested %ntil te indi8id%al a8erage price per D%arter !rom te best
soils became eD%al to te general price o! prod%ction, %ntil te excess o! te latter o8er te !ormer
I and tereby te s%rpl%s-pro!it and te rent I entirely disappeared0
?nd e8en ten, te disappearance o! rent !rom te better soils @o%ld only signi!y tat te
indi8id%al a8erage price o! teir prod%ce coincides @it te general price o! prod%ction, so tat
an increase in te latter @o%ld not yet be reD%ired0
&n te abo8e ill%stration, %pon better soil A I @ic is o@e8er te lo@est in te seD%ence o!
better or rent-bearing soils I 3Z D%arters @ere prod%ced by a capital o! V+ @it s%rpl%s-
prod%cti8eness and <Z D%arters by a capital o! V1= @it %nder-prod%cti8eness, i0e0, a total o! 6
D%arters# +Z o! tis total is t%s prod%ced by te latter portions o! capital @it %nder-
prod%cti8eness0 ?nd it is only at tis point tat te indi8id%al a8erage price o! prod%ction o! te 6
D%arters rises to V3 per D%arter and t%s coincides @it te general price o! prod%ction0
(nder te la@ o! landed property, o@e8er, te latter <Z D%arters co%ld not a8e been prod%ced
in tis @ay at V3 per D%arter, except @en tey co%ld be prod%ced %pon <Z ne@ acres o! soil ?0
5e case in @ic te additional capital prod%ces only at te general price o! prod%ction, @o%ld
a8e constit%ted te limit0 Aeyond tis point, te additional in8estment o! capital in te same land
@o%ld a8e ad to cease0
&ndeed, i!, te !armer once pays V2Z rent !or te !irst t@o in8estments o! capital, e m%st
contin%e to pay it, and e8ery in8estment o! capital @ic prod%ced a D%arter !or more tan V3 /&n
te :erman 18*2 edition tis reads: !or less tan V30 I 0d01 @o%ld res%lt in a ded%ction !rom is
pro!it0 5e eD%alisation o! te indi8id%al a8erage price, in te case o! %nder-prod%cti8eness, is
tereby pre8ented0
'et %s take tis case in te pre8io%s ill%stration, @ere te price o! prod%ction !or soil ?, V3 per
D%arter, reg%lates te price !or A0
$elling ,rice
;apital
V
,ro!it
V
,rice o!
,rod%ction
V
3%tp%t
Mrs
,rice o!
,rod%ction
per Mr V
,er Mr
V
5otal
V
$%rpl%s-
,ro!it
V
'oss
V
<Z Z 3 < 1Z 3 6 3 I
<Z Z 3 1Z < 3 2Z 1Z I
+ 1 6 1Z 2> 3 2Z I 1Z
+ 1 6 1 6 3 3 I 3
1+ 3 18 18 2Z 2Z
+<2 ;apter J'&&&
/> &n te :erman 18*2 edition tis reads: 30 I 0d01
5e price o! prod%ction !or te 3Z D%arters in te !irst t@o in8estments o! capital is like@ise V3
per D%arter !or te !armer, since e as to pay a rent o! V2Z# t%s te di!!erence bet@een is
indi8id%al price o! prod%ction and te general price o! prod%ction is not pocketed by im0 For
im, ten, te excess in prod%ce price !or te !irst t@o in8estments o! capital cannot ser8e to
balance o%t te de!icit inc%rred by te prod%ce in te tird and !o%rt in8estments o! capital0
5e 1Z D%arters !rom in8estment 3 cost te !armer V6, pro!it incl%ded: b%t at te reg%lating price
o! V3 per D%arter, e can sell tem !or only V2Z0 &n oter @ords, e @o%ld not only lose is @ole
pro!it, b%t gb163Z, or 1=T o! is in8ested capital o! V+, o8er and abo8e it0 5e loss o! pro!it and
capital in te case o! in8estment 3 @o%ld amo%nt to V2Z, and in te case o! in8estment 2 to V3,
i0e0, a total o! V2Z, or H%st as m%c as te rent !rom te better in8estments o! capital# te
indi8id%al price o! prod%ction !or te latter, o@e8er, cannot take part in eD%alising te indi8id%al
a8erage price o! prod%ction o! te total prod%ct !rom A, beca%se te excess is paid o%t as rent to a
tird party0
&! it @ere necessary, to meet te demand, to prod%ce te additional 1Z D%arters by te tird
in8estment o! capital te reg%lating market-price @o%ld a8e to rise to V2 per D%arter0 &n
conseD%ence o! tis rise in te reg%lating market-price, te rent !rom A @o%ld rise !or te !irst
and second in8estments, and rent @o%ld e !ormed %pon ?0
5%s alto%g di!!erential rent is b%t a !ormal trans!ormation o! s%rpl%s-pro!it into rent, and
property in land merely enables te o@ner in tis case to trans!er te s%rpl%s-pro!it o! te !armer
to imsel!, @e !ind ne8erteless tat s%ccessi8e in8estment o! capital in te same land, or, @at
amo%nts to te same ting, te increase in capital in8ested in te same land, reaces its limit !ar
more rapidly @en te rate o! prod%cti8eness o! te capital decreases and te reg%lating price
remains te same# in !act a more or less arti!icial barrier is reaced as a conseD%ence o! te mere
!ormal trans!ormation o! s%rpl%s-pro!it into gro%nd-rent, @ic is te res%lt o! landed property0
5e rise in te general price o! prod%ction, @ic becomes necessary ere @itin more narro@
limits tan oter@ise, is in tis case not merely te ca%se o! te increase in di!!erential rent, b%t
te existence o! di!!erential rent as rent is at te same time te reason !or te earlier and more
rapid rise in te general price o! prod%ction I in order to ens%re tereby te increased s%pply o!
prod%ce tat as become necessary0
5e !ollo@ing so%ld !%rtermore be noted:
Ay an additional in8estment o! capital in soil A, te reg%lating price co%ld not, as abo8e, rise to
V2 i! soil ? @ere to s%pply te additional prod%ce belo@ V2 by a second in8estment o! capital, or
i! ne@ and @orse soil tan ?, @ose price o! prod%ction @ere indeed iger tan V3 b%t lo@er
tan V2, @ere to enter into competition0 We see, ten, tat di!!erential rent & and di!!erential rent
&&, @ile te !irst is te basis o! te second, ser8e sim%ltaneo%sly as limits !or one anoter,
@ereby no@ a s%ccessi8e in8estment o! capital in te same land, no@ an in8estment o! capital
side by side in ne@ additional land, is made0 &n like manner tey limit eac oter in oter cases#
!or instance, @en better soil is taken %p0
Chapter 44. Diferential Rent Also on the Worst
Cultivated Soil
'et %s ass%me te demand !or grain is rising, and te s%pply can only res%lt !rom s%ccessi8e
in8estments o! capital %nder conditions o! %nder-prod%cti8eness in te rent-bearing soils, or by
additional in8estment o! capital, also @it decreasing prod%cti8ity, in soil ?, or by te in8estment
o! capital in ne@ lands o! in!erior D%ality tan ?0
'et %s take soil A as representati8e o! te rent-bearing soils0
5e additional in8estment o! capital demands an increase in te market-price abo8e te iterto
pre8ailing price o! prod%ction o! V3 per D%arter, in order to make possible te increased
prod%ction %pon A o! one D%arter B@ic may ere stand !or one million D%arters, H%st as e8ery
acre may stand !or one million acresC0 &ncreased o%tp%t may also be yielded by soils ; and 7,
etc0, te soils bearing te igest rent, b%t only @it decreasing s%rpl%s-prod%cti8eness# b%t it is
ass%med tat te D%arter !rom A is necessary in order to meet te demand0 &! tis D%arter is more
ceaply prod%ced by in8esting more capital in A tan @it te same addition o! capital to ?, or by
descending to soil ? - 1, @ic may, e0g0, reD%ire V2 to prod%ce a D%arter, @ereas te addition to
capital ? migt do so !or V3`, ten te additional capital on A @ill reg%late te market-price0
? prod%ces a D%arter !or V3, as ereto!ore0 $imilarly A, as be!ore, prod%ces a total o! 3Z D%arters
at an indi8id%al price o! prod%ction o! V6 !or its total o%tp%t0 -o@, i! an additional V2 o!
prod%ction price Bincl%ding pro!itC becomes necessary on A in order to prod%ce an additional
D%arter, @ereas it co%ld a8e been prod%ced on ? !or V3`, ten it @o%ld nat%rally be prod%ced
on ?, rater tan on A0 'et %s ass%me, ten, tat it can be prod%ced on A @it te additional price
o! prod%ction o! V3Z0 &n tis case, V3Z @o%ld become te reg%lating price !or te entire o%tp%t0
A @o%ld no@ sell its present o%tp%t o! 2Z D%arters !or Vl+`0 3! tis V6 is te price o! prod%ction
!or te !irst 3Z D%arters and te V3Z !or te last D%arter, i0e0, a total o! V*Z0 5is lea8es a s%rpl%s-
pro!it !or rent R V6[ as against te !ormer V2Z0 &n tis case, an acre o! ? @o%ld also yield a rent
o! V1Z# b%t it @o%ld not be te @orst soil ?, b%t rater te better soil A tat @o%ld reg%late te
price o! prod%ction o! V3Z0 3! co%rse, @e ass%me ere tat ne@ soil o! D%ality ? and eD%ally
!a8o%rable location as tat iterto c%lti8ated is not a8ailable, b%t tat eiter a second in8estment
o! capital in te already c%lti8ated plot ? at a iger price o! prod%ction, or te c%lti8ation o! an
e8en poorer soil ? - 1, is reD%ired0 ?s soon as di!!erential rent && comes into !orce tro%g
s%ccessi8e in8estments o! capital, te limits o! te rising price o! prod%ction may be reg%lated by
better soil# and te @orst soil, te basis o! di!!erential rent &, may also yield rent0 5is, e8en @it a
single di!!erential rent, all c%lti8ated land @o%ld yield rent0 We @o%ld ten a8e te !ollo@ing
t@o tables, @ere by price o! prod%ction @e mean te s%m o! te in8ested capital pl%s <=T pro!it#
in oter @ords, on e8ery V<Z o! capital VZ o! pro!it or a total o! V30
5ype
o!
$oil
?cres ,rice o!
,rod%c-
tion
V
3%tp%t
Mrs
$elling
,rice
V
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V
:rain-
)ent
Mrs
Money-
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V
? 1 3 1 3 3 = =
A 1 6 3Z 3 1=Z 1Z 2Z
+<6 ;apter J'&4
; 1 6 +Z 3 16Z 3Z 1=Z
7 1 6 >Z 3 <<Z +Z 16Z
5otal 2 <1 1>Z +<Z 1=Z 31Z
5is is te state o! a!!airs be!ore te ne@ capital o! V3Z, @ic yields only one D%arter, is
in8ested in A0 ?!ter tis in8estment, te sit%ation looks as !ollo@s:
5ype
o!
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? 1 3 1 3Z 3Z 1N> Z
A 1 *Z 2Z 3Z 1+` 1
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5otal 2 <2Z 18Z 62` 11Z 2=[
/5is, again, is not D%ite correctly calc%lated0 First o! all, te cost o! te 2Z Drs !or !armer A is, in
te !irst place, V*Z: in price o! prod%ction and, secondly, V2Z in rent, i0e0, a total o! V12# a8erage
per D%arter R V3Z0 5is a8erage price o! is total prod%ction t%s becomes te reg%lating market-
price0 5%s, te rent on ? @o%ld amo%nt to V1N* instead o! VZ, and tat on A @o%ld remain V2Z
as ereto!ore# 2Z Drs at V3Z R V12 and, i! @e ded%ct V*Z in price o! prod%ction, V2Z remain !or
s%rpl%s-pro!it0 We see, ten, tat in spite o! te reD%ired cange in n%merical 8al%es tis
ill%stration so@s o@, by means o! di!!erential rent &&, better soil, already yielding rent, may
reg%late te price and t%s trans!orm all soil, e8en iterto rentless, into rent-bearing soil0 I '. 0.1
5e grain-rent m%st rise as soon as te reg%lating price o! prod%ction o! te grain rises, i0e0, as
soon as te price o! prod%ction o! a D%arter o! grain !rom te reg%lating soil, or te reg%lating
in8ested capital in one o! te 8ario%s soil types, rises0 &t is te same as to%g all soils ad
become less prod%cti8e and prod%ced, e0g0, only +N> D%arter instead o! 1 D%arter @it e8ery ne@
in8estment o! V<Z0 Wate8er else tey prod%ce in grain @it te same in8estment o! capital is
trans!ormed into s%rpl%s-prod%ct, @ic represents te s%rpl%s-pro!it and tere!ore te rent0
?ss%ming te rate o! pro!it remains te same, te !armer can b%y less grain @it is pro!it0 5e
rate o! pro!it may remain te same i! @ages do not rise I eiter beca%se tey are depressed to te
pysical minim%m, i0e0, belo@ te normal 8al%e o! labo%r-po@er# or beca%se te oter articles o!
cons%mption needed by te labo%rer and s%pplied by man%!act%re a8e become relati8ely
ceaper# or beca%se te @orking day as become longer or more intensi8e, so tat te rate o!
pro!it in non-agric%lt%ral lines o! prod%ction, @ic, o@e8er, reg%lates te agric%lt%ral pro!it,
as remained te same or as risen# or, !inally, beca%se more constant and less 8ariable capital is
employed in agric%lt%re, e8en to%g te amo%nt o! capital in8ested is te same0
We a8e t%s considered te !irst metod by @ic rent may arise on te iterto @orst soil ?
@ito%t taking still @orse soil %nder c%lti8ation# tat is, rent may arise !rom te di!!erence
+<> ;apter J'&4
bet@een its indi8id%al, iterto reg%lating, price o! prod%ction and te ne@, iger price o!
prod%ction, @ereby te last additional capital employed %nder conditions o! %nder-
prod%cti8eness %pon te better soil s%pplies te necessary additional prod%ce0
&! te additional prod%ce ad to be s%pplied by soil ? - 1, @ic cannot prod%ce a D%arter !or less
tan V2, ten te rent per acre o! ? @o%ld a8e risen to V10 A%t, in tis case, soil ? - 1 @o%ld a8e
taken te place o! ? as te @orst c%lti8ated soil, and te latter @o%ld a8e mo8ed into te lo@est
position in te seD%ence o! rent-bearing soils0 7i!!erential rent & @o%ld a8e canged0 5is case,
ten, is not incl%ded in te consideration o! di!!erential rent &&, @ic arises !rom te 8arying
prod%cti8eness o! s%ccessi8e in8estments o! capital in te same piece o! land0
A%t aside !rom tis, di!!erential rent may arise on soil ? in t@o oter @ays0
Wit te price %ncanged I any gi8en price, e8en a lo@er one compared to !ormer ones I @en
te additional in8estment o! capital res%lts in s%rpl%s-prod%cti8eness, @ic prima facie, and %p
to a certain point m%st al@ays be te case precisely on te @orst soil0
$econdly, o@e8er, @en te prod%cti8eness o! s%ccessi8e in8estments o! capital in soil ?
decreases0
&t is ass%med in bot cases tat te increased prod%ction is reD%ired to meet demand0
A%t !rom te point o! 8ie@ o! di!!erential rent, a pec%liar di!!ic%lty arises ere o@ing to te
pre8io%sly de8eloped la@ I according to @ic it is al@ays te indi8id%al a8erage price o!
prod%ction per D%arter !or te total prod%ction Bor te total o%tlay o! capitalC @ic acts as te
determining !actor0 &n te case o! soil ?, o@e8er, tere is not, as in te cases o! te better soils,
anoter price o! prod%ction @ic limits !or ne@ in8estments o! capital te eD%alisation o! te
indi8id%al @it te general price o! prod%ction0 For te indi8id%al price o! prod%ction o! ? is
precisely te general price o! prod%ction reg%lating te market-price0
'et %s ass%me:
1C "hen the productiveness of successive investments of capital is increasing, 1 acre o! ? @ill
prod%ce 3 Drs instead o! < Drs gi8en an in8estment o! V+ I corresponding to a price o! prod%ction
o! V60 5e !irst in8estment o! V<Z yielded 1 Dr, te second I < Drs0 &n tis case, a price o!
prod%ction o! V6 @ill yield 3 Drs, so tat te a8erage cost o! a D%arter @ill be V<# i0e0, i! te 3 Drs
are sold at V< per D%arter, ten ?, as ereto!ore, does not yield any rent, b%t only te basis o!
di!!erential rent && as been altered# te reg%lating price o! prod%ction is no@ V< instead o! V3# a
capital o! V<Z no@ prod%ces an a8erage o! 1Z Drs on te @orst soil, instead o! 1 Dr, and no@ tis
is te o!!icial prod%cti8ity !or all better soils gi8en an in8estment o! V<Z0 From no@ on, a portion
o! teir !ormer s%rpl%s-prod%ct enters into te !ormation o! teir necessary o%tp%t, H%st as a
portion o! teir s%rpl%s-pro!it enters into !orming te a8erage pro!it0
3n te oter and, i! te calc%lation is made %pon te basis o! better soils, @ere te a8erage
calc%lation does not alter te absol%te s%rpl%s at all, beca%se !or tem te general price o!
prod%ction is te limit !or te in8estment o! capital, ten a D%arter !rom te !irst in8estment o!
capital costs V3 and te < Drs !rom te second in8estment cost only V1Z eac0 5is @o%ld tereby
gi8e rise to a grain-rent o! 1 Dr and a money-rent o! V3 on ?, b%t te 3 Drs @o%ld be sold !or te
old price o! V*0 &! a tird in8estment o! V<Z @ere made %nder conditions o! te same
prod%cti8eness as te second in8estment, ten te total @o%ld be + Drs !or a price o! prod%ction o!
V*0 &! te indi8id%al a8erage price o! prod%ction o! ? so%ld remain te reg%lating price, ten a
D%arter @o%ld no@ be sold at V1 2N+0 5e a8erage price @o%ld a8e !allen once more I not
tro%g a ne@ rise in prod%cti8eness o! te tird in8estment o! capital, b%t merely tro%g te
addition o! a ne@ in8estment o! capital a8ing te same additional prod%cti8eness as te second0
&nstead o! raising te rent as on te rent-bearing soils, te s%ccessi8e in8estments o! capital in soil
? o! iger, b%t constant prod%cti8eness @o%ld proportionally lo@er te price o! prod%ction and
tereby, e8eryting else being eD%al, te di!!erential rent on all oter soils0 3n te oter and, i!
te !irst in8estment o! capital @ic prod%ces 1 Dr at a price o! prod%ction o! V3 so%ld in itsel!
+<8 ;apter J'&4
remain reg%lating, ten + Drs @o%ld be sold !or V1+, and te di!!erential rent o! te later
in8estments o! capital in soil ? @o%ld amo%nt to V60 5e additional capital per acre o! soil ?,
o@e8er it is applied, @o%ld be an impro8ement in tis case, and @o%ld make te original portion
o! capital more prod%cti8e0 &t @o%ld be ridic%lo%s to say tat X o! te capital ad prod%ced 2 Dr
and te oter W I 2 Drs0 For V* per acre @o%ld al@ays prod%ce + Drs, @ile V3 @o%ld prod%ce
only 1 Dr0 Weter or not a rent @o%ld arise ere, @eter or not a s%rpl%s-pro!it @o%ld be
deri8ed, @o%ld depend @olly %pon te circ%mstances0 -ormally te reg%lating price o!
prod%ction @o%ld a8e to !all0 5is @o%ld be te case, i! tis impro8ed b%t more expensi8e
c%lti8ation o! soil ? so%ld occ%r only beca%se it also takes place on te better soils, in oter
@ords, i! a general re8ol%tion in agric%lt%re so%ld occ%r# so tat @en @e no@ re!er to te
nat%ral !ertility o! soil ?, it is ass%med tat it is @orked @it V6 or V* instead o! V30 5is @o%ld
partic%larly apply i! te b%lk o! c%lti8ated acres o! soil ?, @ic !%rnis te main s%pply o! a
gi8en co%ntry, so%ld employ tis ne@ metod0 A%t i! te impro8ement so%ld at !irst extend
only to a small area o! ?, ten tis better c%lti8ated portion @o%ld yield a s%rpl%s-pro!it, @ic
te landlord @o%ld be D%ick to trans!orm @olly or in part into rent, and to !ix in te !orm o! rent0
&n tis @ay I i! te demand kept pace @it te increasing s%pply I as more and more o! soil ?
began to employ te ne@ metod o! c%lti8ation, rent migt be grad%ally !ormed on all soil o!
D%ality ?, and te s%rpl%s-prod%cti8ity migt be eliminated @olly or in part, depending on
market conditions0 5e eD%alisation o! te price o! prod%ction o! ? to te a8erage price o! its
prod%ce obtained %nder conditions o! increased o%tlay o! capital migt t%s be pre8ented by
!ixing te s%rpl%s-pro!it o! tis increased in8estment o! capital in te !orm o! rent0 5%s, as @as
pre8io%sly seen to be te case !or te better soils @en te prod%cti8eness o! te additional
capital decreased, it @o%ld again be te trans!ormation o! s%rpl%s-pro!it into gro%nd-rent, i0e0, te
inter8ention o! property in land, @ic @o%ld raise te price o! prod%ction, instead o! te
di!!erential rent merely being te res%lt o! te di!!erence bet@een te indi8id%al and te general
price o! prod%ction0 &t @o%ld pre8ent, in te case o! soil ?, te coincidence o! bot prices beca%se
it @o%ld inter!ere @it te reg%lation o! te price o! prod%ction by te a8erage price o! prod%ction
on ?# it @o%ld t%s maintain a iger price o! prod%ction tan necessary and tereby create rent0
E8en i! grain @ere !reely imported !rom abroad, te same res%lt co%ld be bro%gt abo%t or
perpet%ated by compelling !armers to %se soil capable o! competing in grain c%lti8ation @ito%t
yielding rent, at te price o! prod%ction reg%lated !rom abroad, !or oter p%rposes, e0g0, past%rage,
so tat only rent-bearing soils @o%ld be %sed !or grain c%lti8ation, i0e0, only soils @ose
indi8id%al a8erage price o! prod%ction per D%arter @ere belo@ tat determined !rom abroad0 3n
te @ole, it is to be ass%med tat in te gi8en case, te price o! prod%ction @ill !all, b%t not to
te le8el o! its a8erage# it @ill be iger tan te a8erage, b%t belo@ te price o! prod%ction o! te
@orst c%lti8ated soil ?, so tat te competition !rom ne@ soil ? is limited0
<C "hen the productiveness of additional capitals is decreasing0 'et %s ass%me tat soil ? - 1
reD%ires V2 to prod%ce te additional D%arter, @ereas soil ? prod%ces it !or V3`, i0e0, more
ceaply, b%t still V` more dearly tan te D%arter prod%ced by its !irst in8estment o! capital0 &n
tis case, te total price o! te t@o D%arters prod%ced %pon ? @o%ld R V6`# t%s te a8erage price
per D%arter R V3 3N80 5e price o! prod%ction @o%ld rise, b%t only by V3N8, @ereas it @o%ld rise
by anoter 3N8 or to V3`, i! te additional capital @ere in8ested in ne@ land @ic prod%ced at
V3`, and it @o%ld t%s bring abo%t a proportional increase in all oter di!!erential rents0
5e price o! prod%ction o! V3 3N8 per D%arter !or ? @o%ld t%s be eD%alised to its a8erage price o!
prod%ction @it an increased in8estment o! capital, and @o%ld be te reg%lating price# t%s, it
@o%ld not yield any rent, since it @o%ld not prod%ce any s%rpl%s-pro!it0
6o@e8er, i! tis D%arter, prod%ced by te second in8estment o! capital, @ere sold !or V3`, soil ?
@o%ld no@ yield a rent o! V`, and indeed, on all acres o! ? in @ic no additional in8estment o!
capital ad taken place and @ic t%s @o%ld still prod%ce at V3 per D%arter0 $o long as any
%nc%lti8ated !ields o! ? remain, te price co%ld rise only temporarily to V3`0 ;ompetition !rom
+<* ;apter J'&4
ne@ !ields o! ? @o%ld old te price o! prod%ction at V3 %ntil all land o! type ?, @ose
!a8o%rable location enables it to prod%ce a D%arter at less tan V3`, @o%ld be exa%sted0 5is is
ten @at @e @o%ld ass%me, alto%g te landlord, so long as an acre o! land yields rent, @ill not
let a tenant !armer a8e anoter acre rent-!ree0
&t @o%ld again depend to @at extent a second in8estment o! capital in te a8ailable soil ? ad
become general, @eter te price o! prod%ction is eD%alised at te a8erage price or @eter te
indi8id%al price o! prod%ction o! te second in8estment o! capital becomes reg%lating at V3`0 5e
latter occ%rs only @en te lando@ner as s%!!icient time %ntil demand is satis!ied to !ix as rent
te s%rpl%s-pro!it deri8ed at te price o! V3` per Dr0
;oncerning decreasing prod%cti8eness o! te soil @it s%ccessi8e in8estments o! capital, see
'iebig0 /'iebig, Die Chemie in ihrer +nwendung auf +gricultur und &hysiologie, Ara%nsc@eig,
186<0 I 0d.1 We a8e obser8ed tat te s%ccessi8e decrease in s%rpl%s-prod%cti8eness o! in8ested
capital in8ariably increases te rent per acre, so long as te price o! prod%ction remains constant,
and tat tis may occ%r e8en @it a !alling price o! prod%ction0
A%t, in general, te !ollo@ing is to be noted0
From te standpoint o! te capitalist mode o! prod%ction, a relati8e increase in te price o!
prod%cts al@ays takes place @en tese prod%cts cannot be sec%red %nless an expendit%re or
payment not pre8io%sly made is inc%rred0 For by te replacement o! capital cons%med in
prod%ction @e mean only te replacement o! 8al%es represented by certain means o! prod%ction0
-at%ral elements entering as agents into prod%ction, and @ic cost noting, no matter @at role
tey play in prod%ction, do not enter as components o! capital, b%t as a !ree gi!t o! -at%re to
capital, tat is, as a !ree gi!t o! -at%re"s prod%cti8e po@er to labo%r, @ic, o@e8er, appears as
te prod%cti8eness o! capital, as all oter prod%cti8ity %nder te capitalist mode o! prod%ction0
5ere!ore, i! s%c a nat%ral po@er, @ic originally costs noting, takes part in prod%ction, it
does not enter into te determination o! price, so long as te prod%ct @ic it elped to prod%ce
s%!!ices to meet te demand0 A%t i! in te co%rse o! de8elopment, a larger o%tp%t is demanded
tan tat @ic can be s%pplied @it te elp o! tis nat%ral po@er, i0e0, i! tis additional o%tp%t
m%st be created @ito%t te elp o! tis nat%ral po@er, or by assisting it @it %man labo%r-
po@er, ten a ne@ additional element enters into capital0 ? relati8ely larger in8estment o! capital
is t%s reD%ired in order to sec%re te same o%tp%t0 ?ll oter circ%mstances remaining te same, a
rise in te price o! prod%ction takes place0
BFrom a note-book Kbeg%n in mid-Febr%ary 18>60L /'.0.1C
Differential rent and rent as mere interest on capital incorporated in the soil0
5e so-called permanent impro8ements I @ic cange te pysical, and, in part, also te
cemical conditions o! te soil by means o! operations reD%iring an expendit%re o! capital, and
@ic may be regarded as an incorporation o! capital in te soil I nearly all amo%nt to gi8ing a
partic%lar piece o! land in a certain limited locality s%c properties as are nat%rally possessed by
some oter piece o! land else@ere, sometimes D%ite near by0 3ne piece o! land is nat%rally le8el,
anoter as to be le8elled# one possesses nat%ral drainage, anoter reD%ires arti!icial drainage#
one is endo@ed by -at%re @it a deep layer o! top soil, anoter needs arti!icial deepening# one
clay soil is nat%rally mixed @it te proper amo%nt o! sand, anoter as to be treated to obtain
tis proportion# one meado@ is nat%rally irrigated or co8ered @it layers o! silt, anoter reD%ires
labo%r to obtain tis condition, or, in te lang%age o! bo%rgeois economics, it reD%ires capital0
&t is indeed a tr%ly am%sing teory, @ereby ere, in te case o! one piece o! land @ose
comparati8e ad8antages a8e been acD%ired, rent is interest, @ereas in te case o! anoter piece
o! land @ic possesses tese ad8antages nat%rally, it is not interest0 B&n !act, tis is so distorted in
practice tat since rent really coincides in te one case @it interest, it is !alsely also called
+3= ;apter J'&4
interest in te oter cases, @ere tis is positi8ely not te case0C 6o@e8er, land yields rent a!ter
capital is in8ested not beca%se capital is in8ested, b%t beca%se te in8ested capital makes tis land
more prod%cti8e tan it !ormerly @as0 ?ss%ming tat all te land o! a gi8en co%ntry reD%ires tis
in8estment o! capital, e8ery piece o! land @ic as not recei8ed it m%st !irst pass tro%g tis
stage, and te rent Binterest yielded in te gi8en caseC borne by land already pro8ided @it
in8estment o! capital constit%tes di!!erential rent H%st as to%g it nat%rally possessed tis
ad8antage and te oter land ad !irst to acD%ire it arti!icially0
5is rent too, @ic may be resol8ed into interest, becomes p%re di!!erential rent as soon as te
in8ested capital is amortised0 3ter@ise, one and te same capital @o%ld a8e to exist t@ice as
capital0
? most am%sing penomenon is tat all opponents o! )icardo @o oppose te idea tat 8al%e
determination is based excl%si8ely on labo%r rater tan regarding di!!erential rent as arising !rom
di!!erences in soil, point o%t tat ere -at%re rater tan labo%r determines 8al%e# b%t at te same
time tey credit tis determination to te location o! te land, or I and to an e8en greater extent I
te interest on capital p%t into te land d%ring its c%lti8ation0 5e same labo%r prod%ces te same
8al%e in a prod%ct created d%ring a gi8en period o! time# b%t te magnit%de or D%ant%m o! tis
prod%ct, and conseD%ently also te portion o! 8al%e associated @it some aliD%ot part o! tis
prod%ct, depends !or a gi8en D%antity o! labo%r solely %pon te D%ant%m o! prod%ct, and te latter,
in t%rn, depends %pon te prod%cti8ity o! te gi8en D%ant%m o! labo%r rater tan te absol%te
magnit%de o! tis D%ant%m0 &t is immaterial @eter tis prod%cti8ity is d%e to -at%re or to
society0 3nly in te case @en te prod%cti8ity itsel! costs labo%r, and conseD%ently capital, does
it increase te price o! prod%ction by a ne@ element I @ic -at%re by itsel! does not do0
Chapter 45. Absolute Ground-Rent
&n te analysis o! di!!erential rent @e proceeded !rom te ass%mption tat te @orst soil does not
pay any gro%nd-rent# or, to p%t it more generally, only s%c land pays gro%nd-rent @ose prod%ct
as an indi8id%al price o! prod%ction belo@ te price o! prod%ction reg%lating te market, so tat
in tis manner a s%rpl%s-pro!it arises @ic is trans!ormed into rent0 &t is to be noted, to begin
@it, tat te la@ o! di!!erential rent as s%c is entirely independent o! te correctness or
incorrectness o! tis ass%mption0
'et %s call te general price o! prod%ction, by @ic te market is reg%lated, ,0 5en, , coincides
@it te indi8id%al price o! prod%ction o! te o%tp%t o! te @orst soil ?# i0e0, its price pays !or te
constant and 8ariable capital cons%med in prod%ction pl%s te a8erage pro!it B R pro!it o!
enterprise pl%s interestC0
5e rent in tis case is eD%al to Eero0 5e indi8id%al price o! prod%ction o! te next better soil A is
R ,l, and , ^ ,l# tat is, , pays !or more tan te act%al price o! prod%ction o! te prod%ct o! soil
A0 'et %s no@ ass%me tat , - ,l R d# d, te excess o! , o8er ,l, is tere!ore te s%rpl%s-pro!it
@ic te !armer o! soil type A realises0 5is d is trans!ormed into rent, @ic m%st be paid to te
landlord0 'et ,ll be te act%al price o! prod%ction o! te tird type o! soil ;, and , - ,ll R <d#
ten tis <d is con8erted into rent# similarly, let ,lll be te indi8id%al price o! prod%ction o! te
!o%rt type o! soil 7, and , - ,lll R 3d, @ic is trans!ormed into gro%nd-rent, etc0 -o@ let %s
ass%me te premise !or soil ?, tat rent R = and tere!ore te price o! its prod%ct R , U =, is
erroneo%s0 ?ss%me rater tat it, too, yields rent R r0 &n tat case, t@o di!!erent concl%sions
!ollo@0
'irst: 5e price o! te prod%ct o! soil ? @o%ld not be reg%lated by te price o! prod%ction on te
latter, b%t @o%ld incl%de an excess abo8e tis price, i0e0, @o%ld be R , U r0 Aeca%se ass%ming te
capitalist mode o! prod%ction to be !%nctioning normally, tat is, ass%ming tat te excess r @ic
te !armer pays to te landlord represents neiter a ded%ction !rom @ages nor !rom te a8erage
pro!it o! capital, te !armer can only pay it by selling te prod%ct abo8e its price o! prod%ction,
t%s, yielding im s%rpl%s-pro!it i! e did not a8e to t%rn o8er tis excess to te landlord in te
!orm o! rent0 5e reg%lating market-price o! te total o%tp%t on te market deri8ed !rom all soils
@o%ld ten not be te price o! prod%ction @ic capital generally yields in all speres o!
prod%ction, i0e0, a price eD%al to costs pl%s a8erage pro!it, b%t rater te price o! prod%ction pl%s
te rent, , U r, and not ,0 For te price o! te prod%ct o! soil ? represents generally te limit o! te
reg%lating general market-price, i0e0, te price at @ic te total prod%ct can be s%pplied, and to
tat extent it reg%lates te price o! tis total prod%ct0
A%t secondly: ?lto%g te general price o! agric%lt%ral prod%cts @o%ld in tis case be
signi!icantly modi!ied, te la@ o! di!!erential rent @o%ld ne8erteless in no @ay lose its !orce0 For
i! te price o! te prod%ct o! soil ?, and tereby te general market-price R , U r, te price !or
soils A, ;, 7, etc0, @o%ld like@ise R , U r0 A%t since , - ,l R d !or soil A, ten B, U rC - B,l U rC
@o%ld like@ise R d, and , - ,ll R B, U rC - B,ll U rC R <d !or soil ;# and !inally , - ,lll R B, U rC -
B,lll U rC R 3d !or soil 7, etc0 5%s te di!!erential rent @o%ld be te same as be!ore and @o%ld be
reg%lated by te same la@, alto%g te rent @o%ld incl%de an element independent o! tis la@
and @o%ld so@ a general increase togeter @it te price o! te agric%lt%ral prod%ct0 &t !ollo@s,
ten, tat no matter @at te case may be as regards te rent o! te least !ertile soils, te la@ o!
di!!erential rent is not only independent o! it, b%t tat te only manner o! grasping di!!erential
rent in keeping @it its caracter is to let te rent on soil ? R =0 Weter tis act%ally R = or ^ = is
immaterial so !ar as te di!!erential rent is concerned, and, in !act, does not come into
consideration0
+3< ;apter J'4
5e la@ o! di!!erential rent, ten, is independent o! te res%lts o! te !ollo@ing st%dy0
&! @e @ere no@ to inD%ire more deeply into te basis o! te ass%mption tat te prod%ct o! te
@orst soil ? does not yield any rent, te ans@er @o%ld o! necessity be as !ollo@s: &! te market-
price o! te agric%lt%ral prod%ct, say grain, attains tat le8el @ere an additional in8estment o!
capital in soil ? res%lts in te %s%al price o! prod%ction, i0e0, te %s%al a8erage pro!it on te capital
is yielded, ten tis condition s%!!ices !or in8esting te additional capital in soil ?0 &n oter
@ords, tis condition is s%!!icient !or te capitalist to in8est ne@ capital yielding te %s%al pro!it
and to employ it in te normal manner0
&t so%ld be noted ere tat in tis case, too, te market-price m%st be iger tan te price o!
prod%ction o! ?0 For as soon as te additional s%pply is created, it is e8ident tat te relation
bet@een s%pply and demand becomes altered0 Formerly te s%pply @as ins%!!icient0 -o@ it is
s%!!icient0 6ence te price m%st !all0 &n order to !all, it m%st a8e been iger tan te price o!
prod%ction o! ?0 A%t d%e to te !act tat soil ? ne@ly taken %nder c%lti8ation is less !ertile, te
price does not !all again as lo@ as @en te price o! prod%ction o! soil A reg%lated te market0
5e price o! prod%ction o! ? constit%tes te limit, not !or te temporary b%t !or te relati8ely
permanent rise o! te market-price0 3n te oter and, i! te ne@ soil taken %nder c%lti8ation is
more !ertile tan te iterto reg%lating soil ?, and yet only s%!!ices to meet te increased
demand, ten te market-price remains %ncanged0 5e in8estigation o! te D%estion @eter te
poorest type o! soil yields rent, o@e8er, coincides in tis case too @it o%r present inD%iry, !or
ere too te ass%mption tat soil ? does not yield any rent @o%ld be explained by te !act tat te
market-price is s%!!icient !or te capitalist !armer to exactly co8er, @it tis price, te in8ested
capital pl%s te a8erage pro!it# in brie!, it @o%ld be explained by te !act tat te market-price
yields im te price o! prod%ction o! is commodities0
?t any rate, te capitalist !armer can c%lti8ate soil ? %nder tese conditions, inasm%c as e, as
capitalist, as s%c po@er o! decision0 5e prereD%isite !or te normal expansion o! capital in soil
? is no@ present0 A%t !rom te premise tat te capitalist !armer can no@ in8est capital in soil ?
%nder a8erage conditions !or te expansion o! capital, e8en i! e did not a8e to pay any rent, it
no@ise !ollo@s tat tis land, belonging to category ?, is no@ at te disposal o! te !armer
@ito%t !%rter ado0 5e !act tat te tenant !armer co%ld realise te %s%al pro!it on is capital did
e not a8e to pay any rent, is by no means a basis !or te landlord to lend is land gratis to te
!armer and to become so pilantropic as to grant cr7dit gratuit !or te sake o! a b%siness
!riendsip0 $%c an ass%mption @o%ld mean te abstraction o! landed property, te elimination o!
land-o@nersip, and it is precisely te existence o! te latter tat constit%tes a limitation to te
in8estment o! capital and te !ree expansion o! capital in te land0 5is limitation does not at all
disappear be!ore te simple re!lection o! te !armer tat te le8el o! grain prices @o%ld enable
im to realise te %s%al pro!it !rom te in8estment o! is capital in te exploitation o! soil ? did
e not a8e to pay any rent# in oter @ords, i! e co%ld proceed in e!!ect as to%g landed
property did not exist0 A%t di!!erential rent pres%pposes te existence o! a monopoly in land
o@nersip, landed property as a limitation to capital, !or @ito%t it s%rpl%s-pro!it @o%ld not be
trans!ormed into gro%nd-rent nor !all to te sare o! te landlord instead o! te !armer0 ?nd
landed property as a limitation contin%es to exist e8en @en rent in te !orm o! di!!erential rent
disappears, i0e0, on soil ?0 &! @e consider te cases in a co%ntry @it capitalist prod%ction, @ere
te in8estment o! capital in te land can take place @ito%t payment o! rent, @e sall !ind tat
tey are all based on a de facto abolition o! landed property, i! not also te legal abolition# tis,
o@e8er, can only take place %nder 8ery speci!ic circ%mstances @ic are by teir 8ery nat%re
accidental0
'irst: Wen te landlord is imsel! a capitalist, or te capitalist is imsel! a landlord0 &n tis case
e may himself manage is land as soon as market-price as risen s%!!iciently to enable im to
get, !rom @at is no@ soil ?, te price o! prod%ction, tat is, replacement o! capital pl%s a8erage
pro!it0 A%t @yQ Aeca%se !or im landed property does not constit%te an obstacle to te
+33 ;apter J'4
in8estment o! capital0 6e can treat is land simply as an element o! -at%re and tere!ore be
g%ided solely by considerations o! expansion o! is capital, by capitalist considerations0 $%c
cases occ%r in practice, b%t only as exceptions0 P%st as capitalist c%lti8ation o! te soil
pres%pposes te separation o! !%nctioning capital !rom landed property, so does it as a r%le
excl%de sel!-management o! landed property0 &t is immediately e8ident tat tis case is a p%rely
accidental one0 &! te increased demand !or grain reD%ires te c%lti8ation o! a larger area o! soil
type ? tan is in te ands o! sel!-managing proprietors, in oter @ords, i! a part o! it m%st be
rented to be at all c%lti8ated, ten tis ypotetical li!ting o! te limitation created by landed
property to te in8estment o! capital at once collapses0 &t is an abs%rd contradiction to start o%t
@it te di!!erentiation %nder te capitalist mode o! prod%ction bet@een capital and land, !armers
and landlords, and ten to t%rn ro%nd and ass%me tat landlords, as a r%le, manage teir o@n land
@ere8er and @ene8er capital @o%ld not dra@ rent !rom te c%lti8ation o! te soil i! landed
property @ere not separate and distinct !rom it0 B$ee te passage by ?dam $mit concerning
mining rent, D%oted belo@0C 5is abolition o! landed property is !ort%ito%s0 &t may or may not
occ%r0
Secondly: &n te total area o! a leaseold tere may be certain portions @ic do not yield any
rent at te existing le8el o! market-prices, so tat tey are in !act loaned gratis# b%t te landlord
does not look %pon it in tat ligt, beca%se e sees te total rental o! te leased land, not te
speci!ic rent o! te indi8id%al component plots0 &n tis case, as regards te rentless component
plots o! te leaseold, landed property as a limitation to te in8estment o! capital is eliminated !or
te capitalist !armer# and tis, indeed, by contract @it te landlord imsel!0 A%t e does not pay
rent !or tese plots merely beca%se e pays rent !or te land associated @it tem0 ? combination
is ere pres%pposed @ereby poorer soil ? does not a8e to be resorted to as a distinctly ne@ !ield
o! prod%ction in order to prod%ce te de!icit s%pply, b%t rater @ereby it merely constit%tes an
inseparable part o! te better land0 A%t te case to be in8estigated is precisely tat in @ic
certain pieces o! land o! soil type ? m%st be independently managed, i0e0, !or te conditions
generally pre8ailing %nder te capitalist mode o! prod%ction, tey m%st be independently leased0
4hirdly: ? !armer may in8est additional capital in te same leaseold e8en i! te additional
prod%ct sec%red in tis manner yields im only te price o! prod%ction at te pre8ailing market-
prices, i0e0, pro8ides im @it te %s%al pro!it b%t does not enable im to pay any additional rent0
6e t%s pays gro%nd-rent @it one portion o! te capital in8ested in te land, b%t not @it te
oter0 6o@ little tis ass%mption elps to sol8e te problem, o@e8er, is seen !rom te !ollo@ing:
&! te market-price Band te !ertility o! te soilC enables im to obtain an additional yield @it is
additional capital, @ic, as in te case o! te old capital, yields a s%rpl%s-pro!it in addition to te
price o! prod%ction, e is able to pocket tis s%rpl%s-pro!it so long as is lease does not expire0
A%t @yQ Aeca%se te limitation placed by landed property on te in8estment o! is capital in
land as been eliminated !or te d%ration o! te lease0 A%t te simple !act tat additional soil o!
poorer D%ality m%st be independently cleared and independently leased in order !or im to sec%re
tis s%rpl%s-pro!it pro8es irre!%tably tat te in8estment o! additional capital in te old soil no
longer s%!!ices to prod%ce te reD%ired increased s%pply0 3ne ass%mption excl%des te oter0 &t is
tr%e tat no@ one migt say: 5e rent on te @orst soil ? is itsel! di!!erential rent I @eter te
comparison is made @it respect to te land c%lti8ated by te o@ner imsel! Btis occ%rs,
o@e8er, as a p%rely cance exceptionC or @it respect to te additional in8estment o! capital in
te old leaseolds @ic do not yield any rent0 6o@e8er, tis @o%ld be 1C a di!!erential rent
@ic does not arise !rom te di!!erence in !ertility o! te 8ario%s categories o! soil, and @ic
tere!ore @o%ld not pres%ppose tat soil ? does not yield any rent and its prod%ce sells at te
price o! prod%ction# and <C te circ%mstance @eter additional in8estments o! capital in te
same leaseold yield rent or not is H%st as irrele8ant to te D%estion as to @eter te ne@ soil o!
class ? to be taken %nder c%lti8ation pays rent or not, as it is irrele8ant to, say, te establisment
o! a ne@ and independent man%!act%ring b%siness @eter anoter man%!act%rer in te same line
+32 ;apter J'4
in8ests a portion o! is capital in interest-bearing paper beca%se e cannot %se all o! it in is
b%siness, or @eter e makes certain impro8ements @ic do not yield im te !%ll pro!it, b%t
ne8erteless do yield more tan interest0 5is is o! secondary importance to im0 5e additional
ne@ establisments, on te oter and, m%st yield te a8erage pro!it and are organised in te ope
o! obtaining tis a8erage pro!it0 &t is tr%e, to be s%re, tat te additional in8estments o! capital in
te old leaseolds and te additional c%lti8ation o! ne@ land o! soil type ? m%t%ally restrict one
anoter0 5e limit, %p to @ic additional capital may be in8ested in te same leaseold %nder
less !a8o%rable conditions o! prod%ction, is determined by te competing ne@ in8estments in soil
?# on te oter and, te rent @ic tis category o! soil can yield is limited by te competing
additional in8estments o! capital in te old leaseolds0
A%t all tis d%bio%s s%bter!%ge does not sol8e te problem, @ic, simply stated, is tis: ?ss%me
te market-price o! grain B@ic in tis inD%iry stands !or prod%cts o! te soil in generalC to be
s%!!icient to permit taking portions o! soil ? %nder c%lti8ation and tat te capital in8ested in
tese ne@ !ields co%ld ret%rn te price o! prod%ction, i0e0, replace capital pl%s a8erage pro!it0 5%s
ass%me tat conditions exist !or te normal expansion o! capital on soil ?0 &s tis s%!!icientQ ;an
tis capital ten really be in8estedQ 3r m%st te market-price rise to te point @ere e8en te
@orst soil ? yields rentQ &n oter @ords, does te lando@nerGs monopoly inder te in8estment o!
capital @ic @o%ld not be te case !rom te p%rely capitalist standpoint in te absence o! tis
monopolyQ &t !ollo@s !rom te @ay in @ic te D%estion itsel! is posed tat i!, e0g0, additional
capitals are in8ested in te old leaseolds, yielding te a8erage pro!it at te gi8en market-price,
b%t no rent, tis circ%mstance in no @ay ans@ers te D%estion @eter capital may no@ really be
in8ested in soil ?, @ic also yields te a8erage pro!its b%t no rent0 A%t tis is precisely te
D%estion be!ore %s0 5e !act tat additional in8estments o! capital not yielding any rent do not
satis!y te demand is pro8ed by te necessity o! taking ne@ land o! soil type ? %nder c%lti8ation0
P%st t@o alternati8es are possible i! te additional c%lti8ation o! soil ? takes place only in so !ar as
it yields rent, tat is, yields more tan te price o! prod%ction0 Eiter te market-price m%st be
s%c tat e8en te last additional in8estments o! capital in te old leaseolds yield s%rpl%s-pro!it,
@eter pocketed by te !armer or by te landlord0 5is rise in price and tis s%rpl%s-pro!it !rom
te last additional in8estments o! capital @o%ld ten res%lt !rom te !act tat soil ? cannot be
c%lti8ated @ito%t yielding rent0 For i! te price o! prod%ction @ere s%!!icient !or c%lti8ation to
take place, merely yielding a8erage pro!it, te price @o%ld not a8e risen so ig, and
competition !rom ne@ plots @o%ld a8e been !elt as soon as tey H%st yielded tis price o!
prod%ction0 ;ompeting @it te additional in8estments in old leaseolds not yielding any rent
@o%ld ten be in8estments in soil ?, @ic like@ise do not yield any rent0 I 3r, te last
in8estments in te old leaseolds do not yield any rent, b%t ne8erteless te market-price as
risen s%!!iciently to make it possible !or soil ? to be taken %nder c%lti8ation and to yield rent0 &n
tis case, te additional in8estment o! capital not yielding any rent @as only possible beca%se soil
? cannot be c%lti8ated %ntil te market-price permits it to pay rent0 Wito%t tis condition, its
c%lti8ation @o%ld a8e already beg%n at a lo@er price le8el# and tose later in8estments o! capital
in te old leaseolds, @ic reD%ire te ig market-price in order to yield te %s%al pro!it
@ito%t rent, co%ld not a8e taken place0 ?t te ig market-price, it is tr%e, tey yield only te
a8erage pro!it0 ?t a lo@er market-price, @ic @o%ld a8e become te reg%lating price o!
prod%ction !rom te time soil ? came %nder c%lti8ation, tey @o%ld t%s not a8e yielded tis
a8erage pro!it, i0e0, te in8estments @o%ld t%s not a8e taken place at all %nder s%c conditions0
&n tis @ay, te rent !rom soil ? @o%ld indeed constit%te di!!erential rent compared @it te
in8estments in te old leaseolds not yielding any rent0 A%t tat s%c di!!erential rent is !ormed
on te land areas o! ? is b%t a conseD%ence o! te !act tat te latter are not at all a8ailable to
c%lti8ation, %nless tey yield rent# i0e0, tat te necessity !or tis rent exists, @ic, in itsel!, is not
determined by any di!!erences in soil types, and @ic constit%tes te barrier to possible
in8estment o! additional capitals in te old leaseolds0 &n eiter case, te rent !rom soil ? @o%ld
+3+ ;apter J'4
not be simply a conseD%ence o! te rise in grain prices, b%t, con8ersely, te !act tat te @orst soil
m%st yield rent in order to make its c%lti8ation at all possible, @o%ld be te ca%se !or te rise in
te grain price to te point @ere tis condition may be !%l!illed0
7i!!erential rent as te pec%liarity tat landed property ere merely intercepts te s%rpl%s-pro!it
@ic @o%ld oter@ise !lo@ into te pocket o! te !armer, and @ic te latter may act%ally
pocket %nder certain circ%mstances d%ring te period o! is lease0 'anded property is ere merely
te ca%se !or trans!erring a portion o! te commodity-price @ic arises @ito%t te property
a8ing anyting to do @it it Bindeed, in conseD%ence o! te !act tat te price o! prod%ction
@ic reg%lates te market-price is determined by competitionC and @ic resol8es itsel! into
s%rpl%s-pro!it I te ca%se !or trans!erring tis portion o! te price !rom one person to anoter,
!rom te capitalist to te landlord0 A%t landed property is not te ca%se @ic creates tis portion
o! te price, or te rise in price %pon @ic tis portion o! te price is premised0 3n te oter
and, i! te @orst soil ? cannot be c%lti8ated I alto%g its c%lti8ation @o%ld yield te price o!
prod%ction I %ntil it prod%ces someting in excess o! te price o! prod%ction, rent, ten landed
property is te creati8e ca%se o! this rise in price0 ,anded property itself has created rent0 5is
!act is not altered, i!, as in te second case mentioned, te rent no@ paid on soil ? constit%tes
di!!erential rent compared @it te last additional in8estment o! capital in old leaseolds, @ic
pay only te price o! prod%ction0 For te circ%mstance tat soil ? cannot be c%lti8ated %ntil te
reg%lating market-price as risen ig eno%g to permit rent to be yielded !rom soil ? I only tis
circ%mstance is te basis ere !or te !act tat te market-price rises to a point @ic enables te
last in8estments in te old leaseolds to yield, indeed, only teir price o! prod%ction, b%t a price
o! prod%ction @ic, at te same time, yields rent on soil ?0 5e !act tat te latter as to pay rent
at all is, in tis case, te ca%se !or te di!!erential rent bet@een soil ? and te last in8estments in
te old leaseolds0
Wen stating, in general, tat soil ? does not pay any rent I ass%ming te price o! grain is
reg%lated by te price o! prod%ction I @e mean rent in te categorical sense o! te @ord0 &! te
!armer pays Klease moneyL @ic constit%tes a ded%ction !rom te normal @ages o! is labo%rers,
or !rom is o@n normal a8erage pro!it, e does not pay rent, i0e0, an independent component o!
te price o! is commodities distinct !rom @ages and pro!it0 We a8e already indicated tat tis
contin%ally takes place in practice0 &n so !ar as te @ages o! te agric%lt%ral labo%rers in a gi8en
co%ntry are, in general, depressed belo@ te normal a8erage le8el o! @ages, so tat a ded%ction
!rom @ages, a part o! te @ages, as a general r%le enters into rent, tis does not constit%te an
exceptional case !or te !armer c%lti8ating te @orst soil0 &n te same price o! prod%ction @ic
makes c%lti8ation o! te @orst soil possible tese lo@ @ages already !orm a constit%ent element,
and te sale o! te prod%ct at te price o! prod%ction does not tere!ore enable te !armer
c%lti8ating tis soil to pay any rent0 5e landlord can also lease is land to some labo%rer, @o
may be satis!ied to pay to te !ormer in te !orm o! rent, all or te largest part o! tat @ic e
realises in te selling price o8er and abo8e te @ages0 &n all tese cases, o@e8er, no real rent is
paid in spite o! te !act tat lease money is paid0 A%t @ere8er conditions correspond to tose
%nder te capitalist mode o! prod%ction, rent and lease money m%st coincide0 .et it is precisely
tis normal condition @ic m%st be analysed ere0
$ince e8en te cases considered abo8e I @ere, %nder te capitalist mode o! prod%ction,
in8estments o! capital in te land may act%ally take place @ito%t yielding rent I do not
contrib%te to te sol%tion o! o%r problem, so m%c less does re!erence to colonial conditions0 5e
criterion establising a colony as a colony I @e are re!erring ere only to tr%e agric%lt%ral
colonies I is not merely te pre8ailing 8ast area o! !ertile land in a nat%ral state0 &t is rater te
circ%mstance tat tis land as not been appropriated, as not been s%bHected to pri8ate
o@nersip0 6erein lies te enormo%s di!!erence, as regards te land, bet@een old co%ntries and
colonies: te legal or act%al non-existence o! landed property, as Wake!ield
xl8
correctly remarks,
and as Mirabea% p2re, te pysiocrat, and oter elder economists, ad disco8ered long be!ore
+36 ;apter J'4
im0 &t is D%ite immaterial ere @eter te colonists simply appropriate te land, or @eter tey
act%ally pay to te state, in te !orm o! a nominal land price, a !ee !or a 8alid legal title to te
land0 &t is also immaterial tat te colonists already settled tere may be te legal o@ners o! te
land0 &n !act, landed property constit%tes no limitation ere to te in8estment o! capital I and also
o! labo%r @ito%t capital# te appropriation o! some o! te land by te colonists already
establised tere does not pre8ent te ne@comers !rom employing teir capital or teir labo%r
%pon ne@ land0 5ere!ore, @en it is necessary to in8estigate te in!l%ence o! landed property
%pon te prices o! prod%cts o! te land and %pon rent I in tose cases @ere landed property
restricts land as an in8estment spere o! capital I it is igly abs%rd to speak o! !ree bo%rgeois
colonies @ere, in agric%lt%re, neiter te capitalist mode o! prod%ction exists, nor te !orm o!
landed property corresponding to it I @ic, in !act, does not exist at all0 )icardo, e0g0, does so in
is capter on gro%nd-rent0 &n te pre!ace e states tat e intends to in8estigate te e!!ect o! te
appropriation o! land %pon te 8al%e o! te prod%cts o! te soil, and directly terea!ter e takes
te colonies as an ill%stration, @ereby e ass%mes tat te land exists in a relati8ely elementary
!orm and tat its exploitation is not limited by te monopoly o! landed property0
5e mere legal o@nersip o! land does not create any gro%nd-rent !or te o@ner0 A%t it does,
indeed, gi8e im te po@er to @itdra@ is land !rom exploitation %ntil economic conditions
permit im to %tilise it in s%c a manner as to yield im a s%rpl%s, be it %sed !or act%al agric%lt%ral
or oter prod%ction p%rposes, s%c as b%ildings, etc0 6e cannot increase or decrease te absol%te
magnit%de o! tis spere, b%t e can cange te D%antity o! land placed on te market0 6ence, as
Fo%rier already obser8ed, it is a caracteristic !act tat in all ci8ilised co%ntries a comparati8ely
appreciable portion o! land al@ays remains %nc%lti8ated0
5%s, ass%ming te demand reD%ires tat ne@ land be taken %nder c%lti8ation, @ose soil, let %s
say, is less !ertile tan tat iterto c%lti8ated I @ill te landlord lease it !or noting, H%st beca%se
te market-price o! te prod%ct o! te land as risen s%!!iciently to ret%rn to te !armer te price
o! prod%ction, and tereby te %s%al pro!it, on is in8estment in tis landQ Ay no means0 5e
in8estment o! capital m%st yield im rent0 6e does not lease is land %ntil e can be paid lease
money !or it0 5ere!ore, te market-price m%st rise to a point abo8e te price o! prod%ction, i0e0,
to , U r, so tat rent can be paid to te landlord0 $ince according to o%r ass%mption, landed
property does not yield anyting %ntil it is leased, is economically 8al%eless %ntil ten, a small
rise in te market-price abo8e te price o! prod%ction s%!!ices to bring te ne@ land o! poorest
D%ality on te market0
5e !ollo@ing D%estion no@ arises: 7oes it !ollo@ !rom te !act tat te @orst soil yields gro%nd-
rent @ic cannot be deri8ed !rom any di!!erence in !ertility tat te price o! te prod%ct o! te
land is necessarily a monopoly price in te %s%al sense, or a price into @ic te rent enters like a
tax, @it te sole distinction tat te landlord le8ies te tax instead o! te stateQ &t goes @ito%t
saying tat tis tax as its speci!ic economic limits0 &t is limited by additional in8estments o!
capital in te old leaseolds, by competition !rom prod%cts o! te land coming !rom abroad I
ass%ming teir import is %nrestricted I by competition among te landlords temsel8es, and
!inally by te needs o! te cons%mers and teir ability to pay0 A%t tis is not te D%estion ere0
5e point is @eter te rent paid on te @orst soil enters into te price o! te prod%cts o! tis
soil I @ic price reg%lates te general market-price according to o%r ass%mption I in te same
@ay as a tax placed on a commodity enters into its price, i0e0, as an element tat is independent o!
te 8al%e o! te commodity0
5is, by no means, necessarily !ollo@s, and te contention tat it does as been made only
beca%se te distinction bet@een te 8al%e o! commodities and teir price o! prod%ction as
ereto!ore not been %nderstood0 We a8e seen tat te price o! prod%ction o! a commodity is not
at all identical @it its 8al%e, alto%g te prices o! prod%ction o! commodities, considered in
teir totality, are reg%lated only by teir total 8al%e, and alto%g te mo8ement o! prod%ction
prices o! 8ario%s kinds o! commodities, all oter circ%mstances being eD%al, is determined
+3> ;apter J'4
excl%si8ely by te mo8ement o! teir 8al%es0 &t as been so@n tat te price o! prod%ction o! a
commodity may lie abo8e or belo@ its 8al%e, and coincides @it its 8al%e only by @ay o!
exception0 6ence, te !act tat prod%cts o! te land are sold abo8e teir price o! prod%ction does
not at all pro8e tat tey are sold abo8e teir 8al%e# H%st as te !act tat prod%cts o! ind%stry, on
te a8erage, are sold at teir price o! prod%ction does not pro8e tat tey are sold at teir 8al%e0 &t
is possible !or agric%lt%ral prod%cts to be sold abo8e teir price o! prod%ction and belo@ teir
8al%e, @ile, on te oter and, many ind%strial prod%cts yield te price o! prod%ction only
beca%se tey are sold abo8e teir 8al%e0
5e relation o! te price o! prod%ction o! a commodity to its 8al%e is determined solely by te
ratio o! te 8ariable part o! te capital @it @ic te commodity is prod%ced to its constant part,
or by te organic composition o! te capital prod%cing it0 &! te composition o! te capital in a
gi8en spere o! prod%ction is lo@er tan tat o! te a8erage social capital, i0e0, i! its 8ariable
portion, @ic is %sed !or @ages, is larger in its relation to te constant portion, %sed !or te
material conditions o! labo%r, tan is te case in te a8erage social capital, ten te 8al%e o! its
prod%ct m%st lie abo8e te price o! prod%ction0 &n oter @ords, beca%se s%c capital employs
more li8ing labo%r, it prod%ces more s%rpl%s-8al%e, and tere!ore more pro!it, ass%ming eD%al
exploitation o! labo%r, tan an eD%ally large aliD%ot portion o! te social a8erage capital0 5e
8al%e o! its prod%ct, tere!ore, is abo8e te price o! prod%ction, since tis price o! prod%ction is
eD%al to capital replacement pl%s a8erage pro!it, and te a8erage pro!it is lo@er tan te pro!it
prod%ced in tis commodity0 5e s%rpl%s-8al%e prod%ced by te a8erage social capital is less tan
te s%rpl%s-8al%e prod%ced by a capital o! tis lo@er composition0 5e opposite is te case @en
te capital in8ested in a certain spere o! prod%ction is o! a bigger composition tan te social
a8erage capital0 5e 8al%e o! commodities prod%ced by it lies belo@ teir price o! prod%ction,
@ic is generally te case @it prod%cts o! te most de8eloped ind%stries0
&! te capital in a certain spere o! prod%ction is o! a lo@er composition tan te a8erage social
capital, ten tis is, in te !irst place, merely anoter @ay o! saying tat te prod%cti8ity o! te
social labo%r in tis partic%lar spere o! prod%ction is belo@ te a8erage# !or te le8el o!
prod%cti8ity attained is mani!ested in te relati8e preponderance o! constant o8er 8ariable capital,
or in te contin%al decrease I !or te gi8en capital I o! te portion %sed !or @ages0 3n te oter
and, i! te capital in a certain spere o! prod%ction is o! a iger composition, ten tis re!lects a
de8elopment o! prod%cti8eness tat is abo8e te a8erage0
'ea8ing aside act%al @orks o! art, @ose consideration by teir 8ery nat%re is excl%ded !rom o%r
disc%ssion, it is sel!-e8ident, moreo8er, tat di!!erent speres o! prod%ction reD%ire di!!erent
proportions o! constant and 8ariable capital in accordance @it teir speci!ic tecnical !eat%res,
and tat li8ing labo%r m%st play a bigger role in some, and smaller in oters0 For instance, in te
extracti8e ind%stries, @ic m%st be clearly disting%ised !rom agric%lt%re, ra@ material as an
element o! constant capital is @olly absent, and e8en a%xiliary material rarely plays an important
role0 &n te mining ind%stry, o@e8er, te oter part o! constant capital, i0e0, !ixed capital, plays an
important role0 -e8erteless, ere too, progress may be meas%red by te relati8e increase o!
constant capital in relation to 8ariable capital0
&! te composition o! capital in agric%lt%re proper is lo@er tan tat o! te a8erage social capital,
ten, prima facie, tis expresses te !act tat in co%ntries @it de8eloped prod%ction agric%lt%re
as not progressed to te same extent as te processing ind%stries0 $%c a !act co%ld be explained
I aside !rom all oter circ%mstances, incl%ding in part decisi8e economic ones I by te earlier
and more rapid de8elopment o! te mecanical sciences, and in partic%lar teir application
compared @it te later and in part D%ite recent de8elopment o! cemistry, geology and
pysiology, and again, in partic%lar, teir application to agric%lt%re0 &ncidentally, it is an
ind%bitable and long-kno@n !act
xl8i
tat te progress o! agric%lt%re itsel! is constantly expressed
by a relati8e gro@t o! constant capital as compared @it 8ariable capital0 Weter te
composition o! agric%lt%ral capital is lo@er tan tat o! te a8erage social capital in a speci!ic
+38 ;apter J'4
co%ntry @ere capitalist prod%ction pre8ails, !or instance England, is a D%estion @ic can only
be decided statistically, and !or o%r p%rposes it is s%per!l%o%s to go into it in detail0 &n any case, it
is teoretically establised tat te 8al%e o! agric%lt%ral prod%cts can be iger tan teir price o!
prod%ction only on tis ass%mption0 &n oter @ords, a capital o! a certain siEe in agric%lt%re
prod%ces more s%rpl%s-8al%e, or @at amo%nts to te same, sets in motion and commands more
s%rpl%s-labo%r Band @it it employs more li8ing labo%r generallyC tan a capital o! te same siEe
o! a8erage social composition0
5is ass%mption, ten, s%!!ices !or tat !orm o! rent @ic @e are analysing ere, and @ic can
obtain only so long as tis ass%mption olds good0 Were8er tis ass%mption no longer olds, te
corresponding !orm o! rent like@ise no longer olds0
6o@e8er, te mere existence o! an excess in te 8al%e o! agric%lt%ral prod%cts o8er teir price o!
prod%ction @o%ld not in itsel! s%!!ice to explain te existence o! a gro%nd-rent @ic is
independent o! di!!erences in !ertility o! 8ario%s soil types and in s%ccessi8e in8estments o!
capital on te same land I a rent, in sort, @ic is to be clearly disting%ised in concept !rom
di!!erential rent and @ic @e may tere!ore call absolute rent0 M%ite a n%mber o! man%!act%red
prod%cts are caracterised by te !act tat teir 8al%e is iger tan teir price o! prod%ction,
@ito%t tereby yielding any excess abo8e te a8erage pro!it, or a s%rpl%s-pro!it, @ic co%ld be
con8erted into rent0 ;on8ersely, te existence and concept o! price o! prod%ction and general rate
o! pro!it, @ic it implies, rest %pon te !act tat indi8id%al commodities are not sold at teir
8al%e0 ,rices o! prod%ction arise !rom an eD%alisation o! te 8al%es o! commodities0 ?!ter
replacing te respecti8e capital-8al%es %sed %p in te 8ario%s speres o! prod%ction, tis
distrib%tes te entire s%rpl%s-8al%e, not in proportion to te amo%nt prod%ced in te indi8id%al
speres o! prod%ction and t%s incorporated in teir commodities, b%t in proportion to te
magnit%de o! ad8anced capitals0 3nly in tis manner do a8erage pro!it and price o! prod%ction
arise, @ose caracteristic element te !ormer is0 &t is te perpet%al tendency o! capitals to bring
abo%t tro%g competition tis eD%alisation in te distrib%tion o! s%rpl%s-8al%e prod%ced by te
total capital, and to o8ercome all obstacles to tis eD%alisation0 6ence it is teir tendency to
tolerate only s%c s%rpl%s-pro!its as arise, %nder all circ%mstances, not !rom te di!!erence
bet@een te 8al%es and prices o! prod%ction o! commodities b%t rater !rom te di!!erence
bet@een te general price o! prod%ction go8erning te market and te indi8id%al prices o!
prod%ction di!!ering !rom it# s%rpl%s-pro!its @ic obtain @itin a certain spere o! prod%ction,
tere!ore, and not bet@een t@o di!!erent speres, and t%s do not a!!ect te general prices o!
prod%ction o! te 8ario%s speres, i0e0, te general rate o! pro!it, b%t rater pres%ppose te
trans!ormation o! 8al%es into prices o! prod%ction and a general rate o! pro!it0 5is s%pposition
rests, o@e8er, as pre8io%sly disc%ssed, %pon te constantly canging proportional distrib%tion o!
te total social capital among te 8ario%s speres o! prod%ction, %pon te perpet%al in!lo@ and
o%t!lo@ o! capitals, %pon teir trans!erability !rom one spere to anoter, in sort, %pon teir !ree
mo8ement bet@een te 8ario%s speres o! prod%ction, @ic represent so many a8ailable !ields
o! in8estment !or te independent components o! te total social capital0 5e premise in tis case
is tat no barrier, or H%st an accidental and temporary barrier, inter!eres @it te competition o!
capitals I !or instance, in a spere o! prod%ction, in @ic te commodity-8al%es are iger tan
te prices o! prod%ction, or @ere te s%rpl%s-8al%e prod%ced exceeds te a8erage pro!it I to
red%ce te 8al%e to te price o! prod%ction and tereby proportionally distrib%te te excess
s%rpl%s-8al%e o! tis spere o! prod%ction among all speres exploited by capital0 A%t i! te
re8erse occ%rs, i! capital meets an alien !orce @ic it can b%t partially, or not at all, o8ercome,
and @ic limits its in8estment in certain speres, admitting it only %nder conditions @ic
@olly or partly excl%de tat general eD%alisation o! s%rpl%s-8al%e to an a8erage pro!it, ten it is
e8ident tat te excess o! te 8al%e o! commodities in s%c speres o! prod%ction o8er teir price
o! prod%ction @o%ld gi8e rise to a s%rpl%s-pro!it, @ic co%ld be con8erted into rent and s%c
made independent @it respect to pro!it0 $%c an alien !orce and barrier are presented by landed
+3* ;apter J'4
property, @en con!ronting capital in its endea8o%r to in8est in land# s%c a !orce is te landlord
8is-O-8is te capitalist0
'anded property is ere te barrier @ic does not permit any ne@ in8estment o! capital in
iterto %nc%lti8ated or %nrented land @ito%t le8ying a tax, or in oter @ords, @ito%t
demanding a rent, alto%g te land to be ne@ly bro%gt %nder c%lti8ation may belong to a
category @ic does not yield any di!!erential rent and @ic, @ere it not !or landed property,
co%ld a8e been c%lti8ated e8en at a small increase in market-price, so tat te reg%lating market-
price @o%ld a8e netted to te c%lti8ator o! tis @orst soil solely is price o! prod%ction0 A%t
o@ing to te barrier raised by landed property, te market-price m%st rise to a le8el at @ic te
land can yield a s%rpl%s o8er te price o! prod%ction, i0e0, yield a rent0 6o@e8er, since te 8al%e o!
te commodities prod%ced by agric%lt%ral capital is iger tan teir price o! prod%ction,
according to o%r ass%mption, tis rent Bsa8e !or one case @ic @e sall disc%ss !ort@itC !orms
te excess o! 8al%e o8er te price o! prod%ction, or a part o! it0 Weter te rent eD%als te entire
di!!erence bet@een te 8al%e and price o! prod%ction, or only a greater or lesser part o! it, @ill
depend @olly on te relation bet@een s%pply and demand and on te area o! land ne@ly taken
%nder c%lti8ation0 $o long as te rent does not eD%al te excess o! te 8al%e o! agric%lt%ral
prod%cts o8er teir price o! prod%ction, a portion o! tis excess @ill al@ays enter into te general
eD%alisation and proportional distrib%tion o! all s%rpl%s-8al%e among te 8ario%s indi8id%al
capitals0 ?s soon as te rent does eD%al te excess o! te 8al%e o8er te price o! prod%ction, tis
entire portion o! s%rpl%s-8al%e o8er and abo8e te a8erage pro!it @ill be @itdra@n !rom tis
eD%alisation0 A%t @eter tis absol%te rent eD%als te @ole excess o! 8al%e o8er te price o!
prod%ction, or H%st a part o! it, te agric%lt%ral prod%cts @ill al@ays be sold at a monopoly price,
not beca%se teir price exceeds teir 8al%e, b%t beca%se it eD%als teir 8al%e, or beca%se teir
price is lo@er tan teir 8al%e b%t iger tan teir price o! prod%ction0 5eir monopoly @o%ld
consist in te !act tat, %nlike oter prod%cts o! ind%stry @ose 8al%e is iger tan te general
price o! prod%ction, tey are not le8elled o%t to te price o! prod%ction0 $ince one portion o! te
8al%e, as @ell as o! price o! prod%ction, is an act%ally gi8en constant, namely te cost-price,
representing te capital R k %sed %p in prod%ction, teir di!!erence consists in te oter, te
8ariable portion, te s%rpl%s-8al%e, @ic eD%als p, te pro!it, in te price o! prod%ction, i0e0,
eD%als te total s%rpl%s-8al%e calc%lated on te social capital and on e8ery indi8id%al capital as an
aliD%ot part o! te social capital# b%t @ic in te 8al%e o! commodities eD%als te act%al s%rpl%s-
8al%e created by tis partic%lar capital, and !orms an integral part o! te commodity-8al%es
prod%ced by tis capital0 &! te 8al%e o! commodities is iger tan teir price o! prod%ction, ten
te price o! prod%ction R k U p, and te 8al%e R k U p U d, so tat p U d R te s%rpl%s-8al%e
contained terein0 5e di!!erence bet@een te 8al%e and te price o! prod%ction, tere!ore, R d,
te excess o! s%rpl%s-8al%e created by tis capital o8er te s%rpl%s-8al%e allocated to it tro%g
te general rate o! pro!it0 &t !ollo@s !rom tis tat te price o! agric%lt%ral prod%cts may lie iger
tan teir price o! prod%ction, @ito%t reacing teir 8al%e0 &t !ollo@s, !%rtermore, tat a
permanent increase in te price o! agric%lt%ral prod%cts may take place %p to a certain point,
be!ore teir price reaces teir 8al%e0 &t !ollo@s like@ise tat te excess in te 8al%e o!
agric%lt%ral prod%cts o8er teir price o! prod%ction can become a determining element o! teir
general market-price solely as a conseD%ence o! te monopoly in landed property0 &t !ollo@s,
!inally, tat in tis case te increase in te price o! te prod%ct is not te ca%se o! rent, b%t rater
tat rent is te ca%se o! te increase in te price o! te prod%ct0 &! te price o! te prod%ct !rom a
%nit area o! te @orst soil R , U r, ten all di!!erential rents @ill rise by corresponding m%ltiples o!
r, since te ass%mption is tat , U r becomes te reg%lating market-price0
&! te a8erage composition o! te non-agric%lt%ral social capital @ere R 8+c U 1+8, and te rate o!
s%rpl%s-8al%e R 1==T, ten te price o! prod%ction @o%ld R 11+0 &! te composition o! te
agric%lt%ral capital @ere R >+c U <+8 and te rate o! s%rpl%s-8al%e @ere te same, ten te 8al%e o!
te agric%lt%ral prod%ct and te reg%lating market-price @o%ld R 1<+0 &! te agric%lt%ral and te
+2= ;apter J'4
non-agric%lt%ral prod%ct so%ld be eD%alised to te same a8erage price B@e ass%me !or te sake o!
bre8ity te total capital in bot lines o! prod%ction to be eD%alC, ten te total s%rpl%s-8al%e @o%ld
R 2=, or <=T, on te <== o! capital0 5e prod%ct o! te one as @ell as te oter @o%ld be sold at
1<=0 &n an eD%alisation into prices o! prod%ction, te a8erage market-prices o! te non-
agric%lt%ral prod%ct @o%ld t%s lie abo8e, and tose o! te agric%lt%ral prod%ct belo@, teir 8al%e0
&! te agric%lt%ral prod%cts @ere sold at teir !%ll 8al%e, tey @o%ld be iger by +, and te
ind%strial prod%cts lo@er by +, tan tey are in te eD%alisation0 &! market conditions do not
permit te sale o! te agric%lt%ral prod%cts at teir !%ll 8al%e, to te !%ll s%rpl%s abo8e te price o!
prod%ction, ten te e!!ect lies bet@een te t@o extremes# te ind%strial prod%cts are sold
some@at abo8e teir 8al%e, and te agric%lt%ral prod%cts some@at abo8e teir price o!
prod%ction0
?lto%g landed property may dri8e te price o! agric%lt%ral prod%ce abo8e its price o!
prod%ction, it does not depend on tis, b%t rater on te general state o! te market, to @at
degree market-price exceeds te price o! prod%ction and approaces te 8al%e, and to @at extent
tere!ore te s%rpl%s-8al%e created in agric%lt%re o8er and abo8e te gi8en a8erage pro!it sall
eiter be trans!ormed into rent or enter into te general eD%alisation o! te s%rpl%s-8al%e to
a8erage pro!it0 ?t any rate tis absol%te rent arising o%t o! te excess o! 8al%e o8er te price o!
prod%ction is b%t a portion o! te agric%lt%ral s%rpl%s-8al%e, a con8ersion o! tis s%rpl%s-8al%e
into rent, its being !ilced by te landlord# H%st as te di!!erential rent arises o%t o! te con8ersion
o! s%rpl%s-pro!it into rent, its being !ilced by te landlord %nder a generally reg%lating price o!
prod%ction0 5ese t@o !orms o! rent are te only normal ones0 ?part !rom tem te rent can be
based only %pon an act%al monopoly price, @ic is determined neiter by price o! prod%ction
nor by 8al%e o! commodities, b%t by te b%yersG needs and ability to pay0 &ts analysis belongs
%nder te teory o! competition, @ere te act%al mo8ement o! market-prices is considered0
&! all te land s%itable !or agric%lt%re in a certain co%ntry @ere leased I ass%ming te capitalist
mode o! prod%ction and normal conditions to be general I tere @o%ld not be any land not paying
rent# b%t tere migt be some capitals, certain parts o! capitals in8ested in land, tat migt not
yield any rent0 For as soon as te land as been rented, landed property ceases to act as an
absol%te barrier against te in8estment o! necessary capital0 $till, it contin%es to act as a relati8e
barrier e8en a!ter tat, in so !ar as te re8ersion to te landlord o! te capital incorporated in te
land circ%mscribes te acti8ity o! te tenant @itin 8ery de!inite limits0 3nly in tis case all rent
@o%ld be trans!ormed into di!!erential rent, alto%g tis @o%ld not be a di!!erential rent
determined by any di!!erence in soil !ertility, b%t rater by te di!!erence bet@een te s%rpl%s-
pro!its arising !rom te last in8estments o! capital in a partic%lar soil type and te rent paid !or te
lease o! te @orst D%ality land0 'anded property acts as an absol%te barrier only to te extent tat
te landlord exacts a trib%te !or making land at all accessible to te in8estment o! capital0 Wen
s%c access as been gained, e can no longer set any absol%te limits to te siEe o! any
in8estment o! capital in a gi8en plot o! land0 &n general, o%sing constr%ction meets a barrier in
te o@nersip by a tird party o! te land %pon @ic te o%ses are to be b%ilt0 A%t, once tis
land as been leased !or te p%rpose o! o%sing constr%ction, it depends %pon te tenant @eter
e @ill b%ild a large or a small o%se0
&! te a8erage composition o! agric%lt%ral capital @ere eD%al to, or iger tan, tat o! te a8erage
social capital, ten absol%te rent I again in te sense H%st described I @o%ld disappear# i0e0, rent
@ic di!!ers eD%ally !rom di!!erential rent as @ell as tat based %pon an act%al monopoly price0
5e 8al%e o! agric%lt%ral prod%ce, ten, @o%ld not lie abo8e its price o! prod%ction, and te
agric%lt%ral capital @o%ld not set any more labo%r in motion, and tere!ore @o%ld also not realise
any more s%rpl%s-labo%r tan te non-agric%lt%ral capital0 5e same @o%ld take place, @ere te
composition o! agric%lt%ral capital to become eD%al to tat o! te a8erage social capital @it te
progress o! ci8ilisation0
+21 ;apter J'4
&t seems to be a contradiction, at !irst glance, to ass%me tat, on te one and, te composition o!
agric%lt%ral capital rises, in oter @ords, tat its constant component increases @it respect to its
8ariable, and, on te oter and, tat te price o! te agric%lt%ral prod%ct so%ld rise ig eno%g
to permit rent to be yielded by ne@ and @orse soil tan tat pre8io%sly c%lti8ated, a rent @ic in
tis case co%ld originate only !rom an excess o! market-price o8er te 8al%e and price o!
prod%ction, in sort, a rent deri8ed solely !rom a monopoly price o! te prod%ct0
&t is necessary to make a distinction ere0
&n te !irst place, it @as noted in considering te manner in @ic rate o! pro!it is !ormed, tat
capitals, @ic a8e te same composition tecnologically speaking, i0e0, @ic set eD%i8alent
amo%nts o! labo%r in motion relati8e to macinery and ra@ materials, may noneteless a8e
di!!erent compositions o@ing to di!!erent 8al%es o! te constant portions o! tese capitals0 5e
ra@ materials or macinery may be dearer in one case tan in anoter0 For te same D%antity o!
labo%r to be set in motion Band tis @o%ld be reD%ired, according to o%r ass%mption, to @ork %p
te same mass o! ra@ materialsC, a larger capital @o%ld a8e to be ad8anced in te one case tan
in te oter, since te same amo%nt o! labo%r cannot be set in motion @it, say, a capital o! 1== i!
te cost o! ra@ material, @ic m%st be co8ered o%t o! te 1==, is 2= in one case and <= in
anoter0 A%t it @o%ld become immediately e8ident tat tese t@o capitals are o! te same
tecnical composition, as soon as te price o! te dearer ra@ material !ell to te le8el o! te
ceaper one0 5e 8al%e ratio bet@een constant and 8ariable capital @o%ld a8e become te same
in tat case, alto%g no cange ad taken place in te tecnical proportions bet@een te li8ing
labo%r and te mass and nat%re o! te conditions o! labo%r employed by tis capital0 3n te oter
band, a capital o! lo@er organic composition co%ld ass%me te appearance o! being in te same
class @it one o! a iger organic composition, merely !rom a rise in te 8al%e o! its constant
portions, solely !rom te 8ie@point o! its 8al%e-composition0 $%ppose one capital R 6=c U 2=8,
beca%se it employs m%c macinery and ra@ material compared to li8ing labo%r-po@er, and
anoter capital R 2=c U 6=8, beca%se it employs m%c li8ing labo%r B6=TC, little macinery Be0g0,
1=TC and compared to labo%r-po@er less and ceaper ra@ material Be0g0, 3=TC0 5en a simple
rise in te 8al%e o! ra@ and a%xiliary materials !rom 3= to 8= co%ld eD%alise te composition, so
tat no@ te second capital @o%ld consist o! 8= ra@ material and 6= labo%r-po@er !or 1= in
macines, or *=c U 6=8, @ic, in percentages, @o%ld also R 6=c U 2=8, @it no cange a8ing
taken place in te tecnical composition0 &n oter @ords, capitals o! eD%al organic composition
may be o! di!!erent 8al%e-composition, and capitals @it identical percentages o! 8al%e-
composition may so@ 8arying degrees o! organic composition and t%s express di!!erent stages
in te de8elopment o! te social prod%cti8ity o! labo%r0 5e mere circ%mstance, ten, tat
agric%lt%ral capital migt be on te general le8el o! 8al%e-composition, @o%ld not pro8e tat te
social prod%cti8ity o! labo%r is eD%ally ig-de8eloped in it0 &t @o%ld merely so@ tat its o@n
prod%ct, @ic again !orms a part o! its conditions o! prod%ction, is dearer, or tat a%xiliary
materials, s%c as !ertiliser, @ic %sed to be close by, m%st no@ be bro%gt !rom a!ar, etc0
A%t aside !rom tis, te pec%liar nat%re o! agric%lt%re m%st be taken into acco%nt0
$%ppose labo%r-sa8ing macinery, cemical aids, etc0, are more extensi8ely %sed in agric%lt%re,
and tat tere!ore constant capital increases tecnically, not merely in 8al%e, b%t also in mass, as
compared @it te mass o! employed labo%r-po@er, ten in agric%lt%re Bas in miningC it is not
only a matter o! te social, b%t also o! te nat%ral, prod%cti8ity o! labo%r @ic depends on te
nat%ral conditions o! labo%r0 &t is possible !or te increase o! social prod%cti8ity in agric%lt%re to
barely compensate, or not e8en compensate, !or te decrease in nat%ral po@er I tis
compensation @ill ne8erteless be e!!ecti8e only !or a sort time I so tat despite tecnical
de8elopment tere, no ceapening o! te prod%ct occ%rs, b%t only a still greater increase in price
is a8erted0 &t is also possible tat te absol%te mass o! prod%cts decreases @it rising grain prices,
@ile te relati8e s%rpl%s-prod%ct increases# namely, in te case o! a relati8e increase in constant
capital @ic consists cie!ly o! macinery or animals reD%iring only replacement o! @ear and
+2< ;apter J'4
tear, and @it a corresponding decrease in 8ariable capital @ic is expended in @ages reD%iring
constant replacement in !%ll o%t o! te prod%ct0
Moreo8er, it is also possible tat @it progress in agric%lt%re only a moderate rise in market-price
abo8e te a8erage is necessary, in order to c%lti8ate and dra@ a rent !rom poorer soil, @ic
@o%ld a8e reD%ired a greater rise in market-price i! tecnical aids @ere less de8eloped0
5e !act tat in larger-scale cattle-raising, !or example, te mass o! employed labo%r-po@er is
8ery small compared @it constant capital as represented in cattle itsel!, co%ld be taken to re!%te
te assertion tat more labo%r-po@er, on a percentage basis, is set in motion by agric%lt%ral
capital tan by te a8erage social capital o%tside o! agric%lt%re0 A%t it so%ld be noted ere tat
@e a8e taken as determining !or rent analysis tat portion o! agric%lt%ral capital @ic prod%ces
te principal plant !oodst%!!s pro8iding te cie! means o! s%bsistence among ci8ilised nations0
?dam $mit I and tis is one o! is merits I as already demonstrated tat a D%ite di!!erent
determination o! prices is to be obser8ed in cattle-raising, and, !or tat matter, generally !or
capitals in8ested in land @ic are not engaged in raising te principal means o! s%bsistence, e0g0,
grain0 -amely in tat case te price is determined in s%c a @ay tat te price o! te prod%ct o!
te land I @ic is %sed !or cattle-raising, say as an arti!icial past%re, b%t @ic co%ld H%st as
easily a8e been trans!ormed into corn!ields o! a certain D%ality I m%st rise ig eno%g to
prod%ce te same rent as on arable land o! te same D%ality0 &n oter @ords, te rent o! corn!ields
becomes a determining element in te price o! cattle, and !or tis reason )amsay as H%stly
remarked tat te price o! cattle is in tis manner arti!icially raised by te rent, by te economic
expression o! landed property, in sort, tro%g landed property0 /:0 )amsay, +n 0ssay on the
Distribution of "ealth, Edinb%rg, 1836, pp0 <>8->*0 I 0d.1
KAy te extension o! c%lti8ation te %nimpro8ed @ilds
become ins%!!icient to s%pply te demand !or
b%tcerGs meat0 ? great part o! te c%lti8ated lands
m%st be employed in rearing and !attening cattle, o!
@ic te price, tere!ore, m%st be s%!!icient to pay,
not only te labo%r necessary !or tending tem, b%t
te rent @ic te landlord and te pro!it @ic te
!armer co%ld a8e dra@n !rom s%c land, employed in
tillage0 5e cattle bred %pon te most %nc%lti8ated
moors, @en bro%gt to te same market, are, in
proportion to teir @eigt or goodness, sold at te
same price as tose @ic are reared %pon te most
impro8ed land0 5e proprietors o! tose moors pro!it
by it, and raise te rent o! teir land in proportion to
te price o! teir cattle0L B?dam $mit, Aook &, ;0
J&, ,art 10C
&n tis case, like@ise, as distinct !rom grain-rent, te di!!erential rent is in !a8o%r o! te @orst soil0
?bsol%te rent explains some penomena, @ic, at !irst sigt, seem to make merely a monopoly
price responsible !or te rent0 5o go on @it ?dam $mitGs example, take te o@ner o! some
-or@egian !orest, !or instance, @ic exists independent o! %man acti8ity, i0e0, it is not a prod%ct
o! sil8ic%lt%re0 &! te proprietor o! tis !orest recei8es a rent !rom a capitalist @o as te timber
+23 ;apter J'4
!elled, peraps in conseD%ence o! a demand !rom England, or i! tis o@ner as te timber !elled
imsel! acting in te capacity o! capitalist, ten a greater or smaller amo%nt o! rent @ill accr%e to
im in timber, apart !rom te pro!it on in8ested capital0 5is appears to be a p%re monopoly
carge deri8ed !rom a p%re prod%ct o! -at%re0 A%t, as a matter o! !act, te capital ere consists
almost excl%si8ely o! a 8ariable component expended in labo%r, and t%s sets more s%rpl%s-labo%r
in motion tan anoter capital o! te same siEe0 5e 8al%e o! te timber, ten, contains a greater
s%rpl%s o! %npaid labo%r, or o! s%rpl%s-8al%e, tan tat o! a prod%ct o! a capital o! a iger
organic composition0 For tis reason te a8erage pro!it can be deri8ed !rom tis timber, and a
considerable s%rpl%s in te !orm o! rent can !all to te sare o! te o@ner o! te !orest0
;on8ersely, it may be ass%med tat, o@ing to te ease @it @ic timber-!elling may be
extended, in oter @ords, its prod%ction rapidly increased, te demand m%st rise 8ery
considerably !or te price o! timber to eD%al its 8al%e, and tereby !or te entire s%rpl%s o! %npaid
labo%r Bo8er and abo8e tat portion @ic !alls to te capitalist as a8erage pro!itC to accr%e to te
o@ner in te !orm o! rent0
We a8e ass%med tat te land ne@ly bro%gt %nder c%lti8ation is o! still in!erior D%ality to te
@orst pre8io%sly c%lti8ated0 &! it is better, it yields a di!!erential rent0 A%t ere @e are analysing
precisely te case @erein rent does not appear as a di!!erential rent0 5ere are only t@o cases
possible0 5e ne@ly c%lti8ated soil is eiter in!erior to, or H%st as good as te pre8io%sly c%lti8ated
soil0 &! in!erior, ten te matter as already been analysed0 &t remains only to analyse te case in
@ic it is H%st as good0
?s already de8eloped in o%r analysis o! di!!erential rent, te progress o! c%lti8ation may H%st as
@ell bring eD%ally good, or e8en better soils %nder te plo%g as @orse soil0
'irst0 Aeca%se in di!!erential rent Bor any rent in general, since e8en in te case o! non-di!!erential
rent te D%estion al@ays arises @eter, on te one and, te soil !ertility in general, and, on te
oter and, its location, admit o! its c%lti8ation at te reg%lating market-price so as to yield a
pro!it and rentC t@o conditions @ork in opposing directions, no@ cancelling one anoter, no@
alternately exerting te determining in!l%ence0 5e rise in market-price I pro8ided te cost-price
o! c%lti8ation as not !allen, i0e0, no tecnical progress as gi8en a ne@ impet%s to !%rter
c%lti8ation I may bring %nder c%lti8ation more !ertile soil !ormerly excl%ded !rom competition by
8irt%e o! its location0 3r it may so enance te ad8antage o! te location o! te in!erior soil tat
its lesser !ertility is co%nterbalanced by it0 3r, @ito%t any rise in market-price te location may
bring better soils into competition tro%g impro8ement in means o! comm%nication, as can be
obser8ed on a large scale in te prairie $tates o! -ort ?merica0 &n co%ntries o! older ci8ilisation
te same also takes place constantly i! not to te same extent as in te colonies, @ere, as
Wake!ield correctly obser8es, location is decisi8e0 //E0 Wake!ield1 0ngland and +merica. +
Comparison of the Social and &olitical State of both $ations, 4ol0 &, 'ondon, 1833, pp0 <12-1+0 I
0d01 5o s%m %p, ten, te contradictory in!l%ences o! location and !ertility, and te 8ariableness o!
te location !actor, @ic is contin%ally co%nterbalanced and perpet%ally passes tro%g
progressi8e canges tending to@ards eD%alisation, alternately carry eD%ally good, better or @orse
land areas into ne@ competition @it te older ones %nder c%lti8ation0
Secondly0 Wit te de8elopment o! nat%ral science and agronomy te soil !ertility is also canged
by canging te means tro%g @ic te soil constit%ents may be rendered immediately
ser8iceable0 &n tis @ay, ligt soil types in France and in te eastern co%nties o! England, @ic
@ere regarded as in!erior at one time, a8e recently risen to !irst place0 B$ee ,assy0 /60 ,assy,
9ente du sol0 &n: 7ictionnaire de lGFconomie politiD%e, 5ome &&0 ,aris0 18+2, p0 +1+0 I 0d01C 3n
te oter and, soil considered in!erior not !or bad cemical composition b%t !or certain
mecanical and pysical obstacles tat indered its c%lti8ation, is con8erted into good land as
soon as means to o8ercome tese obstacles a8e been disco8ered0
4hirdly0 &n all ancient ci8ilisations, old istorical and traditional relations, !or instance, in te
!orm o! state-o@ned lands, comm%nal lands, etc0, a8e p%rely arbitrarily @iteld !rom
+22 ;apter J'4
c%lti8ation large tracts o! land, @ic only ret%rn to it little by little0 5e s%ccession in @ic tey
are bro%gt %nder c%lti8ation depends neiter %pon teir good D%ality nor siting, b%t %pon @olly
external circ%mstances0 &n tracing te istory o! Englis comm%nal lands t%rned s%ccessi8ely into
pri8ate property tro%g te Enclos%re Aills and bro%gt %nder te plo%g, noting @o%ld be
more ridic%lo%s tan te !antastic idea tat a modern agric%lt%ral cemist, s%c as 'iebig, ad
indicated te selection o! land in tis s%ccession, designating certain !ields !or c%lti8ation o@ing
to cemical properties and excl%ding oters0 Wat @as more decisi8e in tis case @as te
opport%nity @ic makes te tie!# te more or less pla%sible legalistic s%bter!%ges o! te big
landlords to H%sti!y teir appropriation0
'ourthly0 ?part !rom te !act tat te stage o! de8elopment reaced at any time by te pop%lation
and capital increase sets certain limits, e8en to%g elastic, to te extension o! c%lti8ation, and
apart !rom cance e!!ects @ic temporarily in!l%ence te market-price I s%c as a series o! good
or bad seasons I te extension o! agric%lt%re o8er a larger area depends on te o8erall state o! te
capital market and b%siness conditions in a co%ntry0 &n periods o! stringency it @ill not s%!!ice !or
%nc%lti8ated soil to yield te tenant an a8erage pro!it I no matter @eter e pays any rent or not
I in order tat additional capital be in8ested in agric%lt%re0 &n oter periods @en tere is a
pletora o! capital, it @ill po%r into agric%lt%re e8en @ito%t a rise in market-price i! only oter
normal conditions are present0 Aetter soil tan iterto c%lti8ated @o%ld in !act be excl%ded !rom
competition solely on te basis o! %n!a8o%rable location, or i! iterto ins%rmo%ntable obstacles
to its employment existed, or tro%g cance0 For tis reason @e so%ld only concern o%rsel8es
@it soils @ic are H%st as good as tose last c%lti8ated0 6o@e8er, tere still exists te di!!erence
in cost o! clearing !or c%lti8ation bet@een te ne@ soil and te one last c%lti8ated0 ?nd it depends
%pon te le8el o! market-prices and credit conditions @eter tis @ill be %ndertaken or not0 ?s
soon as tis soil ten act%ally enters into competition, te market-price @ill !all once more to its
!ormer le8el, ass%ming oter conditions to be eD%al, and te ne@ soil @ill ten yield te same rent
as te corresponding old soil0 5e ass%mption tat it does not yield any rent is pro8ed by its
ad8ocates by ass%ming precisely @at tey are called %pon to pro8e, namely tat te last soil did
not yield any rent0 3ne migt pro8e in te same manner tat o%ses @ic @ere te last b%ilt do
not yield any rent !or te b%ilding o%tside o! o%se-rent proper, e8en to%g tey are leased0 &n
!act, o@e8er, tey do yield rent e8en be!ore yielding any o%se-rent, @en tey !reD%ently
remain 8acant !or a long period0 P%st as s%ccessi8e in8estments o! capital in a certain piece o!
land may bring a proportional s%rpl%s and tereby te same rent as te !irst in8estment, so !ields
o! te same D%ality as tose last c%lti8ated may bring te same proceeds !or te same cost0
3ter@ise it @o%ld be altogeter inexplicable o@ !ields o! te same D%ality are e8er bro%gt
s%ccessi8ely %nder c%lti8ation# it seems tat eiter it @o%ld be necessary to take all togeter, or
rater not a single one o! tem, in order not to bring all te remaining ones into competition0 5e
landlord is al@ays ready to dra@ a rent, i0e0, to recei8e someting !or noting0 A%t capital reD%ires
certain conditions to !%l!il is @is0 ;ompetition bet@een pieces o! land does not, tere!ore,
depend %pon te landlord desiring tem to compete, b%t %pon te capital existing @ic seeks to
compete @it oter capitals in te ne@ !ields0
5o te extent tat te agric%lt%ral rent proper is p%rely a monopoly price, te latter can only be
small, H%st as te absol%te rent can only be small ere %nder normal conditions @ate8er te
excess o! te prod%ctGs 8al%e o8er its price o! prod%ction0 5e essence o! absol%te rent, tere!ore,
consists in tis: :i8en te same rate o! s%rpl%s-8al%e, or degree o! labo%r exploitation, eD%ally
large capitals in 8ario%s speres o! prod%ction prod%ce di!!erent amo%nts o! s%rpl%s-8al%e, in
accordance @it teir 8arying a8erage composition0 &n ind%stry tese 8ario%s masses o! s%rpl%s-
8al%e are eD%alised into an a8erage pro!it and distrib%ted %ni!ormly among te indi8id%al capitals
as aliD%ot parts o! te social capital0 'anded property inders s%c an eD%alisation among
capitals, in8ested in land, @ene8er prod%ction reD%ires land !or eiter agric%lt%re or extraction o!
ra@ materials, and takes old o! a portion o! te s%rpl%s-8al%e, @ic @o%ld oter@ise take part
+2+ ;apter J'4
in eD%alising to te general rate o! pro!it0 5e rent, ten, !orms a portion o! te 8al%e, or, more
speci!ically, s%rpl%s-8al%e, o! commodities, and instead o! !alling into te lap o! te capitalists,
@o a8e extracted it !rom teir labo%rers, it !alls to te sare o! te landlords, @o extract it
!rom te capitalists0 &t is ereby ass%med tat te agric%lt%ral capital sets more labo%r in motion
tan an eD%ally large portion o! non-agric%lt%ral capital0 6o@ !ar te discrepancy goes, or
@eter it exists at all, depends %pon te relati8e de8elopment o! agric%lt%re as compared @it
ind%stry0 &t is in te nat%re o! te case tat tis di!!erence m%st decrease @it te progress o!
agric%lt%re, %nless te proportionate decrease o! 8ariable as compared @it constant capital is still
greater in te case o! ind%strial tan in te case o! agric%lt%ral capital0
5is absol%te rent plays an e8en more important role in te extracti8e ind%stry proper, @ere one
element o! constant capital, ra@ material, is @olly lacking and @ere, excl%ding tose lines in
@ic capital consisting o! macinery and oter !ixed capital is 8ery considerable, by !ar te
lo@est composition o! capital pre8ails0 ,recisely ere, @ere te rent appears entirely attrib%table
to a monopoly price, %n%s%ally !a8o%rable market conditions are necessary !or commodities to be
sold at teir 8al%e, or !or rent to eD%al te entire excess o! a commodityGs s%rpl%s-8al%e o8er its
price o! prod%ction0 5is applies, !or instance, to rent !rom !iseries, stone D%arries, nat%ral
!orests, etc0
xl8ii

Chapter 46. Building Site Rent. Rent in Mining.
Price of Land
Were8er rent exists at all, di!!erential rent appears at all times and is go8erned by te same la@s,
as agric%lt%ral di!!erential rent0 Were8er nat%ral !orces can be monopolised and g%arantee a
s%rpl%s-pro!it to te ind%strial capitalist %sing tem, be it @ater!alls, ric mines, @aters teeming
@it !is, or a !a8o%rably located b%ilding site, tere te person @o by 8irt%e o! title to a portion
o! te globe as become te proprietor o! tese nat%ral obHects @ill @rest tis s%rpl%s-pro!it !rom
!%nctioning capital in te !orm o! rent0 ?dam $mit as set !ort, as concerns land !or b%ilding
p%rposes, tat te basis o! its rent, like tat o! all non-agric%lt%ral land, is reg%lated by
agric%lt%ral rent proper BAook &, ;0 J&, < and 3C0 5is rent is disting%ised, in te !irst place, by
te preponderant in!l%ence exerted ere by location %pon di!!erential rent B8ery signi!icant, e0g0,
in 8ineyards and b%ilding sites in large citiesC# secondly, by te palpable and complete
passi8eness o! te o@ner, @ose sole acti8ity consists Bespecially in minesC in exploiting te
progress o! social de8elopment, to@ard @ic e contrib%tes noting and !or @ic e risks
noting, %nlike te ind%strial capitalist# and !inally by te pre8alence o! monopoly prices in many
cases, partic%larly tro%g te most sameless exploitation o! po8erty B!or po8erty is more
l%crati8e !or o%se-rent tan te mines o! ,otosi e8er @ere !or $pain
xl8iii
C, and te monstro%s
po@er @ielded by landed property, @en %nited and in and @it ind%strial capital, enables it to
be %sed against labo%rers engaged in teir @age str%ggle as a means o! practically expelling tem
!rom te eart as a d@elling-place0
xlix
3ne part o! society t%s exacts trib%te !rom anoter !or te
permission to inabit te eart, as landed property in general assigns te landlord te pri8ilege o!
exploiting te terrestrial body, te bo@els o! te eart, te air, and tereby te maintenance and
de8elopment o! li!e0 -ot only te pop%lation increase and @it it te gro@ing demand !or selter,
b%t also te de8elopment o! !ixed capital, @ic is eiter incorporated in land, or takes root in it
and is based %pon it, s%c as all ind%strial b%ildings, rail@ays, @areo%ses, !actory b%ildings,
docks, etc0, necessarily increase te b%ilding rent0 ? con!%sion o! o%se-rent, in so !ar as it
constit%tes interest and amortisation on capital in8ested in a o%se, and rent !or te mere land, is
not possible in tis case, e8en @it all te good@ill o! a person like ;arey, partic%larly @en
landlord and b%ilding spec%lator are di!!erent persons, as is tr%e in England0 5@o elements so%ld
be considered ere: on te one and, te exploitation o! te eart !or te p%rpose o! reprod%ction
or extraction# on te oter and, te space reD%ired as an element o! all prod%ction and all %man
acti8ity0 ?nd property in land demands its trib%te in bot senses0 5e demand !or b%ilding sites
raises te 8al%e o! land as space and !o%ndation, @ile tereby te demand !or elements o! te
terrestrial body ser8ing as b%ilding material gro@s sim%ltaneo%sly0
l

5at it is te gro%nd-rent, and not te o%se, @ic !orms te act%al obHect o! b%ilding
spec%lation in rapidly gro@ing cities, especially @ere constr%ction is carried on as an ind%stry,
e0g0, in 'ondon, as already been ill%strated in Aook &&, ;apter J&&, in te testimony o! a big
b%ilding spec%lator in 'ondon, Ed@ard ;apps, gi8en be!ore te $elect ;ommittee on Aank ?cts
o! 18+>0 6e stated tere, -o0+23+:
K& tink a man @o @ises to rise in te @orld can
ardly expect to rise by !ollo@ing o%t a !air trade 000it
is necessary !or im to add spec%lati8e b%ilding to it,
and tat m%st be done not on a small scale# 000!or te
+2> ;apter J'4&
b%ilder makes 8ery little pro!it o%t o! te b%ildings
temsel8es# e makes te principal part o! te pro!it
o%t o! te impro8ed gro%nd-rents0 ,eraps e takes a
piece o! gro%nd, and agrees to gi8e V3== a year !or it#
by laying it o%t @it care, and p%tting certain
descriptions o! b%ildings %pon it, e may s%cceed in
making V2== or V2+= a year o%t o! it, and is pro!it
@o%ld be te increased gro%nd-rent o! V1== or V1+= a
year, rater tan te pro!it o! te b%ildings at
@ic 000in many instances, e scarcely looks at all0L
?nd parentetically it so%ld not be !orgotten tat a!ter te lapse o! te lease, generally at te end
o! ** years, te land @it all its b%ildings and its gro%nd-rent I %s%ally increased in te interim
t@ice or tree times, re8erts !rom te b%ilding spec%lator or is legal s%ccessor to te original last
landlord0
Mining rent proper is determined in te same @ay as agric%lt%ral rent0
K5ere are some mines, o! @ic te prod%ce is
barely s%!!icient to pay te labo%r and replace,
togeter @it its ordinary pro!its, te stock employed
in @orking tem0 5ey a!!ord some pro!it to te
%ndertaker o! te @ork, b%t no rent to te landlord0
5ey can be @ro%gt ad8antageo%sly by nobody b%t
te landlord, @o, being imsel! te %ndertaker o! te
@ork, gets te ordinary pro!it o! te capital @ic e
employs in it0 Many coal mines in $cotland are
@ro%gt in tis manner, and can be @ro%gt in no
oter0 5e landlord @ill allo@ nobody else to @ork
tem @ito%t paying some rent, and nobody can
a!!ord to pay any0L B?dam $mit, Aook &, ;0 J&, <0C
&t m%st be disting%ised, @eter te rent springs !rom a monopoly price, beca%se a monopoly
price o! te prod%ct or te land exists independently o! it, or @eter te prod%cts are sold at a
monopoly price, beca%se a rent exists0 Wen @e re!er to a monopoly price, @e mean in general a
price determined only by te p%rcasers" eagerness to b%y and ability to pay, independent o! te
price determined by te general price o! prod%ction, as @ell as by te 8al%e o! te prod%cts0 ?
8ineyard prod%cing @ine o! 8ery extraordinary D%ality @ic can be prod%ced only in relati8ely
small D%antities yields a monopoly price0 5e @ine-gro@er @o%ld realise a considerable s%rpl%s-
pro!it !rom tis monopoly price, @ose excess o8er te 8al%e o! te prod%ct @o%ld be @olly
determined by te means and !ondness o! te discriminating @ine-drinker0 5is s%rpl%s-pro!it,
@ic accr%es !rom a monopoly price, is con8erted into rent and in tis !orm !alls into te lap o!
te landlord, tanks to is title to tis piece o! te globe endo@ed @it sing%lar properties0 6ere,
ten, te monopoly price creates te rent0 3n te oter and, te rent @o%ld create a monopoly
+28 ;apter J'4&
price i! grain @ere sold not merely abo8e its price o! prod%ction, b%t also abo8e its 8al%e, o@ing
to te limits set by landed property to te in8estment o! capital in %nc%lti8ated land @ito%t
payment o! rent0 5at it is only te title o! a n%mber o! persons to te possession o! te globe
enabling tem to appropriate to temsel8es as trib%te a portion o! te s%rpl%s-labo%r o! society
and !%rtermore to a constantly increasing extent @it te de8elopment o! prod%ction, is
concealed by te !act tat te capitalised rent, i0e0, precisely tis capitalised trib%te, appears as te
price o! land, @ic may tere!ore be sold like any oter article o! commerce0 5e b%yer,
tere!ore, does not !eel tat is title to te rent is obtained gratis, and @ito%t te labo%r, risk, and
spirit o! enterprise o! te capitalist, b%t rater tat e as paid !or it @it an eD%i8alent0 5o te
b%yer, as pre8io%sly indicated, te rent appears merely as interest on te capital @it @ic e as
p%rcased te land and conseD%ently is title to te rent0 &n te same @ay, te sla8e-older
considers a -egro, @om e as p%rcased, as is property, not beca%se te instit%tion o! sla8ery
as s%c entitles im to tat -egro, b%t beca%se e as acD%ired im like any oter commodity,
tro%g sale and p%rcase0 A%t te title itsel! is simply trans!erred, and not created by te sale0
5e title m%st exist be!ore it can be sold, and a series o! sales can no more create tis title tro%g
contin%ed repetition tan a single sale can0 Wat created it in te !irst place @ere te prod%ction
relations0 ?s soon as tese a8e reaced a point @ere tey m%st sed teir skin, te material
so%rce o! te title, H%sti!ied economically and istorically and arising !rom te process @ic
creates social li!e, !alls by te @ayside, along @it all transactions based %pon it0 From te
standpoint o! a iger economic !orm o! society, pri8ate o@nersip o! te globe by single
indi8id%als @ill appear D%ite as abs%rd as pri8ate o@nersip o! one man by anoter0 E8en a @ole
society, a nation, or e8en all sim%ltaneo%sly existing societies taken togeter, are not te o@ners
o! te globe0 5ey are only its possessors, its %s%!r%ct%aries, and, like boni patres familias, tey
m%st and it do@n to s%cceeding generations in an impro8ed condition0
&n te !ollo@ing analysis o! te price o! land @e lea8e o%t o! consideration all !l%ct%ations o!
competition, all land spec%lation, and also small landed property, in @ic land !orms te
principal instr%ment o! prod%cers and m%st, tere!ore, be bo%gt by tem at any price0
&0 5e price o! land may rise @ito%t te rent rising, namely:
1C by a mere !all in interest rate, @ic ca%ses te rent to be sold more dearly, and tereby te
capitalised rent, or price o! land, rises#
<C beca%se te interest on capital incorporated in te land rises0
&&0 5e price o! land may rise, beca%se te rent increases0
5e rent may increase, beca%se te price o! te prod%ct o! te land rises, in @ic case te rate o!
di!!erential rent al@ays rises, @eter te rent on te @orst c%lti8ated soil be large, small or non-
existent0 Ay rate @e mean te ratio o! tat portion o! s%rpl%s-8al%e con8erted into rent to te
in8ested capital @ic prod%ces te agric%lt%ral prod%ct0 5is di!!ers !rom te ratio o! s%rpl%s-
prod%ct to total prod%ct, !or te total prod%ct does not comprise te entire in8ested capital,
namely, te !ixed capital, @ic contin%es to exist alongside te prod%ct0 3n te oter and, it
co8ers te !act tat on soils yielding di!!erential rent an increasing portion o! te prod%ct is
trans!ormed into an excess o! s%rpl%s-prod%ct0 5e increase in price o! agric%lt%ral prod%ct o! te
@orst soil !irst creates rent and tereby te price o! land0
5e rent, o@e8er, may also increase @ito%t a rise in price o! te agric%lt%ral prod%ct0 5is price
may remain constant, or e8en decrease0
&! te price remains constant, te rent can gro@ only Bapart !rom monopoly pricesC beca%se, on
te one and, gi8en te same amo%nt o! capital in8ested in te old lands, ne@ lands o! better
D%ality are c%lti8ated, @ic merely s%!!ice, o@e8er, to co8er te increased demand, so tat te
+2* ;apter J'4&
reg%lating market-price remains %ncanged0 &n tis case, te price o! te old lands does not rise,
b%t te price o! te ne@ly c%lti8ated lands rises abo8e tat o! te old ones0
3r, on te oter and, te rent rises beca%se te mass o! capital exploiting te land increases,
ass%ming tat te relati8e prod%cti8ity and market-price remain te same0 ?lto%g te rent t%s
remains te same compared @it te in8ested capital, still its mass, !or instance, may be do%bled,
beca%se te capital itsel! as do%bled0 $ince no !all in price as occ%rred, te second in8estment
o! capital yields a s%rpl%s-pro!it H%st as @ell as te !irst, and it like@ise is trans!ormed into rent
a!ter te expiration o! te lease0 5e mass o! rent rises ere, beca%se te mass o! capital
prod%cing a rent increases0 5e contention tat 8ario%s s%ccessi8e in8estments o! capital in te
same piece o! land can prod%ce rent only in so !ar as teir yield is %neD%al, so tat a di!!erential
rent t%s arises, is red%ced to te contention tat @en t@o capitals o! V1,=== eac are in8ested in
t@o !ields o! eD%al prod%cti8ity, only one o! tem can prod%ce a rent, alto%g bot !ields belong
to a better soil type, @ic prod%ces di!!erential rent0 B5e mass o! rental, te total rent o! a
co%ntry, gro@s tere!ore @it te mass o! capital in8ested, @ito%t te price o! te indi8id%al
pieces o! land, or te rate o! rent, or e8en te mass o! rent on indi8id%al pieces o! land,
necessarily increasing# te amo%nt o! rental gro@s in tis case @it te extension o! c%lti8ation
o8er a @ider area0 5is may e8en be combined @it a decrease in rent on indi8id%al oldings0C
3ter@ise, tis contention @o%ld lead to te oter, namely, tat te in8estment o! capital in t@o
di!!erent pieces o! land existing side by side !ollo@s di!!erent la@s tan te s%ccessi8e in8estment
o! capital in te same plot, @ereas di!!erential rent is deri8ed precisely !rom te identity o! te
la@ in bot cases, !rom te increased prod%cti8eness o! capital in8ested eiter in te same !ield or
in di!!erent !ields0 5e only modi!ication @ic exists ere and is o8erlooked is tat s%ccessi8e
in8estments o! capital, @en applied to di!!erent pieces o! land, meet te barrier o! landed
property, @ic is not te case @it s%ccessi8e in8estments o! capital in te same piece o! land0
5is acco%nts !or te opposing tendencies by @ic tese t@o di!!erent !orms o! in8estment c%rb
eac oter in practice0 -o di!!erence in capital e8er appears ere0 &! te composition o! te capital
remains te same, and similarly te rate o! s%rpl%s-8al%e, te rate o! pro!it remains %naltered, so
tat te mass o! pro!it is do%bled @en te capital is do%bled0 &n like manner te rate o! rent
remains te same %nder te ass%med conditions0 &! a capital o! V1,=== prod%ces a rent o! x, ten a
capital o! V<,===, %nder te ass%med conditions, prod%ces a rent o! <x0 A%t calc%lated @it
re!erence to te area o! land, @ic as remained %naltered, since, according to o%r ass%mption,
te do%bled capital operates in te same !ield, te le8el o! rent as also risen as a conseD%ence o!
its increase in mass0 5e same acre @ic yielded a rent o! V<, no@ yields V20
li

5e relation o! a portion o! te s%rpl%s-8al%e, o! money-rent I !or money is te independent
expression o! 8al%e I to te land is in itsel! abs%rd and irrational# !or te magnit%des @ic are
ere meas%red by one anoter are incommens%rable I a partic%lar %se-8al%e, a piece o! land o! so
many and so many sD%are !eet, on te one and, and 8al%e, especially s%rpl%s-8al%e, on te oter0
5is expresses in !act noting more tan tat, %nder te gi8en conditions, te o@nersip o! so
many sD%are !eet o! land enables te lando@ner to @rest a certain D%antity o! %npaid labo%r,
@ic te capital @allo@ing in tese sD%are !eet like a og in potatoes as realised0 /Written in
te man%script ere in brackets, b%t crossed o%t, is te name K'iebigL01 A%t prima facie te
expression is te same as i! one desired to speak o! te relation o! a !i8e-po%nd note to te
diameter o! te eart0 6o@e8er, te reconciliation o! irrational !orms in @ic certain economic
relations appear and assert temsel8es in practice does not concern te acti8e agents o! tese
relations in teir e8eryday li!e0 ?nd since tey are acc%stomed to mo8e abo%t in s%c relations,
tey !ind noting strange terein0 ? complete contradiction o!!ers not te least mystery to tem0
5ey !eel as m%c at ome as a !is in @ater among mani!estations @ic are separated !rom
teir internal connections and abs%rd @en isolated by temsel8es0 Wat 6egel says @it
re!erence to certain matematical !orm%las applies ere: tat @ic seems irrational to ordinary
common sense is rational, and tat @ic seems rational to it is itsel! irrational0 /6egel,
++= ;apter J'4&
0ncyclopXdie der philosophischen "issenschaften in Grundrisse, 10 5eil, Die ,ogi-. &n: "er-e,
Aand 6, Aerlin, 182=, $0 2=20 I 0d.1 Wen considered in connection @it te land area itsel!, a
rise in te mass o! rent is t%s expressed in te same @ay as a rise in te rate o! rent, and ence
te embarrassment experienced @en te conditions @ic @o%ld explain te one case are
lacking in te oter0
5e price o! land, o@e8er, may also rise e8en @en te price o! te agric%lt%ral prod%ct
decreases0
&n tis case, te di!!erential rent, and @it it te price o! te better lands, may a8e risen, o@ing to
!%rter di!!erentiations0 3r, i! tis is not te case, te price o! te agric%lt%ral prod%ct may a8e
!allen by 8irt%e o! greater labo%r prod%cti8ity b%t in s%c a manner tat te increased prod%ction
more tan co%nterbalances tis0 'et %s ass%me tat one D%arter cost 6= sillings0 -o@, i! te same
acre, @it te same capital, so%ld prod%ce t@o D%arters instead o! one, and te price o! one
D%arter so%ld !all to 2= sillings, ten t@o D%arters @o%ld cost 8= sillings, so tat te 8al%e o!
te prod%ct o! te same capital in8ested in te same acre @o%ld a8e risen by one-tird, despite
te !all in price per D%arter by one-tird0 6o@ tis is possible @ito%t selling te prod%ct abo8e
its price o! prod%ction or abo8e its 8al%e, as been de8eloped in te analysis o! di!!erential rent0
?s a matter o! !act it is possible only in t@o @ays0 Eiter bad soil is excl%ded !rom competition,
b%t te price o! te better soil increases @it te increase in di!!erential rent, i0e0, te general
impro8ement a!!ects te 8ario%s soil types di!!erently0 3r, te same price o! prod%ction Band te
same 8al%e, i! absol%te rent is paidC expresses itsel! on te @orst soil tro%g a larger mass o!
prod%cts, @en labo%r prod%cti8ity as become greater0 5e prod%ct represents te same 8al%e as
be!ore, b%t te price o! its aliD%ot parts as !allen, @ile teir n%mber as increased0 5is is
impossible @en te same capital as been employed# !or in tis case te same 8al%e al@ays
expresses itsel! tro%g any portion o! te prod%ct0 &t is possible, o@e8er, @en additional
capital as been expended !or gyps%m, g%ano, etc0, in sort, !or impro8ements te e!!ects o!
@ic extend o8er se8eral years0 5e stip%lation is tat te price o! an indi8id%al D%arter !alls, b%t
not to te same extent as te n%mber o! D%arters increases0
&&&0 5ese di!!erent conditions %nder @ic rent may rise, and @it it te price o! land in general,
or o! partic%lar kinds o! land, may partly compete, or partly excl%de one anoter, and can only act
alternately0 A%t it !ollo@s !rom te !oregoing tat te conseD%ence o! a rise in te price o! land
does not necessarily signi!y also a rise in rent, or tat a rise in rent, @ic al@ays brings @it it a
rise in te price o! land, is not necessarily contingent %pon an increase in te agric%lt%ral
prod%ct0
lii

)ater tan tracing to teir origin te real nat%ral ca%ses leading to an exa%stion o! te soil,
@ic, incidentally, @ere %nkno@n to all economists @riting on di!!erential rent o@ing to te
le8el o! agric%lt%ral cemistry in teir day, te sallo@ conception @as seiEed %pon tat any
amo%nt o! capital cannot be in8ested in a limited area o! land# as te 0dinburgh 9eview, /5ome
'&4, ?%g%st-7ecember 1831, pp0 *2-*+0 I 0d01 !or instance, arg%ed against )icard Pones tat all
o! England cannot be !ed tro%g te c%lti8ation o! $oo $D%are0 &! tis be considered a special
disad8antage o! agric%lt%re, precisely te opposite is tr%e0 &t is possible to in8est capital ere
s%ccessi8ely @it !r%it!%l res%lts, beca%se te soil itsel! ser8es as an instr%ment o! prod%ction,
@ic is not te case @it a !actory, or olds only to a limited extent, since it ser8es only as a
!o%ndation, as a place and a space pro8iding a basis o! operations0 &t is tr%e tat, compared @it
scattered andicra!ts, large-scale ind%stry may concentrate m%c prod%ction in a small area0
-e8erteless a de!inite amo%nt o! space is al@ays reD%ired at any gi8en le8el o! prod%cti8ity, and
te constr%ction o! tall b%ildings also as its practical limitations0 Aeyond tis any expansion o!
prod%ction also demands an extension o! land area0 5e !ixed capital in8ested in macinery, etc0,
does not impro8e tro%g %se, b%t on te contrary, @ears o%t0 -e@ in8entions may indeed permit
++1 ;apter J'4&
some impro8ement in tis respect, b%t @it any gi8en de8elopment in prod%cti8e po@er,
macines @ill al@ays deteriorate0 &! prod%cti8ity is rapidly de8eloped, all o! te old macinery
m%st be replaced by te more ad8antageo%s# in oter @ords, it is lost0 5e soil, o@e8er, i!
properly treated, impro8es all te time0 5e ad8antage o! te soil, permitting s%ccessi8e
in8estments o! capital to bring gains @ito%t loss o! pre8io%s in8estments, implies te possibility
o! di!!erences in yield !rom tese s%ccessi8e in8estments o! capital0
Chapter 47. Genesis of Capitalist Ground-Rent
I. Introductor# )emar4s
We m%st clari!y in o%r minds @erein lies te real di!!ic%lty in analysing gro%nd-rent !rom te
8ie@point o! modern economics, as te teoretical expression o! te capitalist mode o!
prod%ction0 E8en many o! te more modern @riters a8e not as yet grasped tis, as e8idenced by
eac rene@ed attempt to Kne@lyL explain gro%nd-rent0 5e no8elty almost in8ariably consists in a
relapse into long o%t-o!-date 8ie@s0 5e di!!ic%lty is not to explain te s%rpl%s-prod%ct prod%ced
by agric%lt%ral capital and its corresponding s%rpl%s-8al%e in general0 5is D%estion is sol8ed in
te analysis o! te s%rpl%s-8al%e prod%ced by all prod%cti8e capital, in @ate8er spere it may be
in8ested0 5e di!!ic%lty consists rater in so@ing te so%rce o! te excess o! s%rpl%s-8al%e paid
te landlord by capital in8ested in land in te !orm o! rent, a!ter eD%alisation o! te s%rpl%s-8al%e
to te a8erage pro!it among te 8ario%s capitals, a!ter te 8ario%s capitals a8e sared in te total
s%rpl%s-8al%e prod%ced by te social capital in all speres o! prod%ction in proportion to teir
relati8e siEe# in oter @ords, te so%rce s%bseD%ent to tis eD%alisation and te apparently already
completed distrib%tion o! all s%rpl%s-8al%e @ic, in general, is to be distrib%ted0 M%ite apart !rom
te practical moti8es, @ic prodded modern economists as spokesmen o! ind%strial capital
against landed property to in8estigate tis D%estion I moti8es @ic @e sall point o%t more
clearly in te capter on istory o! gro%nd-rent I te D%estion @as o! paramo%nt interest to tem
as teorists0 5o admit tat te appearance o! rent !or capital in8ested in agric%lt%re is d%e to some
partic%lar e!!ect prod%ced by te spere o! in8estment itsel!, d%e to sing%lar D%alities o! te
eartGs cr%st itsel!, is tantamo%nt to gi8ing %p te conception o! 8al%e as s%c, t%s tantamo%nt to
abandoning all attempts at a scienti!ic %nderstanding o! tis !ield0 E8en te simple obser8ation
tat rent is paid o%t o! te price o! agric%lt%ral prod%ce I @ic takes place e8en @ere rent is
paid in kind i! te !armer is to reco8er is price o! prod%ction I so@ed te abs%rdity o!
attempting to explain te excess o! tis price o8er te ordinary price o! prod%ction# in oter
@ords, to explain te relati8e dearness o! agric%lt%ral prod%cts on te basis o! te excess o!
nat%ral prod%cti8ity o! agric%lt%ral prod%ction o8er te prod%cti8ity o! oter lines o! prod%ction0
For te re8erse is tr%e: te more prod%cti8e labo%r is, te ceaper is e8ery aliD%ot part o! its
prod%ct, beca%se so m%c greater is te mass o! %se-8al%es incorporating te same D%antity o!
labo%r, i0e0, te same 8al%e0
5e @ole di!!ic%lty in analysing rent, tere!ore, consists in explaining te excess o! agric%lt%ral
pro!it o8er te a8erage pro!it, not te s%rpl%s-8al%e, b%t te excess o! s%rpl%s-8al%e caracteristic
o! tis spere o! prod%ction# in oter @ords, not te Knet prod%ctL, b%t te excess o! tis net
prod%ct o8er te net prod%ct o! oter brances o! ind%stry0 5e a8erage pro!it itsel! is a prod%ct
!ormed %nder 8ery de!inite istorical prod%ction relations by te mo8ement o! social processes, a
prod%ct @ic, as @e a8e seen, reD%ires 8ery complex adH%stment0 5o be able to speak at all o! a
s%rpl%s o8er te a8erage pro!it, tis a8erage pro!it itsel! m%st already be establised as a standard
and as a reg%lator o! prod%ction in general as is te case %nder capitalist prod%ction0 For tis
reason tere can be no talk o! rent in te modern sense, a rent consisting o! a s%rpl%s o8er te
a8erage pro!it, i0e0, o8er and abo8e te proportional sare o! eac indi8id%al capital in te
s%rpl%s-8al%e prod%ced by te total social capital, in social !ormations @ere it is not capital
@ic per!orms te !%nction o! en!orcing all s%rpl%s-labo%r and appropriating directly all s%rpl%s-
8al%e0 ?nd @ere tere!ore capital as not yet completely, or only sporadically, bro%gt social
labo%r %nder its control0 &t re!lects nah8etF, e0g0, o! a person like ,assy Bsee belo@C, @en e
speaks o! rent in primiti8e society as a s%rpl%s o8er pro!it /,assy, 9ente du sol. &n: 7ictionnaire
++3 ;apter J'4&&
de lGFconomie politiD%e, 5ome &&0 ,aris, 18+2, p0 +110 I 0d01 I a istorically de!ined social !orm
o! s%rpl%s-8al%e, b%t @ic, according to ,assy, migt almost as @ell exist @ito%t any society0
For te older economists, @o in general merely begin analysing te capitalist mode o!
prod%ction, still %nde8eloped in teir day, te analysis o! rent o!!ers eiter no di!!ic%lty at all, or
only a di!!ic%lty o! a completely di!!erent kind0 ,etty, ;antillon, and in general tose @riters @o
are closer to !e%dal times, ass%me gro%nd-rent to be te normal !orm o! s%rpl%s-8al%e in general, /
/,etty1 + 4reatise on 4aes and Contributions, 'ondon, 166>, pp0 <3-<2# /)icard ;antillon1
0ssai sur la nature du commerce en g7neral, ?msterdam, 1>+60 I 0d01 @ereas pro!it to tem is
still amorpo%sly combined @it @ages, or at best appears to be a portion o! s%rpl%s-8al%e
extorted by te capitalist !rom te landlord0 5ese @riters t%s take as teir point o! depart%re a
sit%ation @ere, in te !irst place, te agric%lt%ral pop%lation still constit%tes te o8er@elming
maHority o! te nation, and, secondly, te landlord still appears as te person appropriating at !irst
and te s%rpl%s-labo%r o! te direct prod%cers by 8irt%e o! is monopoly o! landed property,
@ere landed property, tere!ore, still appears as te main condition o! prod%ction0 For tese
@riters te D%estion co%ld not yet be posed, @ic, in8ersely, seeks to in8estigate !rom te
8ie@point o! capitalist prod%ction o@ landed property manages to @rest back again !rom capital
a portion o! te s%rpl%s-8al%e prod%ced by it Btat is, !ilced by it !rom te direct prod%cersC and
already appropriated directly0
5e physiocrats are tro%bled by di!!ic%lties o! anoter nat%re0 ?s te act%ally !irst systematic
spokesmen o! capital, tey attempt to analyse te nat%re o! s%rpl%s-8al%e in general0 For tem,
tis analysis coincides @it te analysis o! rent, te only !orm o! s%rpl%s-8al%e @ic tey
recognise0 5ere!ore, tey consider rent-yielding, or agric%lt%ral, capital to be te only capital
prod%cing s%rpl%s-8al%e, and te agric%lt%ral labo%r set in motion by it, te only labo%r prod%cing
s%rpl%s-8al%e, @ic !rom a capitalist 8ie@point is D%ite properly considered te only prod%cti8e
labo%r0 5ey are D%ite rigt in considering te creation o! s%rpl%s-8al%e as decisi8e0 ?part !rom
oter merits to be set !ort in Aook &4, tey deser8e credit primarily !or going back !rom
mercantGs capital, @ic !%nctions solely in te spere o! circ%lation, to prod%cti8e capital, in
opposition to te mercantile system, @ic, @it its cr%de realism, constit%tes te act%al 8%lgar
economy o! tat period, p%sing into te backgro%nd in !a8o%r o! its o@n practical interests te
beginnings o! scienti!ic analysis made by ,etty and is s%ccessors0 &n tis critiD%e o! te
mercantile system, incidentally, only its conceptions o! capital and s%rpl%s-8al%e are dealt @it0 &t
as already been indicated pre8io%sly tat te monetary system correctly proclaims prod%ction
!or te @orld-market and te trans!ormation o! te o%tp%t into commodities, and t%s into money,
as te prereD%isite and condition o! capitalist prod%ction0 &n tis systemGs !%rter de8elopment
into te mercantile system, it is no longer te trans!ormation o! commodity-8al%e into money, b%t
te creation o! s%rpl%s-8al%e @ic is decisi8e I b%t !rom te meaningless 8ie@point o! te
circ%lation spere and, at te same time, in s%c manner tat tis s%rpl%s 8al%e is represented as
s%rpl%s money, as te balance o! trade s%rpl%s0 ?t te same time, o@e8er, te caracteristic
!eat%re o! te interested mercants and man%!act%rers o! tat period, @ic is in keeping @it te
stage o! capitalist de8elopment represented by tem, is tat te trans!ormation o! !e%dal
agric%lt%ral societies into ind%strial ones and te corresponding ind%strial str%ggle o! nations on
te @orld-market depends on an accelerated de8elopment o! capital, @ic is not to be arri8ed at
along te so-called nat%ral pat, b%t rater by means o! coerci8e meas%res0 &t makes a tremendo%s
di!!erence @eter national capital is grad%ally and slo@ly trans!ormed into ind%strial capital, or
@eter tis de8elopment is accelerated by means o! a tax @ic tey impose tro%g protecti8e
d%ties mainly %pon lando@ners, middle and small peasants, and andicra!tsmen, by @ay o!
accelerated expropriation o! te independent direct prod%cers, and tro%g te 8iolently
accelerated acc%m%lation and concentration o! capital, in sort by means o! te accelerated
establisment o! conditions o! capitalist prod%ction0 &t sim%ltaneo%sly makes an enormo%s
di!!erence in te capitalist and ind%strial exploitation o! te nat%ral national prod%cti8e po@er0
++2 ;apter J'4&&
6ence te national caracter o! te mercantile system is not merely a prase on te lips o! its
spokesmen0 (nder te pretext o! concern solely !or te @ealt o! te nation and te reso%rces o!
te state, tey, in !act, prono%nce te interests o! te capitalist class and te amassing o! rices in
general to be te %ltimate aim o! te state, and t%s proclaim bo%rgeois society in place o! te old
di8ine state0 A%t at te same time tey are conscio%sly a@are tat te de8elopment o! te interests
o! capital and o! te capitalist class, o! capitalist prod%ction, !orms te !o%ndation o! national
po@er and national ascendancy in modern society0
5e pysiocrats, !%rtermore, are correct in stating tat in !act all prod%ction o! s%rpl%s-8al%e,
and t%s all de8elopment o! capital, as !or its nat%ral basis te prod%cti8eness o! agric%lt%ral
labo%r0 &! man @ere not capable o! prod%cing in one @orking-day more means o! s%bsistence,
@ic signi!ies in te strictest sense more agric%lt%ral prod%cts tan e8ery labo%rer needs !or is
o@n reprod%ction, i! te daily expendit%re o! is entire labo%r po@er s%!!iced merely to prod%ce
te means o! s%bsistence indispensable !or is o@n indi8id%al reD%irements, ten one co%ld not
speak at all eiter o! s%rpl%s-prod%ct or s%rpl%s-8al%e0 ?n agric%lt%ral labo%r prod%cti8ity
exceeding te indi8id%al reD%irements o! te labo%rer is te basis o! all societies, and is abo8e all
te basis o! capitalist prod%ction, @ic disengages a constantly increasing portion o! society
!rom te prod%ction o! basic !oodst%!!s and trans!orms tem into K!ree eads,L as $te%art /$te%art,
+n Dn3uiry Dnto the &rinciples of &olitical 0conomy, 4ol0 &, 7%blin, 1>>=, p0 3*60 I 0d.1 as it,
making tem a8ailable !or exploitation in oter speres0
A%t @at can be said o! more recent @riters on economics, s%c as 7aire, ,assy, etc0, @o parrot
te most primiti8e conceptions concerning te nat%ral conditions o! s%rpl%s-labo%r and tereby
s%rpl%s-8al%e in general, in te t@iligt o! classical economy, indeed on its 8ery deat-bed, and
@o imagine tat tey are t%s propo%nding someting ne@ and striking on gro%nd-rent /7aire,
Dntroduction. DnI &hysiocrats, ;. 5eil, ,aris, 1826# ,assy, 9ente du sol. &n: 7ictionnaire de
lGFconomie politiD%e, 5ome &&, ,aris, 18+2, p0 +110 I 0d.1 long a!ter tis gro%nd-rent as been
in8estigated as a special !orm and become a speci!ic portion o! s%rpl%s-8al%eQ &t is partic%larly
caracteristic o! 8%lgar economy tat it ecoes @at @as ne@, original, pro!o%nd and H%sti!ied
d%ring a speci!ic o%tgro@n stage o! de8elopment, in a period @en it as t%rned platit%dino%s,
stale, and !alse0 &t t%s con!esses its complete ignorance o! te problems @ic concerned
classical economy0 &t con!o%nds tem @it D%estions tat co%ld only a8e been posed on a lo@er
le8el o! de8elopment o! bo%rgeois society0 5e same olds tr%e o! its incessant and sel!-
complacent r%mination o! te pysiocratic prases concerning !ree trade0 5ese prases a8e long
since lost all teoretical interest, no matter o@ m%c tey may engage te practical attention o!
tis or tat state0
&n nat%ral economy proper, @en no part o! te agric%lt%ral prod%ct, or b%t a 8ery insigni!icant
portion, enters into te process o! circ%lation, and ten only a relati8ely small portion o! tat part
o! te prod%ct @ic represents te landlordGs re8en%e, as, e0g0, in many )oman lati!%ndia, or
%pon te 8illas o! ;arlemagne, or more or less d%ring te entire Middle ?ges Bsee 4inmard,
(istoire du travailC, te prod%ct and s%rpl%s-prod%ct o! te large estates consists by no means
p%rely o! prod%cts o! agric%lt%ral labo%r0 &t encompasses eD%ally @ell te prod%cts o! ind%strial
labo%r0 7omestic andicra!ts and man%!act%ring labo%r as secondary occ%pations o! agric%lt%re,
@ic !orms te basis, are te prereD%isite o! tat mode o! prod%ction %pon @ic nat%ral
economy rests I in E%ropean antiD%ity and te Middle ?ges as @ell as in te present-day &ndian
comm%nity, in @ic te traditional organisation as not yet been destroyed0 5e capitalist mode
o! prod%ction completely abolises tis relationsip# a process @ic may be st%died on a large
scale partic%larly in England d%ring te last tird o! te 18t cent%ry0 5inkers like
6errensc@and, @o ad gro@n %p in more or less semi-!e%dal societies, still consider, e0g0, as
late as te close o! te 18t cent%ry, tis separation o! man%!act%re !rom agric%lt%re as a
!oolardy social ad8ent%re, as an %ntinkably risky mode o! existence0 ?nd e8en in te
agric%lt%ral economies o! antiD%ity so@ing te greatest analogy to capitalist agric%lt%re, namely
+++ ;apter J'4&&
;artage and )ome, te similarity to a plantation economy is greater tan to a !orm
corresponding to te really capitalist mode o! exploitation0
liii
? !ormal analogy, @ic,
sim%ltaneo%sly, o@e8er, t%rns o%t to be completely ill%sory in all essential points to a person
!amiliar @it te capitalist mode o! prod%ction, @o does not, like 6err Mommsen,
li8
disco8er a
capitalist mode o! prod%ction in e8ery monetary economy, is not to be !o%nd at all in continental
&taly d%ring antiD%ity, b%t at best only in $icily, since tis island ser8ed )ome as an agric%lt%ral
trib%tary so tat its agric%lt%re @as aimed cie!ly at export0 Farmers in te modern sense existed
tere0
?n erroneo%s conception o! te nat%re o! rent is based %pon te !act tat rent in kind, partly as
tites to te c%rc and partly as a c%riosity perpet%ated by long-establised contracts, as been
dragged o8er into modern times !rom te nat%ral economy o! te Middle ?ges, completely in
contradiction to te conditions o! te capitalist mode o! prod%ction0 &t tereby creates te
impression tat rent does not arise !rom te price o! te agric%lt%ral prod%ct, b%t !rom its mass,
t%s not !rom social conditions, b%t !rom te eart0 We a8e pre8io%sly so@n tat alto%g
s%rpl%s-8al%e is mani!ested in a s%rpl%s-prod%ct te con8erse does not old tat a s%rpl%s-
prod%ct, representing a mere increase in te mass o! prod%ct, constit%tes s%rpl%s-8al%e0 &t may
represent a min%s D%antity in 8al%e0 3ter@ise te cotton ind%stry o! 186=, compared @it tat o!
182=, @o%ld so@ an enormo%s s%rpl%s-8al%e, @ereas on te contrary te price o! te yarn as
!allen0 )ent may increase enormo%sly as a res%lt o! a s%ccession o! crop !ail%res, beca%se te
price o! grain rises, alto%g tis s%rpl%s-8al%e appears as an absol%tely decreasing mass o!
dearer @eat0 ;on8ersely, te rent may !all in conseD%ence o! a s%ccession o! bo%nti!%l years,
beca%se te price !alls, alto%g te red%ced rent appears as a greater mass o! ceaper @eat0 ?s
regards rent in kind, it so%ld be noted no@ tat, in te !irst place, it is a mere tradition carried
o8er !rom an obsolete mode o! prod%ction and managing to prolong its existence as a s%r8i8al0 &ts
contradiction to te capitalist mode o! prod%ction is so@n by its disappearance o! itsel! !rom
pri8ate contracts, and its being !orcibly saken o!! as an anacronism, @ere8er legislation @as
able to inter8ene as in te case o! c%rc tites in England0 $econdly, o@e8er, @ere rent in kind
persisted on te basis o! capitalist prod%ction, it @as no more, and co%ld be no more, tan an
expression o! money-rent in medie8al garb0 Weat, !or instance, is D%oted at 2= sillings per
D%arter0 3ne portion o! tis @eat m%st replace te @ages contained terein, and m%st be sold to
become a8ailable !or rene@ed expendit%re0 ?noter portion m%st be sold to pay its proportionate
sare o! taxes0 $eed and e8en a portion o! !ertiliser enter as commodities into te process o!
reprod%ction, @ere8er te capitalist mode o! prod%ction and @it it di8ision o! social labo%r are
de8eloped, i0e0, tey m%st be p%rcased !or replacement p%rposes# and tere!ore anoter portion
o! tis D%arter m%st be sold to obtain money !or tis0 &n so !ar as tey need not be bo%gt as
act%al commodities, b%t are taken o%t o! te prod%ct itsel! in kind, in order to enter into its
reprod%ction ane@ as conditions o! prod%ction I as occ%rs not only in agric%lt%re, b%t in many
oter lines o! prod%ction prod%cing constant capital I tey !ig%re in te books as money o!
acco%nt and are ded%cted as elements o! te cost-price0 5e @ear and tear o! macinery, and o!
!ixed capital in general, m%st be made good in money0 ?nd !inally comes pro!it, @ic is
calc%lated on tis s%m, expressed as costs eiter in act%al money or in money o! acco%nt0 5is
pro!it is represented by a de!inite portion o! te gross prod%ct, @ic is determined by its price0
?nd te excess portion @ic ten remains !orms rent0 &! te rent in kind stip%lated by contract is
greater tan tis remainder determined by te price, ten it does not constit%te rent, b%t a
ded%ction !rom pro!it0 3@ing to tis possibility alone, rent in kind is an obsolete !orm, in so !ar as
it does not re!lect te price o! te prod%ct, b%t may be greater or smaller tan te real rent, and
t%s may comprise not only a ded%ction !rom pro!it, b%t also !rom tose elements reD%ired !or
capital replacement0 &n !act, tis rent in kind, so !ar as it is rent not merely in name b%t also in
essence, is excl%si8ely determined by te excess o! te price o! te prod%ct o8er its price o!
prod%ction0 3nly it pres%pposes tat tis 8ariable is a constant magnit%de0 A%t it is s%c a
++6 ;apter J'4&&
com!orting re!lection tat te prod%ct in kind so%ld s%!!ice, !irst, to maintain te labo%rer,
secondly, to lea8e te capitalist tenant !armer more !ood tan e needs, and !inally, tat te
remainder so%ld constit%te te nat%ral rent0 M%ite like a man%!act%rer prod%cing <==,=== yards
o! cotton goods0 5ese yards o! goods not only s%!!ice to clote is labo%rers# to clote is @i!e,
all is o!!spring and imsel! ab%ndantly# b%t also lea8e o8er eno%g cotton !or sale, in addition to
paying an enormo%s rent in terms o! cotton goods0 &t is all so simpleS 7ed%ct te price o!
prod%ction !rom <==,=== yards o! cotton goods, and a s%rpl%s o! cotton goods m%st remain !or
rent0 A%t it is indeed a nai8e conception to ded%ct te price o! prod%ction o!, say, V1=,=== !rom
<==,=== yards o! cotton goods, @ito%t kno@ing te selling price, to ded%ct money !rom cotton
goods, to ded%ct an excange-8al%e !rom a %se-8al%e as s%c, and t%s to determine te s%rpl%s
o! yards o! cotton goods o8er po%nds sterling0 &t is @orse tan sD%aring te circle, @ic is at
least based %pon te conception tat tere is a limit at @ic straigt lines and c%r8es
imperceptibly !lo@ togeter0 A%t s%c is te prescription o! M0 ,assy0 7ed%ct money !rom cotton
goods, be!ore te cotton goods a8e been con8erted into money, eiter in oneGs mind or in realityS
Wat remains is te rent, @ic, o@e8er, is to be grasped naturaliter Bsee, !or instance, Karl
?rnd /K0 ?rnd, Die naturgemXsse Lol-swirtschaft, gegenber dem Monopoliengeiste und dem
Communismus, 6ana%, 182+, $0 261-6<0 I 0d01C and not by de8iltries o! sopistry0 5e entire
restoration o! rent in kind is !inally red%ced to tis !oolisness, te ded%ction o! te price o!
prod%ction !rom so many and so many b%sels o! @eat, and te s%btraction o! a s%m o! money
!rom a c%bic meas%re0
II. Labour rent
&! @e consider gro%nd-rent in its simplest !orm, tat o! labour rent, @ere te direct prod%cer,
%sing instr%ments o! labo%r Bplo%g, cattle, etc0C @ic act%ally or legally belong to im,
c%lti8ates soil act%ally o@ned by im d%ring part o! te @eek, and @orks d%ring te remaining
days %pon te estate o! te !e%dal lord @ito%t any compensation !rom te !e%dal lord, te
sit%ation ere is still D%ite clear, !or in tis case rent and s%rpl%s-8al%e are identical0 )ent, not
pro!it, is te !orm ere tro%g @ic %npaid s%rpl%s-labo%r expresses itsel!0 5o @at extent te
labo%rer Ba sel!-s%staining ser!C can sec%re in tis case a s%rpl%s abo8e is indispensable
necessities o! li!e, i0e0, a s%rpl%s abo8e tat @ic @e @o%ld call @ages %nder te capitalist mode
o! prod%ction, depends, oter circ%mstances remaining %ncanged, %pon te proportion in @ic
is labo%r-time is di8ided into labo%r-time !or imsel! and en!orced labo%r-time !or is !e%dal
lord0 5is s%rpl%s abo8e te indispensable reD%irements o! li!e, te germ o! @at appears as pro!it
%nder te capitalist mode o! prod%ction, is tere!ore @olly determined by te amo%nt o! gro%nd-
rent, @ic in tis case is not only directly %npaid s%rpl%s-labo%r, b%t also appears as s%c0 &t is
%npaid s%rpl%s-labo%r !or te Ko@nerL o! te means o! prod%ction, @ic ere coincide @it te
land, and so !ar as tey di!!er !rom it, are mere accessories to it0 5at te prod%ct o! te ser! m%st
ere s%!!ice to reprod%ce is conditions o! labo%r, in addition to is s%bsistence, is a circ%mstance
@ic remains te same %nder all modes o! prod%ction0 For it is not te res%lt o! teir speci!ic
!orm, b%t a nat%ral reD%isite o! all contin%o%s and reprod%cti8e labo%r in general, o! any
contin%ing prod%ction, @ic is al@ays sim%ltaneo%sly reprod%ction, i0e0, incl%ding reprod%ction
o! its o@n operating conditions0 &t is !%rtermore e8ident tat in all !orms in @ic te direct
labo%rer remains te KpossessorL o! te means o! prod%ction and labo%r conditions necessary !or
te prod%ction o! is o@n means o! s%bsistence, te property relationsip m%st sim%ltaneo%sly
appear as a direct relation o! lordsip and ser8it%de, so tat te direct prod%cer is not !ree# a lack
o! !reedom @ic may be red%ced !rom ser!dom @it en!orced labo%r to a mere trib%tary
relationsip0 5e direct prod%cer, according to o%r ass%mption, is to be !o%nd ere in possession
o! is o@n means o! prod%ction, te necessary material labo%r conditions reD%ired !or te
realisation o! is labo%r and te prod%ction o! is means o! s%bsistence0 6e cond%cts is
agric%lt%ral acti8ity and te r%ral ome ind%stries connected @it it independently0 5is
++> ;apter J'4&&
independence is not %ndermined by te circ%mstance tat te small peasants may !orm among
temsel8es a more or less nat%ral prod%ction comm%nity, as tey do in &ndia, since it is ere
merely a D%estion o! independence !rom te nominal lord o! te manor0 (nder s%c conditions
te s%rpl%s-labo%r !or te nominal o@ner o! te land can only be extorted !rom tem by oter
tan economic press%re, @ate8er te !orm ass%med may be0
l8
5is di!!ers !rom sla8e or
plantation economy in tat te sla8e @orks %nder alien conditions o! prod%ction and not
independently0 5%s, conditions o! personal dependence are reD%isite, a lack o! personal !reedom,
no matter to @at extent, and being tied to te soil as its accessory, bondage in te tr%e sense o!
te @ord0 $o%ld te direct prod%cers not be con!ronted by a pri8ate lando@ner, b%t rater, as in
?sia, %nder direct s%bordination to a state @ic stands o8er tem as teir landlord and
sim%ltaneo%sly as so8ereign, ten rent and taxes coincide, or rater, tere exists no tax @ic
di!!ers !rom tis !orm o! gro%nd-rent0 (nder s%c circ%mstances, tere need exist no stronger
political or economic press%re tan tat common to all s%bHection to tat state0 5e state is ten
te s%preme lord0 $o8ereignty ere consists in te o@nersip o! land concentrated on a national
scale0 A%t, on te oter and, no pri8ate o@nersip o! land exists, alto%g tere is bot pri8ate
and common possession and %se o! land0
5e speci!ic economic !orm, in @ic %npaid s%rpl%s-labo%r is p%mped o%t o! direct prod%cers,
determines te relationsip o! r%lers and r%led, as it gro@s directly o%t o! prod%ction itsel! and, in
t%rn, reacts %pon it as a determining element0 (pon tis, o@e8er, is !o%nded te entire !ormation
o! te economic comm%nity @ic gro@s %p o%t o! te prod%ction relations temsel8es, tereby
sim%ltaneo%sly its speci!ic political !orm0 &t is al@ays te direct relationsip o! te o@ners o! te
conditions o! prod%ction to te direct prod%cers I a relation al@ays nat%rally corresponding to a
de!inite stage in te de8elopment o! te metods o! labo%r and tereby its social prod%cti8ity I
@ic re8eals te innermost secret, te idden basis o! te entire social str%ct%re and @it it te
political !orm o! te relation o! so8ereignty and dependence, in sort, te corresponding speci!ic
!orm o! te state0 5is does not pre8ent te same economic basis I te same !rom te standpoint
o! its main conditions I d%e to inn%merable di!!erent empirical circ%mstances, nat%ral
en8ironment, racial relations, external istorical in!l%ences, etc0 !rom so@ing in!inite 8ariations
and gradations in appearance, @ic can be ascertained only by analysis o! te empirically gi8en
circ%mstances0
$o m%c is e8ident @it respect to labo%r rent, te simplest and most primiti8e !orm o! rent: )ent
is ere te prime8al !orm o! s%rpl%s-labo%r and coincides @it it0 A%t tis identity o! s%rpl%s-
8al%e @it %npaid labo%r o! oters need not be analysed ere beca%se it still exists in its 8isible,
palpable !orm, since te labo%r o! te direct prod%cer !or imsel! is still separated in space and
time !rom is labo%r !or te landlord and te latter appears directly in te br%tal !orm o! en!orced
labo%r !or a tird person0 &n te same @ay te Kattrib%teL possessed by te soil to prod%ce rent is
ere red%ced to a tangibly open secret, !or te disposition to !%rnis rent ere also incl%des %man
labo%r-po@er bo%nd to te soil, and te property relation @ic compels te o@ner o! labo%r-
po@er to dri8e it on and acti8ate it beyond s%c meas%re as is reD%ired to satis!y is o@n
indispensable needs0 )ent consists directly in te appropriation o! tis s%rpl%s expendit%re o!
labo%r-po@er by te landlord# !or te direct prod%cer pays im no additional rent0 6ere, @ere
s%rpl%s-8al%e and rent are not only identical b%t @ere s%rpl%s-8al%e as te tangible !orm o!
s%rpl%s-labo%r, te nat%ral conditions or limits o! rent, being tose o! s%rpl%s-8al%e in general, are
plainly clear0 5e direct prod%cer m%st 1C possess eno%g labo%r-po@er, and <C te nat%ral
conditions o! is labo%r, abo8e all te soil c%lti8ated by im, m%st be prod%cti8e eno%g, in a
@ord, te nat%ral prod%cti8ity o! is labo%r m%st be big eno%g to gi8e im te possibility o!
retaining some s%rpl%s-labo%r o8er and abo8e tat reD%ired !or te satis!action o! is o@n
indispensable needs0 &t is not tis possibility @ic creates te rent, b%t rater comp%lsion @ic
t%rns tis possibility into reality0 A%t te possibility itsel! is conditioned by s%bHecti8e and
obHecti8e nat%ral circ%mstances0 ?nd ere too lies noting at all mysterio%s0 $o%ld labo%r-po@er
++8 ;apter J'4&&
be min%te, and te nat%ral conditions o! labo%r scanty, ten te s%rpl%s-labo%r is small, b%t in
s%c a case so are te @ants o! te prod%cers on te one and and te relati8e n%mber o!
exploiters o! s%rpl%s-labo%r on te oter, and !inally so is te s%rpl%s-prod%ct, @ereby tis
barely prod%cti8e s%rpl%s-labo%r is realised !or tose !e@ exploiting lando@ners0
Finally, labo%r rent in itsel! implies tat, all oter circ%mstances remaining eD%al, it @ill depend
@olly %pon te relati8e amo%nt o! s%rpl%s-labo%r, or en!orced labo%r, to @at extent te direct
prod%cer sall be enabled to impro8e is o@n condition, to acD%ire @ealt, to prod%ce an excess
o8er and abo8e is indispensable means o! s%bsistence, or, i! @e @is to anticipate te capitalist
mode o! expression, @eter e sall be able to prod%ce a pro!it !or imsel!, and o@ m%c o! a
pro!it, i0e0, an excess o8er is @ages @ic a8e been prod%ced by imsel!0 )ent ere is te
normal, all-absorbing, so to say legitimate !orm o! s%rpl%s-labo%r, and !ar !rom being excess o8er
pro!it, @ic means in tis case being abo8e any oter excess o8er @ages, it is rater tat te
amo%nt o! s%c pro!it, and e8en its 8ery existence, depends, oter circ%mstances being eD%al,
%pon te amo%nt o! rent, i0e0, te en!orced s%rpl%s-labo%r to be s%rrendered to te lando@ners0
$ince te direct prod%cer is not te o@ner, b%t only a possessor, and since all is s%rpl%s-labo%r
de Yure act%ally belongs to te landlord, some istorians a8e expressed astonisment tat it
so%ld be at all possible !or tose s%bHect to en!orced labo%r, or ser!s, to acD%ire any independent
property, or relati8ely speaking, @ealt, %nder s%c circ%mstances0 6o@e8er, it is e8ident tat
tradition m%st play a dominant role in te primiti8e and %nde8eloped circ%mstances on @ic
tese social prod%ction relations and te corresponding mode o! prod%ction are based0 &t is
!%rtermore clear tat ere as al@ays it is in te interest o! te r%ling section o! society to
sanction te existing order as la@ and to legally establis its limits gi8en tro%g %sage and
tradition0 ?part !rom all else, tis, by te @ay, comes abo%t o! itsel! as soon as te constant
reprod%ction o! te basis o! te existing order and its !%ndamental relations ass%mes a reg%lated
and orderly !orm in te co%rse o! time0 ?nd s%c reg%lation and order are temsel8es
indispensable elements o! any mode o! prod%ction, i! it is to ass%me social stability and
independence !rom mere cance and arbitrariness0 5ese are precisely te !orm o! its social
stability and tere!ore its relati8e !reedom !rom mere arbitrariness and mere cance0 (nder
back@ard conditions o! te prod%ction process as @ell as te corresponding social relations, it
acie8es tis !orm by mere repetition o! teir 8ery reprod%ction0 &! tis as contin%ed on !or some
time, it entrences itsel! as c%stom and tradition and is !inally sanctioned as an explicit la@0
6o@e8er, since te !orm o! tis s%rpl%s-labo%r, en!orced labo%r, is based %pon te imper!ect
de8elopment o! all social prod%cti8e po@ers and te cr%deness o! te metods o! labo%r itsel!, it
@ill nat%rally absorb a relati8ely m%c smaller portion o! te direct prod%cerGs total labo%r tan
%nder de8eloped modes o! prod%ction, partic%larly te capitalist mode o! prod%ction0 5ake it, !or
instance, tat te en!orced labo%r !or te landlord originally amo%nted to t@o days per @eek0
5ese t@o days o! en!orced labo%r per @eek are tereby !ixed, are a constant magnit%de, legally
reg%lated by prescripti8e or @ritten la@0 A%t te prod%cti8ity o! te remaining days o! te @eek,
@ic are at te disposal o! te direct prod%cer imsel!, is a 8ariable magnit%de, @ic m%st
de8elop in te co%rse o! is experience, H%st as te ne@ @ants e acD%ires, and H%st as te
expansion o! te market !or is prod%ct and te increasing ass%rance @it @ic e disposes o!
tis portion o! is labo%r-po@er @ill sp%r im on to a greater exertion o! is labo%r-po@er,
@ereby it so%ld not be !orgotten tat te employment o! is labo%r-po@er is by no means
con!ined to agric%lt%re, b%t incl%des r%ral ome ind%stry0 5e possibility is ere presented !or
de!inite economic de8elopment taking place, depending, o! co%rse, %pon !a8o%rable
circ%mstances, inborn racial caracteristics, etc0
III. )ent In 7ind
5e trans!ormation o! labo%r rent into rent in kind canges noting !rom te economic standpoint
in te nat%re o! gro%nd-rent0 5e latter consists, in te !orms considered ere, in tat rent is te
++* ;apter J'4&&
sole pre8ailing and normal !orm o! s%rpl%s-8al%e, or s%rpl%s-labo%r0 5is is !%rter expressed in
te !act tat it is te only s%rpl%s-labo%r, or te only s%rpl%s-prod%ct, @ic te direct prod%cer,
@o is in possessiono! te labo%r conditions needed !or is o@n reprod%ction, m%st gi8e %p to te
owner o! te land, @ic in tis sit%ation is te all-embracing condition o! labo%r0 ?nd,
!%rtermore, tat land is te only condition o! labo%r @ic con!ronts te direct prod%cer as alien
property, independent o! im, and personi!ied by te landlord0 5o @ate8er extent rent in kind is
te pre8ailing and dominant !orm o! gro%nd-rent, it is !%rter-more al@ays more or less
accompanied by s%r8i8als o! te earlier !orm, i0e0, o! rent paid directly in labo%r, cor8Fe-labo%r,
no matter @eter te landlord be a pri8ate person or te state0 )ent in kind pres%pposes a iger
stage o! ci8ilisation !or te direct prod%cer, i0e0, a iger le8el o! de8elopment o! is labo%r and o!
society in general0 ?nd it is distinct !rom te preceding !orm in tat s%rpl%s-labo%r needs no
longer be per!ormed in its nat%ral !orm, t%s no longer %nder te direct s%per8ision and
comp%lsion o! te landlord or is representati8es: te direct prod%cer is dri8en rater by !orce o!
circ%mstances tan by direct coercion, tro%g legal enactment rater tan te @ip, to per!orm it
on is o@n responsibility0 $%rpl%s-prod%ction, in te sense o! prod%ction beyond te
indispensable needs o! te direct prod%cer, and @itin te !ield o! prod%ction act%ally belonging
to im, %pon te land exploited by imsel! instead o!, as earlier, %pon te nearby lordGs estate
beyond is o@n land, as already become a sel!-%nderstood r%le ere0 &n tis relation te direct
prod%cer more or less disposes o! is entire labo%r-time, alto%g, as pre8io%sly, a part o! tis
labo%r-time, at !irst practically te entire s%rpl%s portion o! it, belongs to te landlord @ito%t
compensation# except tat te landlord no longer directly recei8es tis s%rpl%s-labo%r in its
nat%ral !orm, b%t rater in te prod%ctsG nat%ral !orm in @ic it is realised0 5e b%rdensome, and
according to te @ay in @ic en!orced labo%r is reg%lated, more or less dist%rbing interr%ption
by @ork !or te landlord Bsee A%c &, Kap0 4&&&, <C /Englis edition ; J, < I 0d1 BKMan%!act%rer
and AoyardLC stops @ere8er rent in kind appears in p%re !orm, or at least it is red%ced to a !e@
sort inter8als d%ring te year, @en a contin%ation o! some cor8Fe-labo%r side by side @it rent
in kind takes place0 5e labo%r o! te prod%cer !or imsel! and is labo%r !or te landlord are no
longer palpably separated by time and space0 5is rent in kind, in its p%re !orm, @ile it may drag
!ragments along into more igly de8eloped modes o! prod%ction and prod%ction relations, still
pres%pposes !or its existence a nat%ral economy, i0e0, tat te conditions o! te economy are eiter
@olly or !or te o8er@elming part prod%ced by te economy itsel!, directly replaced and
reprod%ced o%t o! its gross prod%ct0 &t !%rtermore pres%pposes te combination o! r%ral ome
ind%stry @it agric%lt%re0 5e s%rpl%s-prod%ct, @ic !orms te rent, is te prod%ct o! tis
combined agric%lt%ral and ind%strial !amily labo%r, no matter @eter rent in kind contains more
or less o! te ind%strial prod%ct, as is o!ten te case in te Middle ?ges, or @eter it is paid only
in te !orm o! act%al prod%cts o! te land0 &n tis !orm o! rent it is by no means necessary !or rent
in kind, @ic represents te s%rpl%s-labo%r, to !%lly exa%st te entire s%rpl%s-labo%r o! te r%ral
!amily0 ;ompared @it labo%r rent, te prod%cer rater as more room !or action to gain time !or
s%rpl%s-labo%r @ose prod%ct sall belong to imsel!, as @ell as te prod%ct o! is labo%r @ic
satis!ies is indispensable needs0 $imilarly, tis !orm @ill gi8e rise to greater di!!erences in te
economic position o! te indi8id%al direct prod%cers0 ?t least te possibility !or s%c a
di!!erentiation exists, and te possibility !or te direct prod%cer to a8e in t%rn acD%ired te
means to exploit oter labo%rers directly0 5is, o@e8er, does not concern %s ere, since @e are
dealing @it rent in kind in its p%re !orm# H%st as in general @e cannot enter into te endless
8ariety o! combinations @erein te 8ario%s !orms o! rent may be %nited, ad%lterated and
amalgamated0 5e !orm o! rent in kind, by being bo%nd to a de!inite type o! prod%ct and
prod%ction itsel! and tro%g its indispensable combination o! agric%lt%re and domestic ind%stry,
tro%g its almost complete sel!-s%!!iciency @ereby te peasant !amily s%pports itsel! tro%g
its independence !rom te market and te mo8ement o! prod%ction and istory o! tat section o!
society lying o%tside o! its spere, in sort o@ing to te caracter o! nat%ral economy in general,
tis !orm is D%ite adapted to !%rnising te basis !or stationary social conditions as @e see, e0g0, in
+6= ;apter J'4&&
?sia0 6ere, as in te earlier !orm o! labo%r rent, gro%nd-rent is te normal !orm o! s%rpl%s-8al%e,
and t%s o! s%rpl%s-labo%r, i0e0, o! te entire excess labo%r @ic te direct prod%cer m%st
per!orm gratis, ence act%ally %nder comp%lsion alto%g tis comp%lsion no longer con!ronts
im in te old br%tal !orm I !or te bene!it o! te o@ner o! is essential condition o! labo%r, te
land0 5e pro!it, i! by erroneo%sly anticipating @e may t%s call tat portion o! te direct
prod%cerGs labo%r excess o8er is necessary labo%r, @ic e retains !or imsel!, as so little to
do @it determining rent in kind, tat tis pro!it, on te contrary, gro@s %p beind te back o!
rent and !inds its nat%ral limit in te siEe o! rent in kind0 5e latter may ass%me dimensions @ic
serio%sly imperil reprod%ction o! te conditions o! labo%r, te means o! prod%ction temsel8es,
rendering te expansion o! prod%ction more or less impossible and red%cing te direct prod%cers
to te pysical minim%m o! means o! s%bsistence0 5is is partic%larly te case, @en tis !orm is
met @it and exploited by a conD%ering commercial nation, e0g0, te Englis in &ndia0
IV. *one#.)ent
Ay money-rent I as distinct !rom ind%strial and commercial gro%nd-rent based %pon te capitalist
mode o! prod%ction, @ic is b%t an excess o8er a8erage pro!it I @e ere mean te gro%nd-rent
@ic arises !rom a mere cange in !orm o! rent in kind, H%st as te latter in t%rn is b%t a
modi!ication o! labo%r rent0 5e direct prod%cer ere t%rns o8er instead o! te prod%ct, its price to
te landlord B@o may be eiter te state or a pri8ate indi8id%alC0 ?n excess o! prod%cts in teir
nat%ral !orm no longer s%!!ices# it m%st be con8erted !rom its nat%ral !orm into money-!orm0
?lto%g te direct prod%cer still contin%es to prod%ce at least te greater part o! is means o!
s%bsistence imsel!, a certain portion o! tis prod%ct m%st no@ be con8erted into commodities,
m%st be prod%ced as commodities0 5e caracter o! te entire mode o! prod%ction is t%s more or
less canged0 &t loses its independence, its detacment !rom social connection0 5e ratio o! cost o!
prod%ction, @ic no@ comprises greater or lesser expendit%res o! money, becomes decisi8e# at
any rate, te excess o! tat portion o! gross prod%ct to be con8erted into money o8er tat portion
@ic m%st ser8e, on te one and, as means o! reprod%ction again, and, on te oter, as means o!
direct s%bsistence, ass%mes a determining role0 6o@e8er, te basis o! tis type o! rent, alto%g
approacing its dissol%tion, remains te same as tat o! rent in kind, @ic constit%tes its point o!
depart%re0 5e direct prod%cer as be!ore is still possessor o! te land eiter tro%g ineritance or
some oter traditional rigt, and m%st per!orm !or is lord, as o@ner o! is most essential
condition o! prod%ction, excess cor8Fe-labo%r, tat is, %npaid labo%r !or @ic no eD%i8alent is
ret%rned, in te !orm o! a s%rpl%s-prod%ct trans!ormed into money0 3@nersip o! te conditions
o! labo%r as distinct !rom land, s%c as agric%lt%ral implements and oter goods and cattels, is
trans!ormed into te property o! te direct prod%cer e8en %nder te earlier !orms o! rent, !irst in
!act, and ten also legally, and e8en more so is tis te precondition !or te !orm o! money-rent0
5e trans!ormation o! rent in kind into money-rent, taking place !irst sporadically and ten on a
more or less national scale, pres%pposes a considerable de8elopment o! commerce, o! %rban
ind%stry, o! commodity-prod%ction in general, and tereby o! money circ%lation0 &t !%rtermore
ass%mes a market-price !or prod%cts, and tat tey be sold at prices ro%gly approximating teir
8al%es, @ic need not at all be te case %nder earlier !orms0 &n Eastern E%rope @e may still
partly obser8e tis trans!ormation taking place %nder o%r 8ery eyes0 6o@ %n!easible it can be
@ito%t a certain de8elopment o! social labo%r prod%cti8ity is pro8ed by 8ario%s %ns%ccess!%l
attempts to carry it tro%g %nder te )oman Empire, and by relapses into rent in kind a!ter
seeking to con8ert at least te state tax portion o! tis rent into money-rent0 5e same transitional
di!!ic%lties are e8idenced, e0g0, in pre-re8ol%tionary France, @en money-rent @as combined @it
and ad%lterated by, s%r8i8als o! its earlier !orms0
Money-rent, as a transm%ted !orm o! rent in kind, and in antitesis to it, is, ne8erteless, te !inal
!orm, and sim%ltaneo%sly te !orm o! dissol%tion o! te type o! gro%nd-rent @ic @e a8e
ereto!ore considered, namely gro%nd-rent as te normal !orm o! s%rpl%s-8al%e and o! te %npaid
+61 ;apter J'4&&
s%rpl%s-labo%r to be per!ormed !or te o@ner o! te conditions o! prod%ction0 &n its p%re !orm,
tis rent, like labo%r rent and rent in kind, represents no excess o8er pro!it0 &t absorbs te pro!it,
as it is %nderstood0 &n so !ar as pro!it arises beside it practically as a separate portion o! excess
labo%r, money-rent like rent in its earlier !orms still constit%tes te normal limit o! s%c
embryonic pro!it, @ic can only de8elop in relation to te possibilities o! exploitation, be it o!
oneGs o@n excess labo%r or tat o! anoter, @ic remains a!ter te per!ormance o! te s%rpl%s-
labo%r represented by money-rent0 $o%ld any pro!it act%ally arise along @it tis rent, ten tis
pro!it does not constit%te te limit o! rent, b%t rater con8ersely, te rent is te limit o! te pro!it0
6o@e8er, as already indicated, money-rent is sim%ltaneo%sly te !orm o! dissol%tion o! te
gro%nd-rent considered t%s !ar, coinciding prima facie @it s%rpl%s-8al%e and s%rpl%s-labo%r,
i0e0, gro%nd-rent as te normal and dominant !orm o! s%rpl%s-8al%e0
&n its !%rter de8elopment money-rent m%st lead I aside !rom all intermediate !orms, e0g0, te
small peasant tenant !armer I eiter to te trans!ormation o! land into peasantsG !reeold, or to te
!orm corresponding to te capitalist mode o! prod%ction, tat is, to rent paid by te capitalist
tenant !armer0
Wit money-rent pre8ailing, te traditional and c%stomary legal relationsip bet@een landlord
and s%bHects @o possess and c%lti8ate a part o! te land, is necessarily t%rned into a p%re money
relationsip !ixed contract%ally in accordance @it te r%les o! positi8e la@0 5e possessor
engaged in c%lti8ation t%s becomes 8irt%ally a mere tenant0 5is trans!ormation ser8es on te
one and, pro8ided oter general prod%ction relations permit, to expropriate more and more te
old peasant possessors and to s%bstit%te capitalist tenants in teir stead0 3n te oter and, it leads
to te !ormer possessor b%ying imsel! !ree !rom is rent obligation and to is trans!ormation into
an independent peasant @it complete o@nersip o! te land e tills0 5e trans!ormation o! rent in
kind into money-rent is !%rtermore not only ine8itably accompanied, b%t e8en anticipated, by te
!ormation o! a class o! propertyless day-labo%rers, @o ire temsel8es o%t !or money0 7%ring
teir genesis, @en tis ne@ class appears b%t sporadically, te c%stom necessarily de8elops
among te more prospero%s peasants s%bHect to rent payments o! exploiting agric%lt%ral @age-
labo%rers !or teir o@n acco%nt, m%c as in !e%dal times, @en te more @ell-to-do peasant ser!s
temsel8es also eld ser!s0 &n tis @ay, tey grad%ally acD%ire te possibility o! acc%m%lating a
certain amo%nt o! @ealt and temsel8es becoming trans!ormed into !%t%re capitalists0 5e old
sel!-employed possessors o! land temsel8es t%s gi8e rise to a n%rsery scool !or capitalist
tenants, @ose de8elopment is conditioned by te general de8elopment o! capitalist prod%ction
beyond te bo%nds o! te co%ntry-side0 5is class soots %p 8ery rapidly @en partic%larly
!a8o%rable circ%mstances come to its aid, as in England in te 16t cent%ry, @ere te ten
progressi8e depreciation o! money enriced tem %nder te c%stomary long leases at te expense
o! te landlords0
F%rtermore: as soon as rent ass%mes te !orm o! money-rent, and tereby te relationsip
bet@een rent-paying peasant and landlord becomes a relationsip !ixed by contract I a
de8elopment @ic is only possible generally @en te @orld-market, commerce and
man%!act%re a8e reaced a certain relati8ely ig le8el I te leasing o! land to capitalists
ine8itably also makes its appearance0 5e latter iterto stood beyond te r%ral limits and no@
carry o8er to te co%ntryside and agric%lt%re te capital acD%ired in te cities and @it it te
capitalist mode o! operation de8eloped I i0e0, creating a prod%ct as a mere commodity and solely
as a means o! appropriating s%rpl%s-8al%e0 5is !orm can become te general r%le only in tose
co%ntries @ic dominate te @orld-market in te period o! transition !rom te !e%dal to te
capitalist mode o! prod%ction0 Wen te capitalist tenant !armer steps in bet@een landlord and
act%al tiller o! te soil, all relations @ic arose o%t o! te old r%ral mode o! prod%ction are torn
as%nder0 5e !armer becomes te act%al commander o! tese agric%lt%ral labo%rers and te act%al
exploiter o! teir s%rpl%s-labo%r, @ereas te landlord maintains a direct relationsip, and indeed
simply a money and contract%al relationsip, solely @it tis capitalist tenant0 5%s, te nat%re o!
+6< ;apter J'4&&
rent is also trans!ormed, not merely in !act and by cance, as occ%rred in part e8en %nder earlier
!orms, b%t normally, in its recognised and pre8ailing !orm0 From te normal !orm o! s%rpl%s-
8al%e and s%rpl%s-labo%r, it descends to a mere excess o! tis s%rpl%s-labo%r o8er tat portion o! it
appropriated by te exploiting capitalist in te !orm o! pro!it# H%st as te total s%rpl%s-labo%r,
pro!it and excess o8er pro!it, is extracted directly by im, collected in te !orm o! te total
s%rpl%s-prod%ct, and t%rned into cas0 &t is only te excess portion o! tis s%rpl%s-8al%e @ic is
extracted by im !rom te agric%lt%ral labo%rer by direct exploitation, by means o! is capital,
@ic e t%rns o8er to te landlord as rent0 6o@ m%c or o@ little e t%rns o8er to te latter
depends, on te a8erage, %pon te limits set by te a8erage pro!it @ic is realised by capital in
te non-agric%lt%ral speres o! prod%ction, and by te prices o! non-agric%lt%ral prod%ction
reg%lated by tis a8erage pro!it0 From a normal !orm o! s%rpl%s-8al%e and s%rpl%s-labo%r, rent as
no@ become trans!ormed into an excess o8er tat portion o! te s%rpl%s-labo%r claimed in
ad8ance by capital as its legitimate and normal sare, and caracteristic o! tis partic%lar spere
o! prod%ction, te agric%lt%ral spere o! prod%ction0 ,ro!it, instead o! rent, as no@ become te
normal !orm o! s%rpl%s-8al%e and rent still exists solely as a !orm, not o! s%rpl%s-8al%e in general,
b%t o! one o! its o!!soots, s%rpl%s-pro!it, @ic ass%mes an independent !orm %nder partic%lar
circ%mstances0 &t is not necessary to elaborate te manner in @ic a grad%al trans!ormation in
te mode o! prod%ction itsel! corresponds to tis trans!ormation0 5is already !ollo@s !rom te
!act tat it is normal !or te capitalist tenant !armer to prod%ce agric%lt%ral prod%cts as
commodities, and tat, @ile !ormerly only te excess o8er is means o! s%bsistence @as
con8erted into commodities, no@ b%t a relati8ely insigni!icant part o! tese commodities is
directly %sed by im as means o! s%bsistence0 &t is no longer te land, b%t rater capital, @ic
as no@ bro%gt e8en agric%lt%ral labo%r %nder its direct s@ay and prod%cti8eness0
5e a8erage pro!it and te price o! prod%ction reg%lated tereby are !ormed o%tside o! relations in
te co%ntry-side and @itin te spere o! %rban trade and man%!act%re0 5e pro!it o! te rent-
paying peasant does not enter into it as an eD%alising !actor, !or is relation to te landlord is not a
capitalist one0 &n so !ar as e makes pro!it, i0e0, realises an excess abo8e is necessary means o!
s%bsistence, eiter by is o@n labo%r or tro%g exploiting oter peopleGs labo%r, it is done
beind te back o! te normal relationsip, and oter circ%mstances being eD%al, te siEe o! tis
pro!it does not determine rent, b%t on te contrary, it is determined by te rent as its limit0 5e
ig rate o! pro!it in te Middle ?ges is not entirely d%e to te lo@ composition o! capital, in
@ic te 8ariable component in8ested in @ages predominates0 &t is d%e to s@indling on te land,
te appropriation o! a portion o! te landlordGs rent and o! te income o! is 8assals0 &! te
co%ntry-side exploits te to@n politically in te Middle ?ges, @ere8er !e%dalism as not been
broken do@n by exceptional %rban de8elopment I as in &taly, te to@n, on te oter and,
exploits te land economically e8ery@ere and @ito%t exception, tro%g its monopoly prices,
its system o! taxation, its g%ild organisation, its direct commercial !ra%d%lence and its %s%ry0
3ne migt imagine tat te mere appearance o! te capitalist !armer in agric%lt%ral prod%ction
@o%ld pro8e tat te price o! agric%lt%ral prod%cts, @ic !rom time immemorial a8e paid rent
in one !orm or anoter, m%st be iger, at least at te time o! tis appearance, tan te prices o!
prod%ction o! man%!act%re @eter it be beca%se te price o! s%c agric%lt%ral prod%cts as
reaced a monopoly price le8el, or as risen as ig as te 8al%e o! te agric%lt%ral prod%cts, and
teir 8al%e act%ally is abo8e te price o! prod%ction reg%lated by te a8erage pro!it0 For @ere tis
not so, te capitalist !armer co%ld not at all realise, at te existing prices o! agric%lt%ral prod%ce,
!irst te a8erage pro!it o%t o! te price o! tese prod%cts, and ten pay o%t o! te same price an
excess abo8e tis pro!it in te !orm o! rent0 3ne migt concl%de !rom tis tat te general rate o!
pro!it, @ic g%ides te capitalist !armer in is contract @it te landlord, as been !ormed
@ito%t incl%ding rent, and, tere!ore, as soon as it ass%mes a reg%lating role in agric%lt%ral
prod%ction, it !inds tis excess at and and pays it to te landlord0 &t is in tis traditional manner
tat, !or instance, 6err )odbert%s explains te matter0 /P0 )odbert%s, Sociale Griefe an von
+63 ;apter J'4&&
Hirchmann, Dritter GriefI "iderlegung der 9icardo!schen ,ehre von der Grundrente und
Gegrndung einer neuen 9ententheorie. $ee also K0 Marx, 4heorien ber den Mehrwert. <0
5eil,;A>@, pp. 3-1=6, 12<-+20 I 0d.1 A%t:
'irst0 5is appearance o! capital as an independent and leading !orce in agric%lt%re does not take
place all at once and generally, b%t grad%ally and in partic%lar lines o! prod%ction0 &t encompasses
at !irst, not agric%lt%re proper, b%t s%c brances o! prod%ction as cattle-breeding, especially
seep-raising, @ose principal prod%ct, @ool, o!!ers at te early stages a constant excess o!
market-price o8er price o! prod%ction d%ring te rise o! ind%stry, and tis does not le8el o%t %ntil
later0 5%s in England d%ring te 16t cent%ry0
Secondly0 $ince tis capitalist prod%ction appears at !irst b%t sporadically, te ass%mption cannot
be disp%ted tat it !irst extends only to s%c land categories as are able, tro%g teir partic%lar
!ertility, or teir exceptionally !a8o%rable location, to generally pay a di!!erential rent0
4hirdly0 'et %s e8en ass%me tat at te time tis mode o! prod%ction appeared I and tis indeed
pres%pposes an increasing preponderance o! %rban demand I te prices o! agric%lt%ral prod%cts
@ere iger tan te price o! prod%ction, as @as do%btless te case in England d%ring te last
tird o! te 1>t cent%ry0 -e8erteless, as soon as tis mode o! prod%ction as some@at
extricated itsel! !rom te mere s%bordination o! agric%lt%re to capital, and as soon as agric%lt%ral
impro8ement and te red%ction o! prod%ction costs, @ic necessarily accompany its
de8elopment, a8e taken place, te balance @ill be restored by a reaction, a !all in te price o!
agric%lt%ral prod%ce, as appened in England in te !irst al! o! te 18t cent%ry0
)ent, t%s, as an excess o8er te a8erage pro!it cannot be explained in tis traditional @ay0
Wate8er may be te existing istorical circ%mstances at te time rent !irst appears, once it as
str%ck root it cannot exist except %nder te modern conditions earlier described0
Finally, it so%ld be noted in te trans!ormation o! rent in kind into money-rent tat along @it it
capitalised rent, or te price o! land, and t%s its alienability and alienation become essential
!actors, and tat tereby not only can te !ormer peasant s%bHect to payment o! rent be
trans!ormed into an independent peasant proprietor, b%t also %rban and oter moneyed people can
b%y real estate in order to lease it eiter to peasants or capitalists and t%s enHoy rent as a !orm o!
interest on teir capital so in8ested# tat, tere!ore, tis circ%mstance like@ise !acilitates te
trans!ormation o! te !ormer mode o! exploitation, te relation bet@een o@ner and act%al
c%lti8ator o! te land, and o! rent itsel!0
V. *8ta#age And Peasant Proprietorship "f
Land Parcels
We a8e no@ arri8ed at te end o! o%r elaboration o! gro%nd-rent0
&n all tese !orms o! gro%nd-rent, @eter labo%r rent, rent in kind, or money-rent Bas merely a
canged !orm o! rent in kindC, te one paying rent is al@ays s%pposed to be te act%al c%lti8ator
and possessor o! te land, @ose %npaid s%rpl%s-labo%r passes directly into te ands o! te
landlord0 E8en in te last !orm, money-rent in so !ar as it is Kp%re,L i0e0, merely a canged !orm o!
rent in kind I tis is not only possible, b%t act%ally takes place0
?s a transitory !orm !rom te original !orm o! rent to capitalist rent, @e may consider te metayer
system, or sare-cropping, %nder @ic te manager B!armerC !%rnises labo%r Bis o@n or
anoterGsC, and also a portion o! @orking capital, and te landlord !%rnises, aside !rom land,
anoter portion o! @orking capital Be0g0, cattleC, and te prod%ct is di8ided bet@een tenant and
landlord in de!inite proportions @ic 8ary !rom co%ntry to co%ntry0 3n te one and, te !armer
ere lacks s%!!icient capital reD%ired !or complete capitalist management0 3n te oter and, te
sare ere appropriated by te landlord does not bear te p%re !orm o! rent0 &t may act%ally
incl%de interest on te capital ad8anced by im and an excess rent0 &t may also absorb practically
+62 ;apter J'4&&
te entire s%rpl%s-labo%r o! te !armer, or lea8e im a greater or smaller portion o! tis s%rpl%s-
labo%r0 A%t, essentially, rent no longer appears ere as te normal !orm o! s%rpl%s-8al%e in
general0 3n te one and, te sarecropper, @eter e employs is o@n or anoterGs labo%r, is to
lay claim to a portion o! te prod%ct not in is capacity as labo%rer, b%t as possessor o! part o! te
instr%ments o! labo%r, as is o@n capitalist0 3n te oter and, te landlord claims is sare not
excl%si8ely on te basis o! is land-o@nersip, b%t also as lender o! capital0
l8i

? s%r8i8al o! te old comm%nal o@nersip o! land, @ic ad end%red a!ter te transition to
independent peasant !arming, e0g0, in ,oland and )%mania, ser8ed tere as a s%bter!%ge !or
e!!ecting a transition to te lo@er !orms o! gro%nd-rent0 ? portion o! te land belongs to te
indi8id%al peasant and is tilled independently by im0 ?noter portion is tilled in common and
creates a s%rpl%s-prod%ct, @ic ser8es partly to co8er comm%nity expenses, partly as a reser8e in
cases o! crop !ail%re, etc0 5ese last t@o parts o! te s%rpl%s-prod%ct, and %ltimately te entire
s%rpl%s-prod%ct incl%ding te land %pon @ic it as been gro@n, are more and more %s%rped by
state o!!icials and pri8ate indi8id%als, and t%s te originally !ree peasant proprietors, @ose
obligation to till tis land in common is maintained, are trans!ormed into 8assals s%bHect eiter to
cor8Fe-labo%r or rent in kind# @ile te %s%rpers o! common land are trans!ormed into o@ners,
not only o! te %s%rped common lands, b%t e8en te 8ery lands o! te peasants temsel8es0
We need not !%rter in8estigate sla8e economy proper B@ic like@ise passes tro%g a
metamorposis !rom te patriarcal system mainly !or ome %se to te plantation system !or te
@orld-marketC nor te management o! estates %nder @ic te landlords temsel8es are
independent c%lti8ators, possessing all instr%ments o! prod%ction, and exploiting te labo%r o!
!ree or %n!ree bondsmen, @o are paid eiter in kind or money0 'andlord and o@ner o! te
instr%ments o! prod%ction, and t%s te direct exploiter o! labo%rers incl%ded among tese
elements o! prod%ction, are in tis case one and te same person0 )ent and pro!it like@ise
coincide ten, tere occ%rring no separation o! te di!!erent !orms o! s%rpl%s-8al%e0 5e entire
s%rpl%s-labo%r o! te labo%rers, @ic is mani!ested ere in te s%rpl%s-prod%ct, is extracted !rom
tem directly by te o@ner o! all instr%ments o! prod%ction, to @ic belong te land and, %nder
te original !orm o! sla8ery, te immediate prod%cers temsel8es0 Were te capitalist o%tlook
pre8ails, as on ?merican plantations, tis entire s%rpl%s-8al%e is regarded as pro!it# @ere neiter
te capitalist mode o! prod%ction itsel! exists, nor te corresponding o%tlook as been trans!erred
!rom capitalist co%ntries, it appears as rent0 ?t any rate, tis !orm presents no di!!ic%lties0 5e
income o! te landlord, @ate8er it may be called, te a8ailable s%rpl%s-prod%ct appropriated by
im, is ere te normal and pre8ailing !orm, @ereby te entire %npaid s%rpl%s-labo%r is directly
appropriated, and landed property !orms te basis o! s%c appropriation0
F%rter, proprietorship of land parcels. 5e peasant ere is sim%ltaneo%sly te !ree o@ner o! is
land, @ic appears as is principal instr%ment o! prod%ction, te indispensable !ield o!
employment !or is labo%r and is capital0 -o lease money is paid %nder tis !orm0 )ent,
tere!ore, does not appear as a separate !orm o! s%rpl%s-8al%e, alto%g in co%ntries in @ic
oter@ise te capitalist mode o! prod%ction is de8eloped, it appears as a s%rpl%s-pro!it compared
@it oter lines o! prod%ction# b%t as s%rpl%s-pro!it @ic, like all proceeds o! is labo%r in
general, accr%es to te peasant0
5is !orm o! landed property pres%pposes, as in te earlier older !orms, tat te r%ral pop%lation
greatly predominates n%merically o8er te to@n pop%lation, so tat, e8en i! te capitalist mode o!
prod%ction oter@ise pre8ails, it is b%t relati8ely little de8eloped, and t%s also in te oter lines
o! prod%ction te concentration o! capital is restricted to narro@ limits and a !ragmentation o!
capital predominates0 &n te nat%re o! tings, te greater portion o! agric%lt%ral prod%ce m%st be
cons%med as direct means o! s%bsistence by te prod%cers temsel8es, te peasants, and only te
excess abo8e tat @ill !ind its @ay as commodities into %rban commerce0 -o matter o@ te
a8erage market-price o! agric%lt%ral prod%cts may ere be reg%lated, di!!erential rent, an excess
portion o! commodity-prices !rom s%perior or more !a8o%rably located land, m%st e8idently exist
+6+ ;apter J'4&&
ere m%c as %nder te capitalist mode o! prod%ction0 5is di!!erential rent exists, e8en @ere
tis !orm appears %nder social conditions, %nder @ic no general market-price as as yet been
de8eloped# it appears ten in te excess s%rpl%s-prod%ct0 3nly ten it !lo@s into te pockets o! te
peasant @ose labo%r is realised %nder more !a8o%rable nat%ral conditions0 5e ass%mption ere
is generally to be made tat no absol%te rent exists, i0e0, tat te @orst soil does not pay any rent I
precisely %nder tis !orm @ere te price o! land enters as a !actor in te peasantGs act%al cost o!
prod%ction @eter beca%se in te co%rse o! tis !ormGs !%rter de8elopment eiter te price o!
land as been comp%ted at a certain money-8al%e, in di8iding %p an ineritance, or, d%ring te
constant cange in o@nersip o! an entire estate, or o! its component parts, te land as been
bo%gt by te c%lti8ator imsel!, largely by raising money on mortgage# and, tere!ore, @ere te
price o! land, representing noting more tan capitalised rent, is a !actor ass%med in ad8ance, and
@ere rent t%s seems to exist independently o! any di!!erentiation in !ertility and location o! te
land0 For, absol%te rent pres%pposes eiter realised excess in prod%ct 8al%e abo8e its price o!
prod%ction, or a monopoly price exceeding te 8al%e o! te prod%ct0 A%t since agric%lt%re ere is
carried on largely as c%lti8ation !or direct s%bsistence, and te land exists as an indispensable
!ield o! employment !or te labo%r and capital o! te maHority o! te pop%lation, te reg%lating
market-price o! te prod%ct @ill reac its 8al%e only %nder extraordinary circ%mstances0 A%t tis
8al%e @ill, generally, be iger tan its price o! prod%ction o@ing to te preponderant element o!
li8ing labo%r, alto%g tis excess o! 8al%e o8er price o! prod%ction @ill in t%rn be limited by te
lo@ composition e8en o! non-agric%lt%ral capital in co%ntries @it an economy composed
predominantly o! land parcels0 For te peasant o@ning a parcel, te limit o! exploitation is not set
by te a8erage pro!it o! capital, in so !ar as e is a small capitalist# nor, on te oter and, by te
necessity o! rent, in so !ar as e is a lando@ner0 5e absol%te limit !or im as a small capitalist is
no more tan te @ages e pays to imsel!, a!ter ded%cting is act%al costs0 $o long as te price
o! te prod%ct co8ers tese @ages, e @ill c%lti8ate is land, and o!ten at @ages do@n to a
pysical minim%m0 ?s !or is capacity as land proprietor, te barrier o! o@nersip is eliminated
!or im, since it can make itsel! !elt only vis1.1vis a capital Bincl%ding labo%rC separated !rom
land-o@nersip, by erecting an obstacle to te in8estment o! capital0 &t is tr%e, to be s%re, tat
interest on te price o! land I @ic generally as to be paid to still anoter indi8id%al, te
mortgage creditor I is a barrier0 A%t tis interest can be paid precisely o%t o! tat portion o!
s%rpl%s-labo%r @ic @o%ld constit%te pro!it %nder capitalist conditions0 5e rent anticipated in
te price o! land and in te interest paid !or it can tere!ore be noting b%t a portion o! te
peasantGs capitalised s%rpl%s-labo%r o8er and abo8e te labo%r indispensable !or is s%bsistence,
@ito%t tis s%rpl%s-labo%r being realised in a part o! te commodity-8al%e eD%al to te entire
a8erage pro!it, and still less in an excess abo8e te s%rpl%s-labo%r realised in te a8erage pro!it,
i0e0, in a s%rpl%s-pro!it0 5e rent may be a ded%ction !rom te a8erage pro!it, or e8en te only
portion o! it @ic is realised0 For te peasant parcel older to c%lti8ate is land, or to b%y land
!or c%lti8ation, it is tere!ore not necessary, as %nder te normal capitalist mode o! prod%ction,
tat te market-price o! te agric%lt%ral prod%cts rise ig eno%g to a!!ord im te a8erage
pro!it, and still less a !ixed excess abo8e tis a8erage pro!it in te !orm o! rent0 &t is not necessary,
tere!ore, tat te market-price rise, eiter %p to te 8al%e or te price o! prod%ction o! is
prod%ct0 5is is one o! te reasons @y grain prices are lo@er in co%ntries @it predominant
small peasant land proprietorsip tan in co%ntries @it a capitalist mode o! prod%ction0 3ne
portion o! te s%rpl%s-labo%r o! te peasants, @o @ork %nder te least !a8o%rable conditions, is
besto@ed gratis %pon society and does not at all enter into te reg%lation o! price o! prod%ction or
into te creation o! 8al%e in general0 5is lo@er price is conseD%ently a res%lt o! te prod%cersG
po8erty and by no means o! teir labo%r prod%cti8ity0
5is !orm o! !ree sel!-managing peasant proprietorsip o! land parcels as te pre8ailing, normal
!orm constit%tes, on te one and, te economic !o%ndation o! society d%ring te best periods o!
classical antiD%ity, and on te oter and, it is !o%nd among modern nations as one o! te !orms
+66 ;apter J'4&&
arising !rom te dissol%tion o! !e%dal land o@nersip0 5%s, te yeomanry in England, te
peasantry in $@eden, te Frenc and West :erman peasants0 We do not incl%de colonies ere,
since te independent peasant tere de8elops %nder di!!erent conditions0
5e !ree o@nersip o! te sel!-managing peasant is e8idently te most normal !orm o! landed
property !or small-scale operation, i0e0, !or a mode o! prod%ction, in @ic possession o! te land
is a prereD%isite !or te labo%rerGs o@nersip o! te prod%ct o! is o@n labo%r, and in @ic te
c%lti8ator, be e !ree o@ner or 8assal, al@ays m%st prod%ce is o@n means o! s%bsistence
independently, as an isolated labo%rer @it is !amily0 3@nersip o! te land is as necessary !or
!%ll de8elopment o! tis mode o! prod%ction as o@nersip o! tools is !or !ree de8elopment o!
andicra!t prod%ction0 6ere is te basis !or te de8elopment o! personal independence0 &t is a
necessary transitional stage !or te de8elopment o! agric%lt%re itsel!0 5e ca%ses @ic bring
abo%t its do@n!all so@ its limitations0 5ese are: 7estr%ction o! r%ral domestic ind%stry, @ic
!orms its normal s%pplement as a res%lt o! te de8elopment o! large-scale ind%stry# a grad%al
impo8erisment and exa%stion o! te soil s%bHected to tis c%lti8ation# %s%rpation by big
lando@ners o! te common lands, @ic constit%te te second s%pplement o! te management o!
land parcels e8ery@ere and @ic alone enable it to raise cattle# competition, eiter o! te
plantation system or large-scale capitalist agric%lt%re0 &mpro8ements in agric%lt%re, @ic on te
one and ca%se a !all in agric%lt%ral prices and, on te oter, reD%ire greater o%tlays and more
extensi8e material conditions o! prod%ction, also contrib%te to@ards tis, as in England d%ring te
!irst al! o! te 18t cent%ry0
,roprietorsip o! land parcels by its 8ery nat%re excl%des te de8elopment o! social prod%cti8e
!orces o! labo%r, social !orms o! labo%r, social concentration o! capital, large-scale cattle-raising,
and te progressi8e application o! science0
(s%ry and a taxation system m%st impo8eris it e8ery@ere0 5e expendit%re o! capital in te
price o! te land @itdra@s tis capital !rom c%lti8ation0 ?n in!inite !ragmentation o! means o!
prod%ction, and isolation o! te prod%cers temsel8es0 Monstro%s @aste o! %man energy0
,rogressi8e deterioration o! conditions o! prod%ction and increased prices o! means o! prod%ction
I an ine8itable la@ o! proprietorsip o! parcels0 ;alamity o! seasonal ab%ndance !or tis mode o!
prod%ction0
l8ii

3ne o! te speci!ic e8ils o! small-scale agric%lt%re @ere it is combined @it !ree land-o@nersip
arises !rom te c%lti8atorGs in8esting capital in te p%rcase o! land0 B5e same applies also to te
transitory !orm, in @ic te big lando@ner in8ests capital, !irst, to b%y land, and second, to
manage it as is o@n tenant !armer0C 3@ing to te cangeable nat%re @ic te land ere ass%mes
as a mere commodity, te canges o! o@nersip increase,
l8iii
so tat te land, !rom te peasantGs
8ie@point, enters ane@ as an in8estment o! capital @it eac s%ccessi8e generation and di8ision
o! estates, i0e0, it becomes land p%rcased by im0 5e price o! land ere !orms a @eigty element
o! te indi8id%al %nprod%cti8e costs o! prod%ction or cost-price o! te prod%ct !or te indi8id%al
prod%cer0
5e price o! land is noting b%t capitalised and tere!ore anticipated rent0 &! capitalist metods
are employed by agric%lt%re, so tat te landlord recei8es only rent, and te !armer pays noting
!or land except tis ann%al rent, ten it is e8ident tat te capital in8ested by te lando@ner
imsel! in p%rcasing te land constit%tes indeed an interest-bearing in8estment o! capital !or
im, b%t as absol%tely noting to do @it capital in8ested in agric%lt%re itsel!0 &t !orms neiter a
part o! te !ixed, nor o! te circ%lating, capital employed ere#
lix
it merely sec%res !or te b%yer a
claim to recei8e ann%al rent, b%t as absol%tely noting to do @it te prod%ction o! te rent
itsel!0 5e b%yer o! land H%st pays is capital o%t to te one @o sells te land, and te seller in
ret%rn relinD%ises is o@nersip o! te land0 5%s tis capital no longer exists as te capital o!
te p%rcaser# e no longer as it# tere!ore it does not belong to te capital @ic e can in8est
in any @ay in te land itsel!0 Weter e bo%gt te land dear or ceap, or @eter e recei8ed it
!or noting, alters noting in te capital in8ested by te !armer in is establisment, and canges
+6> ;apter J'4&&
noting in te rent, b%t merely alters te D%estion @eter it appears to im as interest or not, or
as iger or lo@er interest respecti8ely0
5ake, !or instance, te sla8e economy0 5e price paid !or a sla8e is noting b%t te anticipated and
capitalised s%rpl%s-8al%e or pro!it to be @r%ng o%t o! te sla8e0 A%t te capital paid !or te
p%rcase o! a sla8e does not belong to te capital by means o! @ic pro!it, s%rpl%s-labo%r, is
extracted !rom im0 3n te contrary0 &t is capital @ic te sla8e-older as parted @it, it is a
ded%ction !rom te capital @ic be as a8ailable !or act%al prod%ction0 &t as ceased to exist !or
im, H%st as capital in8ested in p%rcasing land as ceased to exist !or agric%lt%re0 5e best proo!
o! tis is tat it does not reappear !or te sla8e-older or te lando@ner except @en e, in t%rn,
sells is sla8es or land0 A%t ten te same sit%ation pre8ails !or te b%yer0 5e !act tat e as
bo%gt te sla8e does not enable im to exploit te sla8e @ito%t !%rter ado0 6e is only able to
do so @en e in8ests some additional capital in te sla8e economy itsel!0
5e same capital does not exist t@ice, once in te ands o! te seller, and a second time in te
ands o! te b%yer o! te land0 &t passes !rom te ands o! te b%yer to tose o! te seller, and
tere te matter ends0 5e b%yer no@ no longer as capital, b%t in its stead a piece o! land0 5e
circ%mstance tat te rent prod%ced by a real in8estment o! capital in tis land is calc%lated by te
ne@ lando@ner as interest on capital @ic e as not in8ested in te land, b%t gi8en a@ay to
acD%ire te land, does not in te least alter te economic nat%re o! te land !actor, any more tan
te circ%mstance tat someone as paid V1,=== !or 3T consols as anyting to do @it te capital
o%t o! @ose re8en%e te interest on te national debt is paid0
&n !act, te money expended in p%rcasing land, like tat in p%rcasing go8ernment bonds, is
merely capital in itself, H%st as any 8al%e s%m is capital in itsel!, potential capital, on te basis o!
te capitalist mode o! prod%ction0 Wat is paid !or land, like tat !or go8ernment bonds or any
oter p%rcased commodity, is a s%m o! money0 5is is capital in itsel!, beca%se it can be
con8erted into capital0 &t depends %pon te %se p%t to it by te seller @eter te money obtained
by im is really trans!ormed into capital or not0 For te b%yer, it can ne8er again !%nction as s%c,
no more tan any oter money @ic e as de!initely paid o%t0 &t !ig%res in is acco%nts as
interest-bearing capital, beca%se e considers te income, recei8ed as rent !rom te land or as
interest on state indebtedness, as interest on te money @ic te p%rcase o! te claim to tis
re8en%e as cost im0 6e can only realise it as capital tro%g resale0 A%t ten anoter, te ne@
b%yer, enters te same relationsip maintained by te !ormer, and te money t%s expended
cannot be trans!ormed into act%al capital !or te expender tro%g any cange o! ands0
&n te case o! small landed property te ill%sion is !ostered still more tat land itsel! possesses
8al%e and t%s enters as capital into te price o! prod%ction o! te prod%ct, m%c as macines or
ra@ materials0 A%t @e a8e seen tat rent, and tere!ore capitalised rent, te price o! land, can
enter as a determining !actor into te price o! agric%lt%ral prod%cts in only t@o cases0 First, @en
as a conseD%ence o! te composition o! agric%lt%ral capital I a capital @ic as noting to do
@it te capital in8ested in p%rcasing land I te 8al%e o! te prod%cts o! te soil is iger tan
teir price o! prod%ction, and market conditions enable te landlord to realise tis di!!erence0
$econd, @en tere is a monopoly price0 ?nd bot are least o! all te case %nder te management
o! land parcels and small land-o@nersip beca%se precisely ere prod%ction to a large extent
satis!ies te prod%cersG o@n @ants and is carried on independently o! reg%lation by te a8erage
rate o! pro!it0 E8en @ere c%lti8ation o! land parcels is cond%cted %pon leased land, te lease
money comprises, !ar more so tan %nder any oter conditions, a portion o! te pro!it and e8en a
ded%ction !rom @ages# tis money is ten only a nominal rent, not rent as an independent
category as opposed to @ages and pro!it0
5e expendit%re o! money-capital !or te p%rcase o! land, ten, is not an in8estment o!
agric%lt%ral capital0 &t is a decrease pro tanto in te capital @ic small peasants can employ in
teir o@n spere o! prod%ction0 &t red%ces pro tanto te siEe o! teir means o! prod%ction and
tereby narro@s te economic basis o! reprod%ction0 &t s%bHects te small peasant to te money-
+68 ;apter J'4&&
lender, since credit proper occ%rs b%t rarely in tis spere in general0 &t is a indrance to
agric%lt%re, e8en @ere s%c p%rcase takes place in te case o! large estates0 &t contradicts in !act
te capitalist mode o! prod%ction, @ic is on te @ole indi!!erent to @eter te lando@ner is
in debt, no matter @eter e as inerited or p%rcased is estate0 5e nat%re o! management o!
te leased estate itsel! is not altered @eter te lando@ner pockets te rent imsel! or @eter e
m%st pay it o%t to te older o! is mortgage0
We a8e seen tat, in te case o! a gi8en gro%nd-rent, te price o! land is reg%lated by te interest
rate0 &! te rate is lo@, ten te price o! land is ig, and 8ice 8ersa0 -ormally, ten, a ig price
o! land and a lo@ interest rate so%ld go and in and, so tat i! te peasant paid a ig price !or
te land in conseD%ence o! a lo@ interest rate, te same lo@ rate o! interest so%ld also sec%re is
@orking capital !or im on easy credit terms0 A%t in reality, tings t%rn o%t di!!erently @en
peasant proprietorsip o! land parcels is te pre8ailing !orm0 &n te !irst place, te general la@s o!
credit are not adapted to te !armer, since tese la@s pres%ppose a capitalist as te prod%cer0
$econdly, @ere proprietorsip o! land parcels predominates I @e are not re!erring to colonies
ere I and te small peasant constit%tes te backbone o! te nation, te !ormation o! capital, i0e0,
social reprod%ction, is relati8ely @eak, and still @eaker is te !ormation o! loanable money-
capital, in te sense pre8io%sly elaborated0 5is pres%pposes te concentration and existence o! a
class o! idle ric capitalists BMassieC0 / /Massie1 +n 0ssay on the Governing Causes of the
$atural 9ate of Dnterest, 'ondon, 1>+=, pp <3-<20 I 0d1 5irdly, ere @ere te o@nersip o! te
land is a necessary condition !or te existence o! most prod%cers, and an indispensable !ield o!
in8estment !or teir capital, te price o! land is raised independently o! te interest rate, and o!ten
in in8erse ratio to it, tro%g te preponderance o! te demand !or landed property o8er its
s%pply0 'and sold in parcels brings a !ar iger price in s%c a case tan @en sold in large tracts,
beca%se ere te n%mber o! small b%yers is large and tat o! large b%yers is small BAandes -oires,
/?ssociations o! pro!iteers0 I 0d01 )%bicon# -e@man /-e@man, ,ectures on &olitical 0conomy,
'ondon, 18+1, pp0 18=-810 I 0d.1C0 For all tese reasons, te price o! land rises ere @it a
relati8ely ig rate o! interest0 5e relati8ely lo@ interest, @ic te peasant deri8es ere !rom
te o%tlay o! capital !or te p%rcase o! land BMo%nierC, corresponds ere, on te oter side, to
te ig %s%rio%s interest rate @ic e imsel! as to pay to is mortgage creditors0 5e &ris
system bears o%t te same ting, only in anoter !orm0
5e price o! land, tis element !oreign to prod%ction in itsel!, may tere!ore rise ere to s%c a
point tat it makes prod%ction impossible B7ombasleC0
5e !act tat te price o! land plays s%c a role, tat p%rcase and sale, te circ%lation o! land as a
commodity, de8elops to tis degree, is practically a res%lt o! te de8elopment o! te capitalist
mode o! prod%ction in so !ar as a commodity is ere te general !orm o! all prod%cts and all
instr%ments o! prod%ction0 3n te oter and, tis de8elopment takes place only @ere te
capitalist mode o! prod%ction as a limited de8elopment and does not %n!old all o! its
pec%liarities, beca%se tis rests precisely %pon te !act tat agric%lt%re is no longer, or not yet,
s%bHect to te capitalist mode o! prod%ction, b%t rater to one anded do@n !rom extinct !orms o!
society0 5e disad8antages o! te capitalist mode o! prod%ction, @it its dependence o! te
prod%cer %pon te money-price o! is prod%ct, coincide ere tere!ore @it te disad8antages
occasioned by te imper!ect de8elopment o! te capitalist mode o! prod%ction0 5e peasant t%rns
mercant and ind%strialist @ito%t te conditions enabling im to prod%ce is prod%cts as
commodities0
5e con!lict bet@een te price o! land as an element in te prod%cersG cost-price and no element
in te price o! prod%ction Be8en to%g te rent enters as a determining !actor into te price o! te
agric%lt%ral prod%ct, te capitalised rent, @ic is ad8anced !or <= years or more, by no means
enters as a determinantC is b%t one o! te !orms mani!esting te general contradiction bet@een
pri8ate land-o@nersip and a rational agric%lt%re, te normal social %tilisation o! te soil0 A%t on
te oter and, pri8ate land o@nersip, and tereby expropriation o! te direct prod%cers !rom te
+6* ;apter J'4&&
land I pri8ate land-o@nersip by te one, @ic implies lack o! o@nersip by oters I is te
basis o! te capitalist mode o! prod%ction0
6ere, in small-scale agric%lt%re, te price o! land, a !orm and res%lt o! pri8ate land-o@nersip,
appears as a barrier to prod%ction itsel!0 &n large-scale agric%lt%re, and large estates operating on a
capitalist basis, o@nersip like@ise acts as a barrier, beca%se it limits te tenant !armer in is
prod%cti8e in8estment o! capital, @ic in te !inal analysis bene!its not im, b%t te landlord0 &n
bot !orms, exploitation and sD%andering o! te 8itality o! te soil Bapart !rom making
exploitation dependent %pon te accidental and %neD%al circ%mstances o! indi8id%al prod%cers
rater tan te attained le8el o! social de8elopmentC takes te place o! conscio%s rational
c%lti8ation o! te soil as eternal comm%nal property, an inalienable condition !or te existence
and reprod%ction o! a cain o! s%ccessi8e generations o! te %man race0 &n te case o! small
property, tis res%lts !rom te lack o! means and kno@ledge o! applying te social labo%r
prod%cti8ity0 &n te case o! large property, it res%lts !rom te exploitation o! s%c means !or te
most rapid enricment o! !armer and proprietor0 &n te case o! bot tro%g dependence on te
market-price0
?ll critiD%e o! small landed property resol8es itsel! in te !inal analysis into a criticism o! pri8ate
o@nersip as a barrier and indrance to agric%lt%re0 ?nd similarly all co%nter-criticism o! large
landed property0 &n eiter case, o! co%rse, @e lea8e aside all secondary political considerations0
5is barrier and indrance, @ic are erected by all pri8ate landed property 8is-O-8is agric%lt%ral
prod%ction and te rational c%lti8ation, maintenance and impro8ement o! te soil itsel!, de8elop
on bot sides merely in di!!erent !orms, and in @rangling o8er te speci!ic !orms o! tis e8il its
%ltimate ca%se is !orgotten0
$mall landed property pres%pposes tat te o8er@elming maHority o! te pop%lation is r%ral, and
tat not social, b%t isolated labo%r predominates# and tat, tere!ore, %nder s%c conditions @ealt
and de8elopment o! reprod%ction, bot o! its material and spirit%al prereD%isites, are o%t o! te
D%estion, and tereby also te prereD%isites !or rational c%lti8ation0 3n te oter and, large
landed property red%ces te agric%lt%ral pop%lation to a constantly !alling minim%m, and
con!ronts it @it a constantly gro@ing ind%strial pop%lation cro@ded togeter in large cities0 &t
tereby creates conditions @ic ca%se an irreparable break in te coerence o! social intercange
prescribed by te nat%ral la@s o! li!e0 ?s a res%lt, te 8itality o! te soil is sD%andered, and tis
prodigality is carried by commerce !ar beyond te borders o! a partic%lar state B'iebigC0 / 'iebig,
Die Chemie in ihrer +nwendung auf +gricultur und &hysiologie, Ara%nsc@eig, 186<0 I 0d01
Wile small landed property creates a class o! barbarians standing al!@ay o%tside o! society, a
class combining all te cr%deness o! primiti8e !orms o! society @it te ang%is and misery o!
ci8ilised co%ntries, large landed property %ndermines labo%r-po@er in te last region, @ere its
prime energy seeks re!%ge and stores %p its strengt as a reser8e !%nd !or te regeneration o! te
8ital !orce o! nations I on te land itsel!0 'arge-scale ind%stry and large-scale mecanised
agric%lt%re @ork togeter0 &! originally disting%ised by te !act tat te !ormer lays @aste and
destroys principally labo%r-po@er, ence te nat%ral !orce o! %man beings, @ereas te latter
more directly exa%sts te nat%ral 8itality o! te soil, tey Hoin ands in te !%rter co%rse o!
de8elopment in tat te ind%strial system in te co%ntryside also ener8ates te labo%rers, and
ind%stry and commerce on teir part s%pply agric%lt%re @it te means !or exa%sting te soil0
Part VII. Revenues and their
Sources
Chapter 48. The Trinity Formula
I
lx
;apital I pro!it Bpro!it o! enterprise pl%s interestC, land I gro%nd-rent, labo%r I @ages, tis is te
trinity !orm%la @ic comprises all te secrets o! te social prod%ction process0
F%rtermore, since as pre8io%sly /,resent edition: ;0 JJ&&&0 I 0d.1 demonstrated interest
appears as te speci!ic caracteristic prod%ct o! capital and pro!it o! enterprise on te contrary
appears as @ages independent o! capital, te abo8e trinity !orm%la red%ces itsel! more speci!ically
to te !ollo@ing:
;apital I interest, land I gro%nd-rent, labo%r I @ages, @ere pro!it, te speci!ic caracteristic
!orm o! s%rpl%s-8al%e belonging to te capitalist mode o! prod%ction, is !ort%nately eliminated0
3n closer examination o! tis economic trinity, @e !ind te !ollo@ing:
First, te alleged so%rces o! te ann%ally a8ailable @ealt belong to @idely dissimilar speres and
are not at all analogo%s @it one anoter0 5ey a8e abo%t te same relation to eac oter as
la@yerGs !ees, red beets and m%sic0
;apital, land, labo%rS 6o@e8er, capital is not a ting, b%t rater a de!inite social prod%ction
relation, belonging to a de!inite istorical !ormation o! society, @ic is mani!ested in a ting and
lends tis ting a speci!ic social caracter0 ;apital is not te s%m o! te material and prod%ced
means o! prod%ction0 ;apital is rater te means o! prod%ction trans!ormed into capital, @ic in
temsel8es are no more capital tan gold or sil8er in itsel! is money0 &t is te means o! prod%ction
monopolised by a certain section o! society, con!ronting li8ing labo%r-po@er as prod%cts and
@orking conditions rendered independent o! tis 8ery labo%r-po@er, @ic are personi!ied
tro%g tis antitesis in capital0 &t is not merely te prod%cts o! labo%rers t%rned into
independent po@ers, prod%cts as r%lers and b%yers o! teir prod%cers, b%t rater also te social
!orces and te !%t%re /Q illegible1 /? later collation @it te man%script so@ed tat te text reads
as !ollo@s: Kdie :esellsca!tlicen Krn!te %nd 9%sammennngende Form dieser ?rbeitL Bte
social !orces o! teir labo%r and socialised !orm o! tis labo%rC0 I 0d.1 !orm o! tis labo%r, @ic
con!ront te labo%rers as properties o! teir prod%cts0 6ere, ten, @e a8e a de!inite and, at !irst
glance, 8ery mystical, social !orm, o! one o! te !actors in a istorically prod%ced social
prod%ction process0
?nd no@ alongside o! tis @e a8e te land, inorganic nat%re as s%c, rudis indigesta3ue moles,
/K? r%de and %ndigested massL, 38id, Metamorphoses, Aook &, >0 I 0d1 in all its prime8al
@ildness0 4al%e is labo%r0 5ere!ore s%rpl%s-8al%e cannot be eart0 ?bsol%te !ertility o! te soil
e!!ects noting more tan te !ollo@ing: a certain D%antity o! labo%r prod%ces a certain prod%ct I
in accordance @it te nat%ral !ertility o! te soil0 5e di!!erence in soil !ertility ca%ses te same
D%antities o! labo%r and capital, ence te same 8al%e, to be mani!ested in di!!erent D%antities o!
agric%lt%ral prod%cts# tat is, ca%ses tese prod%cts to a8e di!!erent indi8id%al 8al%es0 5e
eD%alisation o! tese indi8id%al 8al%es into market-8al%es is responsible !or te !act tat te
+>1 ;apter J'4&&&
Kad8antages o! !ertile o8er in!erior soil 000 are trans!erred !rom te c%lti8ator or cons%mer to te
landlordL0 B)icardo, &rinciples, 'ondon, 18<1, p06<0C
?nd !inally, as tird party in tis %nion, a mere gost I KteL 'abo%r, @ic is no more tan an
abstraction and taken by itsel! does not exist at all, or, i! @e take000 /illegible1 /?s as been
establised by later reading o! te man%script, it reads ere: K@enn @ir das :emeinte nemenL Bi!
@e take tat @ic is beind itC0 I 0d01, te prod%cti8e acti8ity o! %man beings in general, by
@ic tey promote te intercange @it -at%re, di8ested not only o! e8ery social !orm and @ell-
de!ined caracter, b%t e8en in its bare nat%ral existence, independent o! society, remo8ed !rom all
societies, and as an expression and con!irmation o! li!e @ic te still non-social man in general
as in common @it te one @o is in any @ay social0
II
;apital I interest# landed property, pri8ate o@nersip o! te Eart, and, to be s%re, modern and
corresponding to te capitalist mode o! prod%ction I rent# @age-labo%r I @ages0 5e connection
bet@een te so%rces o! re8en%e is s%pposed to be represented in tis !orm0 Wage-labo%r and
landed property, like capital, are istorically determined social !orms# one o! labo%r, te oter o!
monopolised terrestrial globe, and indeed bot !orms corresponding to capital and belonging to
te same economic !ormation o! society0
5e !irst striking ting abo%t tis !orm%la is tat side by side @it capital, @it tis !orm o! an
element o! prod%ction belonging to a de!inite mode o! prod%ction, to a de!inite istorical !orm o!
social process o! prod%ction, side by side @it an element o! prod%ction amalgamated @it and
represented by a de!inite social !orm are indiscriminately placed: te land on te one and and
labo%r on te oter, t@o elements o! te real labo%r process, @ic in tis material !orm are
common to all modes o! prod%ction, @ic are te material elements o! e8ery process o!
prod%ction and a8e noting to do @it its social !orm0
$econdly0 &n te !orm%la: capital I interest, land I gro%nd-rent, labo%r I @ages, capital, land and
labo%r appear respecti8ely as so%rces o! interest Binstead o! pro!itC, gro%nd-rent and @ages, as
teir prod%cts, or !r%its# te !ormer are te basis, te latter te conseD%ence, te !ormer are te
ca%se, te latter te e!!ect# and indeed, in s%c a manner tat eac indi8id%al so%rce is related to
its prod%ct as to tat @ic is eHected and prod%ced by it0 ?ll te proceeds, interest Binstead o!
pro!itC, rent, and @ages, are tree components o! te 8al%e o! te prod%cts, i0e0, generally
speaking, components o! 8al%e or expressed in money, certain money components, price
components0 5e !orm%la: capital I interest is no@ indeed te most meaningless !orm%la o!
capital, b%t still one o! its !orm%las0 A%t o@ so%ld land create 8al%e, i0e0, a socially de!ined
D%antity o! labo%r, and moreo8er tat partic%lar portion o! te 8al%e o! its o@n prod%cts @ic
!orms te rentQ 'and, e0g0, takes part as an agent o! prod%ction in creating a %se-8al%e, a material
prod%ct, @eat0 A%t it as noting to do @it te prod%ction o! te value of wheat. &n so !ar as
8al%e is represented by @eat, te latter is merely considered as a de!inite D%antity o! materialised
social labo%r, regardless o! te partic%lar s%bstance in @ic tis labo%r is mani!ested or o! te
partic%lar %se-8al%e o! tis s%bstance0 5is no@ise contradicts tat 1C oter circ%mstances being
eD%al, te ceapness or dearness o! @eat depends %pon te prod%cti8ity o! te soil0 5e
prod%cti8ity o! agric%lt%ral labo%r is dependent on nat%ral conditions, and te same D%antity o!
labo%r is represented by more or !e@er prod%cts, %se-8al%es, in accordance @it s%c
prod%cti8ity0 6o@ large te D%antity o! labo%r represented in one b%sel o! @eat depends %pon
te n%mber o! b%sels yielded by te same D%antity o! labo%r0 &t depends, in tis case, %pon te
soil prod%cti8ity in @at D%antities o! prod%ct te 8al%e sall be mani!ested0 A%t tis 8al%e is
gi8en, independent o! tis distrib%tion0 4al%e is represented in %se-8al%e# and %se-8al%e is a
prereD%isite !or te creation o! 8al%e# b%t it is !olly to create an antitesis by placing a %se-8al%e,
+>< ;apter J'4&&&
like land, on one side and on te oter side 8al%e, and a partic%lar portion o! 8al%e at tat0 <C000
/ere te man%script breaks o!!10
III
4%lgar economy act%ally does no more tan interpret, systematise and de!end in doctrinaire
!asion te conceptions o! te agents o! bo%rgeois prod%ction @o are entrapped in bo%rgeois
prod%ction relations0 &t so%ld not astonis %s, ten, tat 8%lgar economy !eels partic%larly at
ome in te estranged o%t@ard appearances o! economic relations in @ic tese prima facie
abs%rd and per!ect contradictions appear and tat tese relations seem te more sel!-e8ident te
more teir internal relationsips are concealed !rom it, alto%g tey are %nderstandable to te
pop%lar mind0 A%t all science @o%ld be s%per!l%o%s i! te o%t@ard appearance and te essence o!
tings directly coincided0 5%s, 8%lgar economy as not te sligtest s%spicion tat te trinity
@ic it takes as its point o! depart%re, namely, land I rent, capital I interest, labo%r I @ages or
te price o! labo%r, are prima facie tree impossible combinations0 First @e a8e te %se-8al%e
land, @ic as no 8al%e, and te excange-8al%e rentI so tat a social relation concei8ed as a
ting is made proportional to -at%re, i0e0, t@o incommens%rable magnit%des are s%pposed to
stand in a gi8en ratio to one anoter0 5en capital J interest. &! capital is concei8ed as a certain
s%m o! 8al%es represented independently by money, ten it is prima facie nonsense to say tat a
certain 8al%e so%ld be @ort more tan it is @ort0 &t is precisely in te !orm: capital I interest
tat all intermediate links are eliminated, and capital is red%ced to its most general !orm%la,
@ic tere!ore in itsel! is also inexplicable and abs%rd0 5e 8%lgar economist pre!ers te !orm%la
capital I interest, @it its occ%lt D%ality o! making a 8al%e %neD%al to itsel!, to te !orm%la capital
I pro!it, precisely !or te reason tat tis already more nearly approaces act%al capitalist
relations0 5en again, dri8en by te dist%rbing to%gt tat 2 is not + and tat 1== taler cannot
possibly be 11= taler, e !lees !rom capital as 8al%e to te material s%bstance o! capital# to its %se-
8al%e as a condition o! prod%ction o! labo%r, to macinery, ra@ materials, etc0 5%s, e is able
once more to s%bstit%te in place o! te !irst incompreensible relation, @ereby 2 R +, a @olly
incommens%rable one bet@een a %se-8al%e, a ting on one side, and a de!inite social prod%ction
relation, s%rpl%s-8al%e, on te oter, as in te case o! landed property0 ?s soon as te 8%lgar
economist arri8es at tis incommens%rable relation, e8eryting becomes clear to im, and e no
longer !eels te need !or !%rter to%gt0 For e as arri8ed precisely at te KrationalL in
bo%rgeois conception0 Finally, labour J wages, or price o! labo%r, is an expression, as so@n in
Aook &, @icprima facie contradicts te conception o! 8al%e as @ell as o! price I te latter
generally being b%t a de!inite expression o! 8al%e0 ?nd Kprice o! labo%rL is H%st as irrational as a
yello@ logaritm0 A%t ere te 8%lgar economist is all te more satis!ied, beca%se e as gained
te pro!o%nd insigt o! te bo%rgeois, namely, tat e pays money !or labo%r, and since precisely
te contradiction bet@een te !orm%la and te conception o! 8al%e relie8es im !rom all
obligation to %nderstand te latter0
We
lxi
a8e seen tat te capitalist process o! prod%ction is a istorically determined !orm o! te
social process o! prod%ction in general0 5e latter is as m%c a prod%ction process o! material
conditions o! %man li!e as a process taking place %nder speci!ic istorical and economic
prod%ction relations, prod%cing and reprod%cing tese prod%ction relations temsel8es, and
tereby also te bearers o! tis process, teir material conditions o! existence and teir m%t%al
relations, i0e0, teir partic%lar socio-economic !orm0 For te aggregate o! tese relations, in @ic
te agents o! tis prod%ction stand @it respect to -at%re and to one anoter, and in @ic tey
prod%ce, is precisely society, considered !rom te standpoint o! its economic str%ct%re0 'ike all its
predecessors, te capitalist process o! prod%ction proceeds %nder de!inite material conditions,
@ic are, o@e8er, sim%ltaneo%sly te bearers o! de!inite social relations entered into by
+>3 ;apter J'4&&&
indi8id%als in te process o! reprod%cing teir li!e0 5ose conditions, like tese relations, are on
te one and prereD%isites, on te oter and res%lts and creations o! te capitalist process o!
prod%ction# tey are prod%ced and reprod%ced by it0 We sa@ also tat capital I and te capitalist
is merely capital personi!ied and !%nctions in te process o! prod%ction solely as te agent o!
capital I in its corresponding social process o! prod%ction, p%mps a de!inite D%antity o! s%rpl%s-
labo%r o%t o! te direct prod%cers, or labo%rers# capital obtains tis s%rpl%s-labo%r @ito%t an
eD%i8alent, and in essence it al@ays remains !orced labo%r I no matter o@ m%c it may seem to
res%lt !rom !ree contract%al agreement0 5is s%rpl%s-labo%r appears as s%rpl%s-8al%e, and tis
s%rpl%s-8al%e exists as a s%rpl%s-prod%ct0 $%rpl%s-labo%r in general, as labo%r per!ormed o8er and
abo8e te gi8en reD%irements, m%st al@ays remain0 &n te capitalist as @ell as in te sla8e system,
etc0, it merely ass%mes an antagonistic !orm and is s%pplemented by complete idleness o! a
strat%m o! society0 ? de!inite D%antity o! s%rpl%s-labo%r is reD%ired as ins%rance against accidents,
and by te necessary and progressi8e expansion o! te process o! reprod%ction in keeping @it
te de8elopment o! te needs and te gro@t o! pop%lation, @ic is called acc%m%lation !rom
te 8ie@point o! te capitalist0 &t is one o! te ci8ilising aspects o! capital tat it en!orces tis
s%rpl%s-labo%r in a manner and %nder conditions @ic are more ad8antageo%s to te
de8elopment o! te prod%cti8e !orces, social relations, and te creation o! te elements !or a ne@
and iger !orm tan %nder te preceding !orms o! sla8ery, ser!dom, etc0 5%s it gi8es rise to a
stage, on te one and, in @ic coercion and monopolisation o! social de8elopment Bincl%ding
its material and intellect%al ad8antagesC by one portion o! society at te expense o! te oter are
eliminated# on te oter and, it creates te material means and embryonic conditions, making it
possible in a iger !orm o! society to combine tis s%rpl%s-labo%r @it a greater red%ction o!
time de8oted to material labo%r in general0 For, depending on te de8elopment o! labo%r
prod%cti8ity, s%rpl%s-labo%r may be large in a small total @orking-day, and relati8ely small in a
large total @orking-day0 &! te necessary labo%r-time R 3 and te s%rpl%s-labo%r R 3, ten te total
@orking-day R 6 and te rate o! s%rpl%s-labo%r R 1==T0 &! te necessary labo%r R * and te
s%rpl%s-labo%r R 3, ten te total @orking-day R 1< and te rate o! s%rpl%s-labo%r only R 33XT0
&n tat case, it depends %pon te labo%r prod%cti8ity o@ m%c %se-8al%e sall be prod%ced in a
de!inite time, ence also in a de!inite s%rpl%s labo%r-time0 5e act%al @ealt o! society, and te
possibility o! constantly expanding its reprod%ction process, tere!ore, do not depend %pon te
d%ration o! s%rpl%s-labo%r, b%t %pon its prod%cti8ity and te more or less copio%s conditions o!
prod%ction %nder @ic it is per!ormed0 &n !act, te realm o! !reedom act%ally begins only @ere
labo%r @ic is determined by necessity and m%ndane considerations ceases# t%s in te 8ery
nat%re o! tings it lies beyond te spere o! act%al material prod%ction0 P%st as te sa8age m%st
@restle @it -at%re to satis!y is @ants, to maintain and reprod%ce li!e, so m%st ci8ilised man,
and e m%st do so in all social !ormations and %nder all possible modes o! prod%ction0 Wit is
de8elopment tis realm o! pysical necessity expands as a res%lt o! is @ants# b%t, at te same
time, te !orces o! prod%ction @ic satis!y tese @ants also increase0 Freedom in tis !ield can
only consist in socialised man, te associated prod%cers, rationally reg%lating teir intercange
@it -at%re, bringing it %nder teir common control, instead o! being r%led by it as by te blind
!orces o! -at%re# and acie8ing tis @it te least expendit%re o! energy and %nder conditions
most !a8o%rable to, and @orty o!, teir %man nat%re0 A%t it noneteless still remains a realm o!
necessity0 Aeyond it begins tat de8elopment o! %man energy @ic is an end in itsel!, te tr%e
realm o! !reedom, @ic, o@e8er, can blossom !ort only @it tis realm o! necessity as its
basis0 5e sortening o! te @orking-day is its basic prereD%isite0
&n a capitalist society, tis s%rpl%s-8al%e, or tis s%rpl%s-prod%ct Blea8ing aside cance
!l%ct%ations in its distrib%tion and considering only its reg%lating la@, its standardising limitsC, is
di8ided among capitalists as di8idends proportionate to te sare o! te social capital eac olds0
&n tis !orm s%rpl%s-8al%e appears as a8erage pro!it @ic !alls to te sare o! capital, an a8erage
pro!it @ic in t%rn di8ides into pro!it o! enterprise and interest, and @ic %nder tese t@o
+>2 ;apter J'4&&&
categories may !all into te laps o! di!!erent kinds o! capitalists0 5is appropriation and
distrib%tion o! s%rpl%s-8al%e, or s%rpl%s-prod%ct, on te part o! capital, o@e8er, as its barrier in
landed property0 P%st as te operating capitalist p%mps s%rpl%s-labo%r, and tereby s%rpl%s 8al%e
and s%rpl%s-prod%ct in te !orm o! pro!it, o%t o! te labo%rer, so te landlord in t%rn p%mps a
portion o! tis s%rpl%s-8al%e, or s%rpl%s-prod%ct, o%t o! te capitalist in te !orm o! rent in
accordance @it te la@s already elaborated0
6ence, @en speaking ere o! pro!it as tat portion o! s%rpl%s-8al%e !alling to te sare o! capital,
@e mean a8erage pro!it BeD%al to pro!it o! enterprise pl%s interestC @ic is already limited by te
ded%ction o! rent !rom te aggregate pro!it Bidentical in mass @it aggregate s%rpl%s-8al%eC# te
ded%ction o! rent is ass%med0 ,ro!it o! capital Bpro!it o! enterprise pl%s interestC and gro%nd-rent
are t%s no more tan partic%lar components o! s%rpl%s-8al%e, categories by @ic s%rpl%s-8al%e
is di!!erentiated depending on @eter it !alls to te sare o! capital or landed property, eadings
@ic in no @it o@e8er alter its nat%re0 ?dded togeter, tese !orm te s%m o! social s%rpl%s-
8al%e0 ;apital p%mps te s%rpl%s-labo%r, @ic is represented by s%rpl%s-8al%e and s%rpl%s-
prod%ct, directly o%t o! te labo%rers0 5%s, in tis sense, it may be regarded as te prod%cer o!
s%rpl%s-8al%e0 'anded property as noting to do @it te act%al process o! prod%ction0 &ts role is
con!ined to trans!erring a portion o! te prod%ced s%rpl%s-8al%e !rom te pockets o! capital to its
o@n0 6o@e8er, te landlord plays a role in te capitalist process o! prod%ction not merely tro%g
te press%re e exerts %pon capital, nor merely beca%se large landed property is a prereD%isite and
condition o! capitalist prod%ction since it is a prereD%isite and condition o! te expropriation o!
te labo%rer !rom te means o! prod%ction, b%t partic%larly beca%se e appears as te
personi!ication o! one o! te most essential conditions o! prod%ction0
Finally, te labo%rer in te capacity o! o@ner and seller o! is indi8id%al labo%r-po@er recei8es a
portion o! te prod%ct %nder te label o! @ages, in @ic tat portion o! is labo%r appears @ic
@e call necessary labo%r, i0e0, tat reD%ired !or te maintenance and reprod%ction o! tis labo%r-
po@er, be te conditions o! tis maintenance and reprod%ction scanty or bo%nti!%l, !a8o%rable or
%n!a8o%rable0
Wate8er may be te disparity o! tese relations in oter respects, tey all a8e tis in common:
;apital yields a pro!it year a!ter year to te capitalist, land a gro%nd-rent to te landlord, and
labo%r-po@er, %nder normal conditions and so long as it remains %se!%l labo%r-po@er, a @age to
te labo%rer0 5ese tree portions o! total 8al%e ann%ally prod%ced, and te corresponding
portions o! te ann%ally created total prod%ct Blea8ing aside !or te present any consideration o!
acc%m%lationC, may be ann%ally cons%med by teir respecti8e o@ners, @ito%t exa%sting te
so%rce o! teir reprod%ction0 5ey are like te ann%ally cons%mable !r%its o! a perennial tree, or
rater tree trees# tey !orm te ann%al incomes o! tree classes, capitalist, lando@ner and
labo%rer, re8en%es distrib%ted by te !%nctioning capitalist in is capacity as direct extorter o!
s%rpl%s-labo%r and employer o! labo%r in general0 5%s, capital appears to te capitalist, land to
te landlord, and labo%r-po@er, or rater labo%r itsel!, to te labo%rer Bsince e act%ally sells
labo%r-po@er only as it is mani!ested, and since te price o! labo%r-po@er, as pre8io%sly so@n,
ine8itably appears as te price o! labo%r %nder te capitalist mode o! prod%ctionC, as tree
di!!erent so%rces o! teir speci!ic re8en%es, namely, pro!it, gro%nd-rent and @ages0 5ey are
really so in te sense tat capital is a perennial p%mping-macine o! s%rpl%s-labo%r !or te
capitalist, land a perennial magnet !or te landlord, attracting a portion o! te s%rpl%s-8al%e
p%mped o%t by capital, and !inally, labo%r te constantly sel!-rene@ing condition and e8er sel!-
rene@ing means o! acD%iring %nder te title o! @ages a portion o! te 8al%e created by te
labo%rer and t%s a part o! te social prod%ct meas%red by tis portion o! 8al%e, i0e0, te
necessities o! li!e0 5ey are so, !%rtermore, in te sense tat capital !ixes a portion o! te 8al%e
and tereby o! te prod%ct o! te ann%al labo%r in te !orm o! pro!it# landed property !ixes
anoter portion in te !orm o! rent# and @age-labo%r !ixes a tird portion in te !orm o! @ages,
and precisely by tis trans!ormation con8erts tem into re8en%es o! te capitalist, lando@ner, and
+>+ ;apter J'4&&&
labo%rer, @ito%t, o@e8er, creating te s%bstance itsel! @ic is trans!ormed into tese 8ario%s
categories0 5e distrib%tion rater pres%pposes te existence o! tis s%bstance, namely, te total
8al%e o! te ann%al prod%ct, @ic is noting b%t materialised social labo%r0 -e8erteless, it is
not in tis !orm tat te matter appears to te agents o! prod%ction, te bearers o! te 8ario%s
!%nctions in te prod%ction process, b%t rater in a distorted !orm0 Wy tis takes place @ill be
de8eloped in te !%rter co%rse o! o%r analysis0 ;apital landed property and labo%r appear to
tose agents o! prod%ction as tree di!!erent, independent so%rces, !rom @ic as s%c tere arise
tree di!!erent components o! te ann%ally prod%ced 8al%e I and tereby te prod%ct in @ic it
exists# t%s, !rom @ic tere arise not merely te di!!erent !orms o! tis 8al%e as re8en%es !alling
to te sare o! partic%lar !actors in te social process o! prod%ction, b%t !rom @ic tis 8al%e
itsel! arises, and tereby te s%bstance o! tese !orms o! re8en%e0
/6ere one !olio seet o! te man%script is missing01
000 7i!!erential rent is bo%nd %p @it te relati8e soil !ertility, in oter @ords, @it properties
arising !rom te soil as s%c0 A%t, in te !irst place, in so !ar as it is based %pon te di!!erent
indi8id%al 8al%es o! te prod%cts o! di!!erent soil types, it is b%t te determination H%st mentioned#
secondly, in so !ar as it is based %pon te reg%lating general market-8al%e, @ic di!!ers !rom
tese indi8id%al 8al%es, it is a social la@ carried tro%g by means o! competition, @ic as to
do neiter @it te soil nor te di!!erent degrees o! its !ertility0
&t migt seem as i! a rational relation @ere expressed at least in Klabo%r I @ages0L A%t tis is no
more te case tan @it Kland I gro%nd-rent0L &n so !ar as labo%r is 8al%e-creating, and is
mani!ested in te 8al%e o! commodities, it as noting to do @it te distrib%tion o! tis 8al%e
among 8ario%s categories0 &n so !ar as it as te speci!ically social caracter o! @age-labo%r, it is
not 8al%e-creating0 &t as already been so@n in general tat @ages o! labo%r, or price o! labo%r,
is b%t an irrational expression !or te 8al%e, or price o! labo%r-po@er# and te speci!ic social
conditions, %nder @ic tis labo%r-po@er is sold, a8e noting to do @it labo%r as a general
agent in prod%ction0 'abo%r is also materialised in tat 8al%e component o! a commodity @ic
as @ages !orms te price o! labo%r-po@er# it creates tis portion H%st as m%c as te oter portions
o! te prod%ct# b%t it is materialised in tis portion no more and no di!!erently tan in te portions
!orming rent or pro!it0 ?nd, in general, @en @e establis labo%r as 8al%e-creating, @e do not
consider it in its concrete !orm as a condition o! prod%ction, b%t in its social delimitation @ic
di!!ers !rom tat o! @age-labo%r0
E8en te expression Kcapital I pro!itL is incorrect ere0 &! capital is 8ie@ed in te only relation in
@ic it prod%ces s%rpl%s-8al%e, namely, its relation to te labo%rer @ereby it extorts s%rpl%s-
labo%r by comp%lsion exerted %pon labo%r-po@er, i0e0, te @age-labo%rer, ten tis s%rpl%s-8al%e
comprises, o%tside o! pro!it Bpro!it o! enterprise pl%s interestC, also rent, in sort te entire
%ndi8ided s%rpl%s-8al%e0 6ere, on te oter and, as a so%rce o! re8en%e, it is placed only in
relation to tat portion !alling to te sare o! te capitalist0 5is is not te s%rpl%s-8al%e @ic it
extracts generally b%t only tat portion @ic it extracts !or te capitalist0 $till more does all
connection 8anis no sooner te !orm%la is trans!ormed into Kcapital I interest0L
&! @e at !irst considered te disparity o! te abo8e tree so%rces, @e no@ note tat teir prod%cts,
teir o!!soots, or re8en%es, on te oter band, all belong to te same spere, tat o! 8al%e0
6o@e8er, tis is compensated !or Btis relation not only bet@een incommens%rable magnit%des,
b%t also bet@een @olly %nlike, m%t%ally %nrelated, and non-comparable tingsC in tat capital,
like land and labo%r, is simply considered as a material s%bstance, tat is, simply as a prod%ced
means o! prod%ction, and t%s is abstracted bot as a relation to te labo%rer and as 8al%e0
5irdly, i! %nderstood in tis @ay, te !orm%la, capital I interest Bpro!itC, land I rent, labo%r I
@ages, presents a %ni!orm and symmetrical incongr%ity0 &n !act, since @age-labo%r does not
appear as a socially determined !orm o! labo%r, b%t rater all labo%r appears by its nat%re as
@age-labo%r Bt%s appearing to tose in te grip o! capitalist prod%ction relationsC, te de!inite
+>6 ;apter J'4&&&
speci!ic social !orms ass%med by te material conditions o! labo%r I te prod%ced means o!
prod%ction and te land I @it respect to @age-labo%r BH%st as tey, in t%rn, con8ersely
pres%ppose @age-labo%rC, directly coincide @it te material existence o! tese conditions o!
labo%r or @it te !orm possessed by tem generally in te act%al labo%r-process, independent o!
its concrete istorically determined social !orm, or indeed independent o! any social !orm0 5e
canged !orm o! te conditions o! labo%r, i0 e0, alienated !rom labo%r and con!ronting it
independently, @ereby te prod%ced means o! prod%ction are t%s trans!ormed into capital, and
te land into monopolised land, or landed property I tis !orm belonging to a de!inite istorical
period tereby coincides @it te existence and !%nction o! te prod%ced means o! prod%ction
and o! te land in te process o! prod%ction in general0 5ese means o! prod%ction are in
temsel8es capital by nat%re# capital is merely an Keconomic appellationL !or tese means o!
prod%ction# and so, in itsel! land is by nat%re te eart monopolised by a certain n%mber o!
lando@ners0 P%st as prod%cts con!ront te prod%cer as an independent !orce in capital and
capitalists I @o act%ally are b%t te personi!ication o! capital I so land becomes personi!ied in
te landlord and like@ise gets on its ind legs to demand, as an independent !orce, its sare o! te
prod%ct created @it its elp0 5%s, not te land recei8es its d%e portion o! te prod%ct !or te
restoration and impro8ement o! its prod%cti8ity, b%t instead te landlord takes a sare o! tis
prod%ct to ca!!er a@ay or sD%ander0 &t is clear tat capital pres%pposes labo%r as @age-labo%r0
A%t it is H%st as clear tat i! labo%r as @age-labo%r is taken as te point o! depart%re, so tat te
identity o! labo%r in general @it @age-labo%r appears to be sel!-e8ident, ten capital and
monopolised land m%st also appear as te nat%ral !orm o! te conditions o! labo%r in relation to
labo%r in general0 5o be capital, ten, appears as te nat%ral !orm o! te means o! labo%r and
tereby as te p%rely real caracter arising !rom teir !%nction in te labo%r-process in general0
;apital and prod%ced means o! prod%ction t%s become identical terms0 $imilarly, land and land
monopolised tro%g pri8ate o@nersip become identical0 5e means o! labo%r as s%c, @ic
are by nat%re capital, t%s become te so%rce o! pro!it, m%c as te land as s%c becomes te
so%rce o! rent0
'abo%r as s%c, in its simple capacity as p%rposi8e prod%cti8e acti8ity, relates to te means o!
prod%ction, not in teir social determinate !orm, b%t rater in teir concrete s%bstance, as material
and means o! labo%r# te latter like@ise are disting%ised !rom one anoter merely materially, as
%se-8al%es, i0e0, te land as %nprod%ced, te oters as prod%ced, means o! labo%r0 &!, ten, labo%r
coincides @it @age-labo%r, so does te partic%lar social !orm in @ic te conditions o! labo%r
con!ront labo%r coincide @it teir material existence0 5e means o! labo%r as s%c are ten
capital, and te land as s%c is landed property0 5e !ormal independence o! tese conditions o!
labo%r in relation to labo%r, te %niD%e !orm o! tis independence @it respect to @age-labo%r, is
ten a property inseparable !rom tem as tings, as material conditions o! prod%ction, an inerent,
immanent, intrinsic caracter o! tem as elements o! prod%ction0 5eir de!inite social caracter in
te process o! capitalist prod%ction bearing te stamp o! a de!inite istorical epoc is a nat%ral,
and intrinsic s%bstanti8e caracter belonging to tem, as it @ere, !rom time immemorial, as
elements o! te prod%ction process0 5ere!ore, te respecti8e part played by te eart as te
original !ield o! acti8ity o! labo%r, as te realm o! !orces o! -at%re, as te pre-existing arsenal o!
all obHects o! labo%r, and te oter respecti8e part played by te prod%ced means o! prod%ction
Binstr%ments, ra@ materials, etc0C in te general process o! prod%ction, m%st seem to be expressed
in te respecti8e sares claimed by tem as capital and landed property, i0e0, @ic !all to te
sare o! teir social representati8es in te !orm o! pro!it BinterestC and rent, like to te labo%rer I
te part is labo%r plays in te process o! prod%ction is expressed in @ages0 )ent, pro!it and
@ages t%s seem to gro@ o%t o! te role played by te land, prod%ced means o! prod%ction, and
labo%r in te simple labo%r-process, e8en @en @e consider tis labo%r-process as one carried on
merely bet@een man and -at%re, lea8ing aside any istorical determination0 &t is merely te same
ting again, in anoter !orm, @en it is arg%ed: te prod%ct in @ic a @age-labo%rerGs labo%r !or
+>> ;apter J'4&&&
imsel! is mani!ested, is proceeds or re8en%e, is simply @ages, te portion o! 8al%e Band tereby
te social prod%ct meas%red by tis 8al%eC @ic is @ages represent0 5%s, i! @age-labo%r
coincides @it labo%r generally, ten so do @ages @it te prod%ce o! labo%r, and te 8al%e
portion representing @ages @it te 8al%e created by labo%r generally0 A%t in tis @ay te oter
portions o! 8al%e, pro!it and rent also appear independent @it respect to @ages, and m%st arise
!rom so%rces o! teir o@n, @ic are speci!ically di!!erent and independent o! labo%r# tey m%st
arise !rom te participating elements o! prod%ction, to te sare o! @ose o@ners tey !all# i0e0,
pro!it arises !rom te means o! prod%ction, te material elements o! capital, and rent arises !rom
te land, or -at%re, as represented by te landlord B)oscerC0 /)oscer, System der
Lol-swirtschaft, Aand &, Die Grundlagen der $ationalK-onomie, $t%ttgart %nd ?%gsb%rg, 18+8. J
0d.1
'anded property, capital and @age-labo%r are t%s trans!ormed !rom so%rces o! re8en%e I in te
sense tat capital attracts to te capitalist, in te !orm o! pro!it, a portion o! te s%rpl%s-8al%e
extracted by im !rom labo%r, tat monopoly in land attracts !or te landlord anoter portion in
te !orm o! rent# and tat labo%r grants te labo%rer te remaining portion o! 8al%e in te !orm o!
@ages I !rom so%rces by means o! @ic one portion o! 8al%e is trans!ormed into te !orm o!
pro!it, anoter into te !orm o! rent, and a tird into te !orm o! @ages I into act%al so%rces !rom
@ic tese 8al%e portions and respecti8e portions o! te prod%ct in @ic tey exist, or !or
@ic tey are excangeable, arise temsel8es, and !rom @ic, tere!ore, in te !inal analysis,
te 8al%e o! te prod%ct itsel! arises0
lxii

&n te case o! te simplest categories o! te capitalist mode o! prod%ction, and e8en o!
commodity-prod%ction, in te case o! commodities and money, @e a8e already pointed o%t te
mysti!ying caracter tat trans!orms te social relations, !or @ic te material elements o!
@ealt ser8e as bearers in prod%ction, into properties o! tese tings temsel8es BcommoditiesC
and still more prono%ncedly trans!orms te prod%ction relation itsel! into a ting BmoneyC0 ?ll
!orms o! society, in so !ar as tey reac te stage o! commodity-prod%ction and money
circ%lation, take part in tis per8ersion0 A%t %nder te capitalist mode o! prod%ction and in te
case o! capital, @ic !orms its dominant category, its determining prod%ction relation, tis
encanted and per8erted @orld de8elops still more0 &! one considers capital, to begin @it, in te
act%al process o! prod%ction as a means o! extracting s%rpl%s-labo%r, ten tis relationsip is still
8ery simple, and te act%al connection impresses itsel! %pon te bearers o! tis process, te
capitalists temsel8es, and remains in teir conscio%sness0 5e 8iolent str%ggle o8er te limits o!
te @orking-day demonstrates tis strikingly0 A%t e8en @itin tis non-mediated spere, te
spere o! direct action bet@een labo%r and capital, matters do not rest in tis simplicity0 Wit te
de8elopment o! relati8e s%rpl%s-8al%e in te act%al speci!ically capitalist mode o! prod%ction,
@ereby te prod%cti8e po@ers o! social labo%r are de8eloped, tese prod%cti8e po@ers and te
social interrelations o! labo%r in te direct labo%r-process seem trans!erred !rom labo%r to capital0
;apital t%s becomes a 8ery mystic being since all o! labo%rGs social prod%cti8e !orces appear to
be d%e to capital, rater tan labo%r as s%c, and seem to iss%e !rom te @omb o! capital itsel!0
5en te process o! circ%lation inter8enes, @it its canges o! s%bstance and !orm, on @ic all
parts o! capital, e8en agric%lt%ral capital, de8ol8e to te same degree tat te speci!ically
capitalist mode o! prod%ction de8elops0 5is is a spere @ere te relations %nder @ic 8al%e is
originally prod%ced are p%sed completely into te backgro%nd0 &n te direct process o!
prod%ction te capitalist already acts sim%ltaneo%sly as prod%cer o! commodities and manager o!
commodity-prod%ction0 6ence tis process o! prod%ction appears to im by no means simply as a
process o! prod%cing s%rpl%s-8al%e0 A%t @ate8er may be te s%rpl%s-8al%e extorted by capital in
te act%al prod%ction process and appearing in commodities, te 8al%e and s%rpl%s-8al%e
contained in te commodities m%st !irst be realised in te circ%lation process0 ?nd bot te
restit%tion o! te 8al%es ad8anced in prod%ction and, partic%larly, te s%rpl%s-8al%e contained in
te commodities seem not merely to be realised in te circ%lation, b%t act%ally to arise !rom it# an
+>8 ;apter J'4&&&
appearance @ic is especially rein!orced by t@o circ%mstances: !irst, te pro!it made in selling
depends on ceating, deceit, inside kno@ledge, skill and a to%sand !a8o%rable market
opport%nities# and ten by te circ%mstance tat added ere to labo%r-time is a second
determining element I time o! circ%lation0 5is acts, in !act, only as a negati8e barrier against te
!ormation o! 8al%e and s%rpl%s-8al%e, b%t it as te appearance o! being as de!inite a basis as
labo%r itsel! and o! introd%cing a determining element tat is independent o! labo%r and res%lting
!rom te nat%re o! capital0 &n Aook && @e nat%rally ad to present tis spere o! circ%lation merely
@it re!erence to te !orm determinations @ic it created and to demonstrate te !%rter
de8elopment o! te str%ct%re o! capital taking place in tis spere0 A%t in reality tis spere is te
spere o! competition, @ic, considered in eac indi8id%al case, is dominated by cance# @ere,
ten, te inner la@, @ic pre8ails in tese accidents and reg%lates tem, is only 8isible @en
tese accidents are gro%ped togeter in large n%mbers, @ere it remains, tere!ore, in8isible and
%nintelligible to te indi8id%al agents in prod%ction0 A%t !%rtermore: te act%al process o!
prod%ction, as a %nity o! te direct prod%ction process and te circ%lation process, gi8es rise to
ne@ !ormations, in @ic te 8ein o! internal connections is increasingly lost, te prod%ction
relations are rendered independent o! one anoter, and te component 8al%es become ossi!ied into
!orms independent o! one anoter0
5e con8ersion o! s%rpl%s-8al%e into pro!it, as @e a8e seen, is determined as m%c by te
process o! circ%lation as by te process o! prod%ction0 $%rpl%s-8al%e, in te !orm o! pro!it, is no
longer related back to tat portion o! capital in8ested in labo%r !rom @ic it arises, b%t to te
total capital0 5e rate o! pro!it is reg%lated by la@s o! its o@n, @ic permit, or e8en reD%ire, it to
cange @ile te rate o! s%rpl%s-8al%e remains %naltered0 ?ll tis obsc%res more and more te
tr%e nat%re o! s%rpl%s-8al%e and t%s te act%al mecanism o! capital0 $till more is tis acie8ed
tro%g te trans!ormation o! pro!it into a8erage pro!it and o! 8al%es into prices o! prod%ction,
into te reg%lating a8erages o! market-prices0 ? complicated social process inter8enes ere, te
eD%alisation process o! capitals, @ic di8orces te relati8e a8erage prices o! te commodities
!rom teir 8al%es, as @ell as te a8erage pro!its in te 8ario%s speres o! prod%ction BD%ite aside
!rom te indi8id%al in8estments o! capital in eac partic%lar spere o! prod%ctionC !rom te act%al
exploitation o! labo%r by te partic%lar capitals0 -ot only does it appear so, b%t it is tr%e in !act
tat te a8erage price o! commodities di!!ers !rom teir 8al%e, t%s !rom te labo%r realised in
tem, and te a8erage pro!it o! a partic%lar capital di!!ers !rom te s%rpl%s-8al%e @ic tis
capital as extracted !rom te labo%rers employed by it0 5e 8al%e o! commodities appears,
directly, solely in te in!l%ence o! !l%ct%ating prod%cti8ity o! labo%r %pon te rise and !all o! te
prices o! prod%ction, %pon teir mo8ement and not %pon teir %ltimate limits0 ,ro!it seems to be
determined only secondarily by direct exploitation o! labo%r, in so !ar as te latter permits te
capitalist to realise a pro!it de8iating !rom te a8erage pro!it at te reg%lating market-prices,
@ic apparently pre8ail independent o! s%c exploitation0 -ormal a8erage pro!its temsel8es
seem immanent in capital and independent o! exploitation# abnormal exploitation, or e8en
a8erage exploitation %nder !a8o%rable, exceptional conditions, seems to determine only te
de8iations !rom a8erage pro!it, not tis pro!it itsel!0 5e di8ision o! pro!it into pro!it o! enterprise
and interest Bnot to mention te inter8ention o! commercial pro!it and pro!it !rom money-dealing,
@ic are !o%nded %pon circ%lation and appear to arise completely !rom it, and not !rom te
process o! prod%ction itsel!C cons%mmates te indi8id%alisation o! te !orm o! s%rpl%s-8al%e, te
ossi!ication o! its !orm as opposed to its s%bstance, its essence0 3ne portion o! pro!it, as opposed
to te oter, separates itsel! entirely !rom te relationsip o! capital as s%c and appears as arising
not o%t o! te !%nction o! exploiting @age-labo%r, b%t o%t o! te @age-labo%r o! te capitalist
imsel!0 &n contrast tereto, interest ten seems to be independent bot o! te labo%rerGs @age-
labo%r and te capitalistGs o@n labo%r, and to arise !rom capital as its o@n independent so%rce0 &!
capital originally appeared on te s%r!ace o! circ%lation as a !etisism o! capital, as a 8al%e-
creating 8al%e, so it no@ appears again in te !orm o! interest-bearing capital, as in its most
+>* ;apter J'4&&&
estranged and caracteristic !orm0 Were!ore also te !orm%la capital I interest, as te tird to
land I rent and labo%r I @ages, is m%c more consistent tan capital I pro!it, since in pro!it tere
still remains a recollection o! its origin, @ic is not only exting%ised in interest, b%t is also
placed in a !orm toro%gly antitetical to tis origin0
Finally, capital as an independent so%rce o! s%rpl%s-8al%e is Hoined by landed property, @ic acts
as a barrier to a8erage pro!it and trans!ers a portion o! s%rpl%s-8al%e to a class tat neiter @orks
itsel!, nor directly exploits labo%r, nor can !ind morally edi!ying rationalisations, as in te case o!
interest-bearing capital, e0g0, risk and sacri!ice o! lending capital to oters0 $ince ere a part o! te
s%rpl%s-8al%e seems to be bo%nd %p directly @it a nat%ral element, te land, rater tan @it
social relations, te !orm o! m%t%al estrangement and ossi!ication o! te 8ario%s parts o! s%rpl%s-
8al%e is completed, te inner connection completely disr%pted, and its so%rce entirely b%ried,
precisely beca%se te relations o! prod%ction, @ic are bo%nd to te 8ario%s material elements o!
te prod%ction process, a8e been rendered m%t%ally independent0
&n capital I pro!it, or still better capital I interest, land I rent, labo%r I @ages, in tis economic
trinity represented as te connection bet@een te component parts o! 8al%e and @ealt in general
and its so%rces, @e a8e te complete mysti!ication o! te capitalist mode o! prod%ction, te
con8ersion o! social relations into tings, te direct coalescence o! te material prod%ction
relations @it teir istorical and social determination0 &t is an encanted, per8erted, topsy-t%r8y
@orld, in @ic Monsie%r le ;apital and Madame la 5erre do teir gost-@alking as social
caracters and at te same time directly as mere tings0 &t is te great merit o! classical economy
to a8e destroyed tis !alse appearance and ill%sion, tis m%t%al independence and ossi!ication o!
te 8ario%s social elements o! @ealt, tis personi!ication o! tings and con8ersion o! prod%ction
relations into entities, tis religion o! e8eryday li!e0 &t did so by red%cing interest to a portion o!
pro!it, and rent to te s%rpl%s abo8e a8erage pro!it, so tat bot o! tem con8erge in s%rpl%s-
8al%e# and by representing te process o! circ%lation as a mere metamorposis o! !orms, and
!inally red%cing 8al%e and s%rpl%s-8al%e o! commodities to labo%r in te direct prod%ction
process0 -e8erteless e8en te best spokesmen o! classical economy remain more or less in te
grip o! te @orld o! ill%sion @ic teir criticism ad dissol8ed, as cannot be oter@ise !rom a
bo%rgeois standpoint, and t%s tey all !all more or less into inconsistencies, al!-tr%ts and
%nsol8ed contradictions0 3n te oter and, it is H%st as nat%ral !or te act%al agents o! prod%ction
to !eel completely at ome in tese estranged and irrational !orms o! capital I interest, land I rent,
labo%r I @ages, since tese are precisely te !orms o! ill%sion in @ic tey mo8e abo%t and !ind
teir daily occ%pation0 &t is tere!ore H%st as nat%ral tat 8%lgar economy, @ic is no more tan a
didactic, more or less dogmatic, translation o! e8eryday conceptions o! te act%al agents o!
prod%ction, and @ic arranges tem in a certain rational order, so%ld see precisely in tis
trinity, @ic is de8oid o! all inner connection, te nat%ral and ind%bitable lo!ty basis !or its
sallo@ pompo%sness0 5is !orm%la sim%ltaneo%sly corresponds to te interests o! te r%ling
classes by proclaiming te pysical necessity and eternal H%sti!ication o! teir so%rces o! re8en%e
and ele8ating tem to a dogma0
&n o%r description o! o@ prod%ction relations are con8erted into entities and rendered
independent in relation to te agents o! prod%ction, @e lea8e aside te manner in @ic te
interrelations, d%e to te @orld-market, its conH%nct%res, mo8ements o! market-prices, periods o!
credit, ind%strial and commercial cycles, alternations o! prosperity and crisis, appear to tem as
o8er@elming nat%ral la@s tat irresistibly en!orce teir @ill o8er tem, and con!ront tem as
blind necessity0 We lea8e tis aside beca%se te act%al mo8ement o! competition belongs beyond
o%r scope, and @e need present only te inner organisation o! te capitalist mode o! prod%ction,
in its ideal a8erage, as it @ere0
&n preceding !orms o! society tis economic mysti!ication arose principally @it respect to money
and interest-bearing capital0 &n te nat%re o! tings it is excl%ded, in te !irst place, @ere
prod%ction !or te %se-8al%e, !or immediate personal reD%irements, predominates# and, secondly,
+8= ;apter J'4&&&
@ere sla8ery or ser!dom !orm te broad !o%ndation o! social prod%ction, as in antiD%ity and
d%ring te Middle ?ges0 6ere, te domination o! te prod%cers by te conditions o! prod%ction is
concealed by te relations o! dominion and ser8it%de, @ic appear and are e8ident as te direct
moti8e po@er o! te process o! prod%ction0 &n early comm%nal societies in @ic primiti8e
comm%nism pre8ailed, and e8en in te ancient comm%nal to@ns, it @as tis comm%nal society
itsel! @it its conditions @ic appeared as te basis o! prod%ction, and its reprod%ction appeared
as its %ltimate p%rpose0 E8en in te medie8al g%ild system neiter capital nor labo%r appear
%ntrammelled, b%t teir relations are rater de!ined by te corporate r%les, and by te same
associated relations, and corresponding conceptions o! pro!essional d%ty, cra!tsmansip, etc0 3nly
@en te capitalist mode o! prod%ction I /5e man%script breaks o!! ere I 0d.1
Chapter 49. Concerning the Analysis of the
Process of Production
For te p%rposes o! te !ollo@ing analysis @e may lea8e o%t o! consideration te distinction
bet@een price o! prod%ction and 8al%e, since tis distinction disappears altogeter @en, as ere,
te 8al%e o! te total ann%al prod%ct o! labo%r is considered, i0e0, te prod%ct o! te total social
capital0
,ro!it Bpro!it o! enterprise pl%s interestC and rent are noting b%t pec%liar !orms ass%med by
partic%lar parts o! te s%rpl%s-8al%e o! commodities0 5e magnit%de o! s%rpl%s-8al%e is te limit
o! te total siEe o! te parts into @ic it may be di8ided0 ?8erage pro!it pl%s rent are, tere!ore,
eD%al to te s%rpl%s-8al%e0 &t is possible !or part o! te s%rpl%s-labo%r, and t%s s%rpl%s-8al%e,
contained in te commodities, not to take part directly in te eD%alisation o! an a8erage pro!it, so
tat part o! te commodity-8al%e is not expressed at all in its price0 A%t !irst, tis is balanced
eiter by te !act tat te rate o! pro!it increases, @en te commodities sold belo@ teir 8al%e
!orm an element o! te constant capital, or by pro!it and rent being represented by a larger
prod%ct, @en commodities sold belo@ teir 8al%e enter into te portion o! 8al%e cons%med as
re8en%e in te !orm o! articles !or indi8id%al cons%mption0 $econdly, tis is eliminated in te
a8erage mo8ement0 ?t any rate, e8en i! a portion o! s%rpl%s-8al%e not expressed in te price o!
te commodity is lost !or te price !ormation, te s%m o! a8erage pro!it pl%s rent in its normal
!orm can ne8er be larger tan te total s%rpl%s-8al%e, alto%g it may be smaller0 &ts normal !orm
pres%pposes @ages corresponding to te 8al%e o! labo%r-po@er0 E8en monopoly rent, in so !ar as
it is not a ded%ction !rom @ages, i0e0, does not constit%te a special category, m%st al@ays
indirectly be a part o! te s%rpl%s-8al%e0 &! it is not part o! te price excess abo8e te price o!
prod%ction o! te commodity itsel!, o! @ic it is a constit%ent part Bas in di!!erential rentC, or an
excess portion o! te s%rpl%s-8al%e o! te commodity itsel!, o! @ic it is a constit%ent part,
abo8e tat portion o! its o@n s%rpl%s-8al%e meas%red by te a8erage pro!it Bas in absol%te rentC, it
is at least part o! te s%rpl%s-8al%e o! oter commodities, i0e0, o! commodities @ic are
excanged !or tis commodity a8ing a monopoly price0 5e s%m o! a8erage pro!it pl%s gro%nd-
rent can ne8er be greater tan te magnit%de o! @ic tey are components and @ic exists
be!ore tis di8ision0 &t is tere!ore immaterial !or o%r disc%ssion @eter te entire s%rpl%s-8al%e
o! te commodities, i0e0, all te s%rpl%s-labo%r contained in te commodities, is realised in teir
price or not0 5e s%rpl%s-labo%r is not entirely realised i! only !or te reason tat d%e to a
contin%al cange in te amo%nt o! labo%r socially necessary to prod%ce a certain commodity,
res%lting !rom te constant cange in te prod%cti8eness o! labo%r, some commodities are al@ays
prod%ced %nder abnormal conditions and m%st, tere!ore, be sold belo@ teir indi8id%al 8al%e0 ?t
any rate, pro!it pl%s rent eD%al te total realised s%rpl%s-8al%e Bs%rpl%s-labo%rC, and !or p%rposes
o! tis disc%ssion te realised s%rpl%s-8al%e may be eD%ated to all s%rpl%s-8al%e# !or pro!it and
rent are realised s%rpl%s-8al%e, or, generally speaking, te s%rpl%s-8al%e @ic passes into te
prices o! commodities, t%s in practice all te s%rpl%s-8al%e !orming a constit%ent part o! tis
price0
3n te oter and, @ages, @ic !orm te tird speci!ic !orm o! re8en%e, are al@ays eD%al to te
8ariable component part o! capital, i0e0, te component part @ic is laid o%t in p%rcasing li8ing
labo%r-po@er, paying labo%rers rater tan in means o! labo%r0 B5e labo%r @ic is paid in te
expendit%re o! re8en%e is itsel! paid in @ages, pro!it, or rent, and tere!ore does not !orm any
8al%e portion o! commodities by @ic it is paid0 6ence it is not considered in te analysis o!
+8< ;apter J'&J
commodity-8al%e and o! te component parts into @ic it is di8ided0C &t is te materialisation o!
tat portion o! te total @orking-day o! te labo%rer in @ic te 8al%e o! 8ariable capital and
t%s te price o! labo%r is reprod%ced# tat portion o! commodity-8al%e in @ic te labo%rer
reprod%ces te 8al%e o! is o@n labo%r-po@er, or te price o! is labo%r0 5e total @orking-day o!
te labo%rer is di8ided into t@o parts0 3ne portion in @ic e per!orms te amo%nt o! labo%r
necessary to reprod%ce te 8al%e o! is o@n means o! s%bsistence# te paid portion o! is total
labo%r, te portion necessary !or is o@n maintenance and reprod%ction0 5e entire remaining
portion o! te @orking-day, te entire excess D%antity o! labo%r per!ormed abo8e te 8al%e o! te
labo%r realised in is @ages, is s%rpl%s-labo%r, %npaid labo%r, represented in te s%rpl%s-8al%e o!
is total commodity-prod%ction Band t%s in an excess D%antity o! commoditiesC, s%rpl%s-8al%e
@ic in t%rn is di8ided into di!!erently named parts, into pro!it Bpro!it o! enterprise pl%s interestC
and rent0
5e entire 8al%e portion o! commodities, ten, in @ic te total labo%r o! te labo%rers added
d%ring one day, or one year, is realised, te total 8al%e o! te ann%al prod%ct, created by tis
labo%r, is di8ided into te 8al%e o! @ages, into pro!it and into rent0 For tis total labo%r is di8ided
into necessary labo%r, by @ic te labo%rer creates tat 8al%e portion o! te prod%ct @it @ic
e is imsel! paid, tat is, is @ages, and into %npaid s%rpl%s-labo%r, by @ic e creates tat
8al%e portion o! te prod%ct @ic represents s%rpl%s-8al%e and @ic is later di8ided into pro!it
and rent0 ?side !rom tis labo%r, te labo%rer per!orms no labo%r, and aside !rom te total 8al%e
o! te prod%ct, @ic ass%mes te !orms o! @ages, pro!it and rent, e creates no 8al%e0 5e 8al%e
o! te ann%al prod%ct, in @ic te ne@ labo%r added by te labo%rer d%ring te year is
incorporated, is eD%al to te @age, or te 8al%e o! te 8ariable capital pl%s te s%rpl%s-8al%e,
@ic in t%rn is di8ided into pro!it and rent0
5e entire 8al%e portion o! te ann%al prod%ct, ten, @ic te labo%rer creates in te co%rse o!
te year, is expressed in te ann%al 8al%e s%m o! te tree re8en%es, te 8al%e o! @ages, pro!it,
and rent0 E8idently, tere!ore, te 8al%e o! te constant portion o! capital is not reprod%ced in te
ann%ally created 8al%e o! prod%ct, !or te @ages are only eD%al to te 8al%e o! te 8ariable
portion o! capital ad8anced in prod%ction, and rent and pro!it are only eD%al to te s%rpl%s-8al%e,
te excess o! 8al%e prod%ced abo8e te total 8al%e o! ad8anced capital, @ic eD%als te 8al%e o!
te constant capital pl%s te 8al%e o! te 8ariable capital0
&t is completely irrele8ant to te problem to be sol8ed ere tat a portion o! te s%rpl%s-8al%e
con8erted into te !orm o! pro!it and rent is not cons%med as re8en%e, b%t is acc%m%lated0 5at
portion @ic is sa8ed %p as an acc%m%lation !%nd ser8es to create ne@, additional capital, b%t not
to replace te old capital, be it te component part o! old capital laid o%t !or labo%r-po@er or !or
means o! labo%r0 We may tere!ore ass%me ere, !or te sake o! simplicity, tat te re8en%e
passes @olly into indi8id%al cons%mption0 5e di!!ic%lty is t@o-!old0 3n te one and te 8al%e
o! te ann%al prod%ct, in @ic te re8en%es, @ages, pro!it and rent, are cons%med, contains a
portion o! 8al%e eD%al to te portion o! 8al%e o! constant capital %sed %p in it0 &t contains tis
portion o! 8al%e in addition to tat portion @ic resol8es itsel! into @ages and tat @ic
resol8es itsel! into pro!it and rent0 &ts 8al%e is tere!ore R @ages U pro!it U rent U ; Bits constant
portion o! 8al%eC0 6o@ can an ann%ally prod%ced 8al%e, @ic only R @ages U pro!it U rent, b%y a
prod%ct te 8al%e o! @ic R B@ages U pro!it U rentC U ;Q 6o@ can te ann%ally prod%ced 8al%e
b%y a prod%ct @ic as a iger 8al%e tan its o@nQ
3n te oter and, i! @e lea8e aside tat portion o! constant capital @ic did not pass o8er into
te prod%ct, and @ic tere!ore contin%es to exist, alto%g @it red%ced 8al%e, as be!ore te
ann%al prod%ction o! commodities# in oter @ords, temporarily lea8ing o%t o! consideration te
employed, b%t not cons%med, !ixed capital, ten te constant portion o! ad8anced capital is seen
to a8e been @olly trans!erred to te ne@ prod%ct in te !orm o! ra@ and a%xiliary materials,
@ereas a part o! te means o! labo%r as been @olly cons%med and anoter part only partially,
and t%s only a part o! its 8al%e as been cons%med in prod%ction0 5is entire portion o! constant
+83 ;apter J'&J
capital cons%med in prod%ction m%st be replaced in kind0 ?ss%ming all oter circ%mstances,
partic%larly te prod%cti8e po@er o! labo%r, to remain %ncanged, tis portion reD%ires te same
amo%nt o! labo%r !or its replacement as be!ore, i0e0, it m%st be replaced by an eD%i8alent 8al%e0 &!
not, ten reprod%ction itsel! cannot take place on te !ormer scale0 A%t @o is obliged to per!orm
tis labo%r, and @o does per!orm itQ
?s to te !irst di!!ic%lty: Wo is obliged to pay !or te constant portion o! 8al%e contained in te
prod%ct, and @it @atQ I &t is ass%med tat te 8al%e o! constant capital cons%med in prod%ction
reappears as a part o! te 8al%e o! te prod%ct0 5is does not contradict te ass%mptions o! te
second di!!ic%lty0 For it as already been demonstrated in Aook & BKap0 4C /Englis edition: ;0
4&&0I0d01 BK5e 'abo%r ,rocess and te ,rocess o! ,rod%cing $%rpl%s-4al%eLC o@ te old 8al%e
remains sim%ltaneo%sly preser8ed in te prod%ct tro%g te mere addition o! ne@ labo%r,
alto%g tis does not reprod%ce te old 8al%e and does no more tan add to it, creates merely
additional 8al%e# b%t tat tis res%lts !rom labo%r, not in so !ar as it is 8al%e-creating, i0e0, labo%r
in general, b%t in its !%nction as de!inite prod%cti8e labo%r0 5ere!ore, no additional labo%r @as
necessary to preser8e te 8al%e o! te constant portion in te prod%ct in @ic te re8en%e, i0e0,
te entire 8al%e created d%ring te year, is expended0 A%t to be s%re, ne@ additional labo%r is
reD%ired to replace te 8al%e and %se-8al%e o! constant capital cons%med d%ring te preceding
year, @ito%t te replacement o! @ic no reprod%ction at all is possible0
?ll ne@ly added labo%r is represented in te 8al%e ne@ly created d%ring te year, and tis in t%rn
is di8ided into te tree re8en%es: @ages, pro!it and rent0 I 5%s, on te one and, no excess
social labo%r remains !or te replacement o! te cons%med constant capital, @ic m%st be
replaced partially in kind and according to its 8al%e, and partially merely according to its 8al%e
B!or p%re @ear and tear on !ixed capitalC0 3n te oter and, te 8al%e ann%ally created by labo%r,
di8ided into @ages, pro!it and rent, and to be expended in tis !orm, appears not to s%!!ice to pay
!or, or b%y, te constant portion o! capital, @ic m%st be contained, o%tside teir o@n 8al%e, in
te ann%al prod%ct0
&t is seen tat te problem presented ere as already been sol8ed in te consideration o!
reprod%ction o! te total social capital I Aook &&, ,art &&&0 We ret%rn to it ere, in te !irst place,
beca%se s%rpl%s-8al%e ad not been de8eloped tere in its re8en%e !orms: pro!it Bpro!it o!
enterprise pl%s interestC and rent, and co%ld not, tere!ore, be treated in tese !orms# and ten,
also beca%se precisely in te !orm o! @ages, pro!it and rent tere is contained an incredible
bl%nder in analysis, @ic per8ades all political economy since ?dam $mit0
We di8ided all capital tere into t@o big classes: ;lass &, prod%cing means o! prod%ction, and
;lass &&, prod%cing articles o! indi8id%al cons%mption0 5e !act tat certain prod%cts may ser8e
eD%ally @ell bot !or personal cons%mption and as means o! prod%ction Ba orse, grain, etc0C does
not in8alidate te absol%te correctness o! tis di8ision in any @ay0 &t is act%ally no ypotesis, b%t
merely an expression o! !act0 5ake te ann%al prod%ct o! a co%ntry0 3ne portion o! te prod%ct,
@ate8er its ability to ser8e as means o! prod%ction, passes o8er into indi8id%al cons%mption0 &t is
te prod%ct !or @ic @ages, pro!it and rent are expended0 5is prod%ct is te prod%ct o! a
de!inite department o! te social capital0 &t is possible tat tis same capital may also prod%ce
prod%cts belonging to ;lass &0 &n so !ar as it does so, it is not te portion o! tis capital cons%med
in te prod%cts o! ;lass &&, prod%cts belonging act%ally to indi8id%al cons%mption, @ic s%pplies
te prod%cti8ely cons%med prod%cts belonging to ;lass &0 5is entire prod%ct &&, @ic passes
into indi8id%al cons%mption, and !or @ic tere!ore te re8en%e is spent, is te existent !orm o!
te capital cons%med in it pl%s te prod%ced s%rpl%s0 &t is t%s te prod%ct o! a capital in8ested
solely in te prod%ction o! articles o! cons%mption0 ?nd in te same @ay 7epartment & o! te
ann%al prod%ct, @ic ser8es as means o! reprod%ction I ra@ materials and instr%ments o! labo%r
I @ate8er capacity tis prod%ct may oter@ise possess naturaliter to ser8e as means o!
cons%mption, is te prod%ct o! a capital in8ested solely in te prod%ction o! means o! prod%ction0
Ay !ar te greater part o! prod%cts !orming constant capital exists also materially in a !orm in
+82 ;apter J'&J
@ic it cannot pass into indi8id%al cons%mption0 &n so !ar as tis co%ld be done, e0g0, in so !ar as
a !armer co%ld eat is seed-corn, b%tcer is dra%gt animals, etc0, te economic barrier @orks te
same !or im as i! tis portion did not exist in cons%mable !orm0
?s already indicated, @e lea8e o%t o! consideration in bot classes te !ixed portion o! constant
capital, @ic contin%es to exist in kind and, so !ar as its 8al%e is concerned, independently o! te
ann%al prod%ct o! bot classes0
&n ;lass &&, !or te prod%cts o! @ic @ages, pro!it and rent are expended, in sort, te re8en%es
cons%med, te prod%ct itsel! consists o! tree components so !ar as its 8al%e is concerned0 3ne
component is eD%al to te 8al%e o! te constant portion o! capital cons%med in prod%ction# a
second component is eD%al to te 8al%e o! te 8ariable ad8anced capital laid o%t in @ages# !inally,
a tird component is eD%al to te prod%ced s%rpl%s-8al%e, t%s R pro!it U rent0 5e !irst
component o! te prod%ct o! ;lass &&, te 8al%e o! te constant portion o! capital, can be
cons%med neiter by te capitalists o! ;lass &&, nor by te labo%rers o! tis class, nor by te
lando@ners0 &t !orms no part o! teir re8en%es, b%t m%st be replaced in kind and m%st be sold !or
tis to occ%r0 3n te oter and, te oter t@o components o! tis prod%ct are eD%al to te 8al%e
o! te re8en%es created in tis class, R @ages U pro!it U rent0 &n ;lass & te prod%ct consists o! te
same constit%ents, as regards !orm0 A%t tat part @ic ere !orms re8en%e, @ages U pro!it U rent,
in sort, te 8ariable portion o! capital U s%rpl%s-8al%e, is not cons%med ere in te nat%ral !orm
o! prod%cts o! tis ;lass &, b%t in prod%cts o! ;lass &&0 5e 8al%e o! te re8en%es o! ;lass & m%st,
tere!ore, be cons%med in tat portion o! prod%cts o! ;lass && @ic !orms te constant capital o!
&& to be replaced0 5e portion o! te prod%ct o! ;lass && @ic m%st replace its constant capital is
cons%med in its nat%ral !orm by te labo%rers, capitalists and landlords o! ;lass &0 5ey spend
teir re8en%e !or tis prod%ct o! &&0 3n te oter and, te prod%ct o! &, to te extent tat it
represents a re8en%e o! ;lass &, is prod%cti8ely cons%med in its nat%ral !orm by ;lass &&, @ose
constant capital it replaces in kind0 Finally, te %sed-%p constant portion o! capital o! ;lass & is
replaced o%t o! te 8ery prod%cts o! tis class, @ic consist precisely o! means o! labo%r, ra@
and a%xiliary materials, etc0, partly tro%g excange by capitalists o! & among temsel8es, partly
so tat some o! tese capitalists can directly %se teir o@n prod%ct once more as means o!
prod%ction0
'et %s take te pre8io%s sceme BAook &&, ;apter JJ, &&C !or simple reprod%ction:
&0 2,===c U 1,===8 U
1,===s R 6,===
&&0 <,===c U +==8 U
+==s R 3,===
o R *,===
?ccording to tis, te prod%cers and landlords o! && cons%me +==8 U +==s R 1,=== as re8en%e#
<,===c remains to be replaced0 5is is cons%med by te labo%rers, capitalists and tose @o dra@
rent !rom &, @ose income R 1,===8 U 1,===s R <,===0 5e cons%med prod%ct o! && is cons%med as
re8en%e by &, and te portion o! te re8en%e o! & representing an %ncons%mable prod%ct is
cons%med as constant capital by &&0 &t remains ten to acco%nt !or te 2,===c o! &0 5is is replaced
o%t o! te prod%ct o! & itsel!, @ic R 6,===, or rater R 6,=== - <,===# !or tese <,=== a8e
already been con8erted into constant capital !or &&0 &t so%ld be noted, o! co%rse, tat tese
n%mbers a8e been cosen arbitrarily, and so te relation bet@een te 8al%e o! te re8en%es o! &
and te 8al%e o! te constant capital o! && appears arbitrary0 &t is e8ident, o@e8er, tat so !ar as
te process o! reprod%ction is normal and takes place %nder oter@ise eD%al circ%mstances, i0e0,
lea8ing aside te acc%m%lation, te s%m o! te 8al%es o! @ages, pro!it and rent in ;lass & m%st
eD%al te 8al%e o! te constant portion o! capital o! ;lass &&0 3ter@ise eiter ;lass && @ill not be
able to replace its constant capital, or ;lass & @ill not be able to con8ert its re8en%e !rom
%ncons%mable into cons%mable !orm0
+8+ ;apter J'&J
5%s, te 8al%e o! te ann%al commodity-prod%ct, H%st like te 8al%e o! te commodity-prod%ct
prod%ced by some partic%lar in8estment o! capital, and like te 8al%e o! any indi8id%al
commodity, resol8es itsel! into t@o component parts: ?, @ic replaces te 8al%e o! te ad8anced
constant capital, and A, @ic is represented in te !orm o! re8en%e I @ages, pro!it and rent0 5e
latter component part o! 8al%e, A, is co%nterposed to te !ormer ?, in so !ar as ?, %nder oter@ise
eD%al circ%mstances: 1C ne8er ass%mes te !orm o! re8en%e and <C al@ays !lo@s back in te !orm
o! capital, and indeed constant capital0 5e oter component, A, o@e8er, carries @itin itsel!, in
t%rn, an antitesis0 ,ro!it and rent a8e tis in common @it @ages: all tree are !orms o!
re8en%e0 -e8erteless tey di!!er essentially in tat pro!it and rent represent s%rpl%s-8al%e, i0e0,
%npaid labo%r, @ereas @ages represent paid labo%r0 5e portion o! te 8al%e o! te prod%ct
@ic represents @ages expended t%s replaces @ages, and, %nder te conditions ass%med by %s,
@ere reprod%ction takes place on te same scale and %nder te same conditions, is again
recon8erted into @ages, !lo@s back !irst as 8ariable capital, as a component o! te capital tat
m%st be ad8anced ane@ !or reprod%ction0 5is portion as a t@o-!old !%nction0 &t exists !irst in te
!orm o! capital and is excanged as s%c !or labo%r-po@er0 &n te ands o! te labo%rer, it is
trans!ormed into re8en%e @ic e dra@s o%t o! te sale o! is labo%r-po@er, is con8erted as
re8en%e into means o! s%bsistence and cons%med0 5is do%ble process is re8ealed tro%g te
mediation o! money circ%lation0 5e 8ariable capital is ad8anced in money, paid o%t as @ages0
5is is its !irst !%nction as capital0 &t is excanged !or labo%r-po@er and trans!ormed into te
mani!estation o! tis labo%r-po@er, into labo%r0 5is is te process as regards te capitalist0
$econdly, o@e8er: @it tis money te labo%rers b%y a part o! te commodities prod%ced by
tem, @ic is meas%red by tis money, and is cons%med by tem as re8en%e0 &! @e imagine te
circ%lation o! money to be eliminated, ten a part o! te labo%rerGs prod%ct is in te ands o! te
capitalist in te !orm o! a8ailable capital0 6e ad8ances tis part as capital, gi8es it to te labo%rer
!or ne@ labo%r-po@er, @ile te labo%rer cons%mes it as re8en%e directly or indirectly tro%g
excange !or oter commodities0 5at portion o! te 8al%e o! te prod%ct, ten, @ic is destined
in te co%rse o! reprod%ction to be con8erted into @ages, into re8en%e !or te labo%rers, !irst
!lo@s back into te ands o! te capitalist in te !orm o! capital, or more acc%rately 8ariable
capital0 &t is an essential reD%irement tat it so%ld !lo@ back in tis !orm in order !or labo%r as
@age-labo%r, te means o! prod%ction as capital, and te process o! prod%ction itsel! as a
capitalist process, to be contin%ally reprod%ced ane@0
&n order to a8oid %nnecessary di!!ic%lty, one so%ld disting%is gross o%tp%t and net o%tp%t !rom
gross income and net income0
5e gross o%tp%t, or gross prod%ct, is te total reprod%ced prod%ct0 Wit te exception o! te
employed b%t not cons%med portion o! !ixed capital, te 8al%e o! te gross o%tp%t, or gross
prod%ct, eD%als te 8al%e o! capital ad8anced and cons%med in prod%ction, tat is, constant and
8ariable capital pl%s s%rpl%s-8al%e, @ic resol8es itsel! into pro!it and rent0 3r, i! @e consider
te prod%ct o! te total social capital instead o! tat o! an indi8id%al capital, te gross o%tp%t
eD%als te material elements !orming te constant and 8ariable capital, pl%s te material elements
o! te s%rpl%s-prod%ct in @ic pro!it and rent are represented0
5e gross income is tat portion o! 8al%e and tat portion o! te gross prod%ct meas%red by it
@ic remains a!ter ded%cting tat portion o! 8al%e and tat portion o! te prod%ct o! total
prod%ction meas%red by it @ic replaces te constant capital ad8anced and cons%med in
prod%ction0 5e gross income, ten, is eD%al to @ages Bor te portion o! te prod%ct destined to
again become te income o! te labo%rerC U pro!it U rent0 5e net income, on te oter and, is
te s%rpl%s-8al%e, and t%s te s%rpl%s-prod%ct, @ic remains a!ter ded%cting @ages, and @ic,
in !act, t%s represents te s%rpl%s-8al%e realised by capital and to be di8ided @it te landlord,
and te s%rpl%s-prod%ct meas%red by it0
5%s, @e sa@ tat te 8al%e o! eac indi8id%al commodity and te 8al%e o! te total commodity-
prod%ct o! eac indi8id%al capital is di8ided into t@o parts: one replaces only constant capital,
+86 ;apter J'&J
and te oter, alto%g a !raction o! it !lo@s back as 8ariable capital I t%s also !lo@s back in te
form o! capital I ne8erteless is destined to be @olly trans!ormed into gross income, and to
ass%me te !orm o! @ages, pro!it and rent, te s%m o! @ic makes %p te gross income0
F%rtermore, @e sa@ tat te same is tr%e o! te 8al%e o! te ann%al total prod%ct o! a society0 ?
di!!erence bet@een te prod%ct o! te indi8id%al capitalist and tat o! society exists only in so !ar
as: !rom te standpoint o! te indi8id%al capitalist te net income di!!ers !rom te gross income,
!or te latter incl%des te @ages, @ereas te !ormer excl%des tem0 4ie@ing te income o! te
@ole society, national income consists o! @ages pl%s pro!it pl%s rent, t%s, o! te gross income0
A%t e8en tis is an abstraction to te extent tat te entire society, on te basis o! capitalist
prod%ction, bases itsel! on te capitalist standpoint and tereby considers only te income
resol8ed into pro!it and rent as net income0
3n te oter and, te !antasy o! men like $ay, to te e!!ect tat te entire yield, te entire gross
o%tp%t, resol8es itsel! into te net income o! te nation or cannot be disting%ised !rom it, tat
tis distinction tere!ore disappears !rom te national 8ie@point, is b%t te ine8itable and %ltimate
expression o! te abs%rd dogma per8ading political economy since ?dam $mit, tat in te !inal
analysis te 8al%e o! commodities resol8es itsel! completely into income, into @ages, pro!it and
rent0
lxiii

5o compreend, in te case o! eac indi8id%al capitalist, tat a portion o! is prod%ct m%st be
trans!ormed again into capital Be8en aside !rom te expansion o! reprod%ction, or acc%m%lationC,
indeed not only into 8ariable capital, @ic is destined to again become in its t%rn income !or te
labo%rers, t%s a !orm o! re8en%e, b%t also into constant capital, @ic can ne8er be trans!ormed
into re8en%e I s%c discernment is nat%rally extraordinarily easy0 5e simplest obser8ation o! te
process o! prod%ction so@s tis clearly0 5e di!!ic%lty !irst begins as soon as te process o!
prod%ction is 8ie@ed as a @ole0 5e 8al%e o! te entire portion o! te prod%ct @ic is
cons%med as re8en%e in te !orm o! @ages, pro!it and rent Bit is entirely immaterial @eter te
cons%mption is indi8id%al or prod%cti8eC, indeed, completely resol8es itsel! %nder analysis into
te s%m o! 8al%es consisting o! @ages pl%s pro!it pl%s rent, tat is, into te total 8al%e o! te tree
re8en%es, alto%g te 8al%e o! tis portion o! te prod%ct, H%st like tat @ic does not enter into
re8en%e, contains a 8al%e portion R ;, eD%al to te 8al%e o! te constant capital contained in tese
portions, and t%s prima facie cannot be limited by te 8al%e o! te re8en%e0 5is circ%mstance
@ic, on te one and, is a practically irre!%table !act, on te oter and, an eD%ally %ndeniable
teoretical contradiction presents a di!!ic%lty @ic is most easily circ%m8ented by te assertion
tat commodity-8al%e contains anoter portion o! 8al%e, merely appearing to di!!er, !rom te
standpoint o! te indi8id%al capitalist, !rom te portion existing in te !orm o! re8en%e0 5e
prase: tat @ic appears as re8en%e !or one constit%tes capital !or anoter, relie8es one o! te
necessity !or any !%rter re!lection0 A%t o@, ten, te old capital can be replaced @en te 8al%e
o! te entire prod%ct is cons%mable in te !orm o! re8en%e# and o@ te 8al%e o! te prod%ct o!
eac indi8id%al capital can be eD%al to te 8al%e s%m o! te tree re8en%es pl%s ;, constant
capital, @ereas te s%m o! te 8al%es o! te prod%cts o! all capitals is eD%al to te 8al%e s%m o!
te tree re8en%es pl%s = I tis appears, o! co%rse, as an insol%ble riddle and m%st be sol8ed by
declaring tat te analysis is completely incapable o! %nra8elling te simple elements o! price,
and m%st be content to go aro%nd in a 8icio%s circle making a sp%rio%s ad8ance ad infinitum.
5%s, tat @ic appears as constant capital may be resol8ed into @ages, pro!it and rent, b%t te
commodity-8al%es in @ic @ages, pro!it and rent appear, are determined in teir t%rn by @ages,
pro!it and rent, and so !ort ad infinitum0
lxi8

5e !%ndamentally erroneo%s dogma to te e!!ect tat te 8al%e o! commodities in te last
analysis may be resol8ed into @ages U pro!it U rent also expresses itsel! in te proposition tat te
cons%mer m%st %ltimately pay !or te total 8al%e o! te total prod%ct# or also tat te money
circ%lation bet@een prod%cers and cons%mers m%st %ltimately be eD%al to te money circ%lation
+8> ;apter J'&J
bet@een te prod%cers temsel8es B5ookeC# all tese propositions are as !alse as te axiom %pon
@ic tey are based0
5e di!!ic%lties, @ic lead to tis erroneo%s and prima facie abs%rd analysis, are brie!ly tese:
1C 5e !%ndamental relationsip o! constant and 8ariable capital, ence also te nat%re o! s%rpl%s-
8al%e, and tereby te entire basis o! te capitalist mode o! prod%ction, are not %nderstood0 5e
8al%e o! eac partial prod%ct o! capital, eac indi8id%al commodity, contains a portion o! 8al%e R
constant capital, a portion o! 8al%e R 8ariable capital Btrans!ormed into @ages !or labo%rersC, and
a portion o! 8al%e R s%rpl%s-8al%e Blater split into pro!it and rentC0 5%s, o@ is it possible !or te
labo%rer @it is @ages, te capitalist @it is pro!it, te landlord @it is rent, to be able to b%y
commodities, eac o! @ic contains not only one o! tese constit%ent elements, b%t all tree o!
tem# and o@ is it possible !or te s%m o! te 8al%es o! @ages, pro!it and rent, tat is, te tree
so%rces o! re8en%e togeter, to be able to b%y te commodities @ic go to make %p te total
cons%mption o! te recipients o! tese incomes I commodities containing an additional
component o! 8al%e, namely constant capital, o%tside tese tree components o! 8al%eQ 6o@
so%ld tey b%y a 8al%e o! !o%r @it a 8al%e o! treeQ
lx8

We presented o%r analysis in Aook &&, ,art &&&0
<C 5e metod is not grasped @ereby labo%r, in adding a ne@ 8al%e, preser8es te old 8al%e in a
ne@ !orm @ito%t prod%cing tis old 8al%e ane@0
3C 5e pattern o! te process o! reprod%ction is not %nderstood I o@ it appears not !rom te
standpoint o! indi8id%al capital, b%t rater !rom tat o! te total capital# te di!!ic%lty is not
%nderstood o@ it is tat te prod%ct in @ic @ages and s%rpl%s-8al%e, in sort, te entire 8al%e
prod%ced by all te labo%r ne@ly added d%ring te year, is realised, replaces te constant part o!
its 8al%e and yet at te same time resol8es itsel! into 8al%e limited solely by te re8en%es# and
!%rtermore o@ it is tat te constant capital cons%med in prod%ction can be replaced in
s%bstance and 8al%e by ne@ capital, alto%g te total s%m o! ne@ly added labo%r is realised only
in @ages and s%rpl%s-8al%e, and is !%lly represented in te s%m o! te 8al%es o! bot0 &t is
precisely ere tat te main di!!ic%lty lies, in te analysis o! reprod%ction and te relations o! its
8ario%s component parts, bot as concerns teir material caracter and teir 8al%e relationsips0
2C 5o tese di!!ic%lties is added still anoter, @ic increases e8en more as soon as te 8ario%s
component parts o! s%rpl%s-8al%e appear in te !orm o! m%t%ally independent re8en%es0 5is
di!!ic%lty consists in te de!inite designations o! re8en%e and capital intercanging, and altering
teir position, so tat tey seem to be merely relati8e determinations !rom te point o! 8ie@ o! te
indi8id%al capitalist and to disappear @en te total process o! prod%ction is 8ie@ed as a @ole0
For instance, te re8en%e o! te labo%rers and capitalists o! ;lass &, @ic prod%ces constant
capital, replaces in 8al%e and s%bstance te constant capital o! te capitalists o! ;lass &&, @ic
prod%ces articles o! cons%mption0 3ne may, tere!ore, sD%eeEe o%t o! te dilemma by
remonstrating tat @at is re8en%e !or one is capital !or anoter and tat tese designations t%s
a8e noting to do @it te act%al pec%liarities o! te 8al%e components o! commodities0
F%rtermore: commodities @ic are %ltimately destined to !orm te s%bstanti8e elements o!
re8en%e expendit%re, tat is, articles o! cons%mption, pass tro%g 8ario%s stages d%ring te year,
e0g0, @oollen yarn, clot0 &n one stage tey !orm a portion o! constant capital, in te oter tey are
cons%med indi8id%ally, and t%s pass @olly into te re8en%e0 3ne may tere!ore imagine along
@it ?dam $mit tat constant capital is b%t an apparent element o! commodity-8al%e, @ic
disappears in te total pattern0 5%s, a !%rter excange takes place o! 8ariable capital !or
re8en%e0 5e labo%rer b%ys @it is @ages tat portion o! commodities @ic !orm is re8en%e0
&n tis @ay e sim%ltaneo%sly replaces !or te capitalist te money-!orm o! 8ariable capital0
Finally: one portion o! prod%cts @ic !orm constant capital is replaced in kind or tro%g
excange by te prod%cers o! constant capital temsel8es# a process @it @ic te cons%mers
+88 ;apter J'&J
a8e noting to do0 Wen tis is o8erlooked te impression is created tat te re8en%e o!
cons%mers replaces te entire prod%ct, i0e0, incl%ding te constant portion o! 8al%e0
+C ?side !rom te con!%sion @ic te trans!ormation o! 8al%es into prices o! prod%ction brings
abo%t, anoter arises d%e to te trans!ormation o! s%rpl%s-8al%e into di!!erent, special, m%t%ally
independent !orms o! re8en%e applying to te 8ario%s elements o! prod%ction, i0e0, into pro!it and
rent0 &t is !orgotten tat te !act tat te 8al%es o! commodities are te basis, and tat te di8ision
o! tese commodity-8al%es into distinct constit%ent parts, and te !%rter de8elopment o! tese
constit%ents o! 8al%e into !orms o! re8en%e, teir transm%tation into relations o! 8ario%s o@ners o!
di!!erent !actors o! prod%ction to tese indi8id%al components o! 8al%e, teir distrib%tion among
tese o@ners according to de!inite categories and titles, itsel! alters noting in 8al%e
determination and its la@0 P%st as little is te la@ o! 8al%e canged by te circ%mstance tat te
eD%alisation o! pro!it, i0e0, te distrib%tion o! te total s%rpl%s-8al%e among te 8ario%s capitals,
and te obstacles @ic landed property partially Bin absol%te rentC p%ts in te @ay o! tis
eD%alisation, bring abo%t a di8ergence bet@een te reg%lating a8erage prices and te indi8id%al
8al%es o! commodities0 5is again a!!ects merely te addition o! s%rpl%s-8al%e to te 8ario%s
commodity-prices, b%t does not abolis s%rpl%s-8al%e itsel!, nor te total 8al%e o! commodities as
te so%rce o! tese 8ario%s component parts o! price0
5is is te 3uid pro 3uo @ic @e sall consider in te next capter, and @ic is ine8itably
linked @it te ill%sion tat 8al%e arises o%t o! its o@n component parts0 ?nd namely, te 8ario%s
component 8al%es o! te commodity acD%ire independent !orms as re8en%es, and as s%c
re8en%es tey are related back to te partic%lar material elements o! prod%ction as teir so%rces o!
origin instead o! to te 8al%e o! te commodity as teir so%rce0 5ey are act%ally related back to
tose so%rces I o@e8er, not as components o! 8al%e, b%t rater as re8en%es, as components o!
8al%e !alling to te sare o! tese partic%lar categories o! agents in prod%ction: te labo%rer, te
capitalist and te landlord0 A%t ten one migt !ancy tat tese constit%ents o! 8al%e, rater tan
arising o%t o! te di8ision o! commodity-8al%e, con8ersely !orm it instead only tro%g teir
combination, @ic leads to te pretty and 8icio%s circle, @ereby te 8al%e o! commodities
arises o%t o! te s%m o! te 8al%es o! @ages, pro!it and rent, and te 8al%e o! @ages, pro!it and
rent, in its t%rn, is determined by te 8al%e o! commodities, etc0
lx8i

;onsidering reprod%ction in its normal state, only a part o! ne@ly added labo%r is employed !or
prod%ction, and t%s !or replacement o! constant capital# precisely tat part @ic replaces te
constant capital %sed %p in te prod%ction o! articles o! cons%mption, o! material elements o!
re8en%e0 5is is balanced by te !act tat tis constant portion o! ;lass && costs no additional
labo%r0 A%t, no@, tis constant capital Blooking %pon te total process o! reprod%ction, in @ic
ten te abo8e-mentioned eD%alisation o! ;lasses & and && is incl%dedC, not representing a prod%ct
o! ne@ly added labo%r, alto%g tis prod%ct co%ld not be created @ito%t it I tis constant
capital, in te process o! reprod%ction, considered !rom te standpoint o! s%bstance, is exposed to
certain accidents and dangers @ic co%ld decimate it0 BF%rtermore, o@e8er, considered !rom
te point o! 8ie@ o! 8al%e as @ell, it may be depreciated tro%g a cange in te prod%cti8eness
o! labo%r# b%t tis re!ers only to te indi8id%al capitalist0C ?ccordingly, a portion o! te pro!it,
tere!ore o! s%rpl%s-8al%e and tereby also s%rpl%s-prod%ct, in @ic Bas concerns 8al%eC only
ne@ly added labo%r is represented, ser8es as an ins%rance !%nd0 ?nd it matters not @eter tis
ins%rance !%nd is managed by ins%rance companies as a separate b%siness or not0 5is is te sole
portion o! re8en%e @ic is neiter cons%med as s%c nor ser8es necessarily as a !%nd !or
acc%m%lation0 Weter it act%ally ser8es as s%c, or co8ers merely a loss in reprod%ction,
depends %pon cance0 5is is also te only portion o! s%rpl%s-8al%e and s%rpl%s-prod%ct, and t%s
o! s%rpl%s-labo%r, @ic @o%ld contin%e to exist, o%tside o! tat portion ser8ing !or acc%m%lation,
and ence expansion o! te process o! reprod%ction, e8en a!ter te abolition o! te capitalist mode
o! prod%ction0 5is, o! co%rse, pres%pposes tat te portion reg%larly cons%med by direct
prod%cers does not remain limited to its present minim%m0 ?part !rom s%rpl%s-labo%r !or tose
+8* ;apter J'&J
@o on acco%nt o! age are not yet, or no longer, able to take part in prod%ction, all labo%r to
s%pport tose @o do not @ork @o%ld cease0 &! @e tink back to te beginnings o! society, @e
!ind no prod%ced means o! prod%ction, ence no constant capital, te 8al%e o! @ic co%ld pass
into te prod%ct, and @ic, in reprod%ction on te same scale, @o%ld a8e to be replaced in kind
o%t o! te prod%ct and to a degree meas%red by its 8al%e0 A%t -at%re tere directly pro8ides te
means o! s%bsistence, @ic need not !irst be prod%ced0 -at%re tereby also gi8es to te sa8age
@o as b%t !e@ @ants to satis!y te time, not to %se te as yet non-existent means o! prod%ction
in ne@ prod%ction, b%t to trans!orm, alongside te labo%r reD%ired to appropriate nat%rally
existing means o! prod%ction, oter prod%cts o! -at%re into means o! prod%ction: bo@s, stone
kni8es, boats, etc0 5is process among sa8ages, considered merely !rom te s%bstanti8e side,
corresponds to te recon8ersion o! s%rpl%s-labo%r into ne@ capital0 &n te process o!
acc%m%lation, te con8ersion o! s%c prod%cts o! excess labo%r into capital obtains contin%ally#
and te circ%mstance tat all ne@ capital arises o%t o! pro!it, rent, or oter !orms o! re8en%e, i0e0,
o%t o! s%rpl%s-labo%r, leads to te mistaken idea tat all 8al%e o! commodities arises !rom some
re8en%e0 5is recon8ersion o! pro!it into capital so@s rater %pon closer analysis tat,
con8ersely, te additional labo%r I @ic is al@ays represented in te !orm o! re8en%e I does not
ser8e !or te maintenance, or reprod%ction respecti8ely, o! te old capital 8al%e, b%t !or te
creation o! ne@ excess capital so !ar as it is not cons%med as re8en%e0
5e @ole di!!ic%lty arises !rom te !act tat all ne@ly added labo%r, in so !ar as te 8al%e created
by it is not resol8ed into @ages, appears as pro!it I interpreted ere as a !orm o! s%rpl%s-8al%e in
general I i0e0, as a 8al%e @ic costs te capitalist noting and @ic, o! co%rse, tere!ore does
not a8e to replace !or im anyting ad8anced, any capital @ate8er0 5is 8al%e t%s exists in te
!orm o! a8ailable additional @ealt, in sort, !rom te 8ie@point o! te indi8id%al capitalist, in te
!orm o! is re8en%e0 A%t tis ne@ly created 8al%e can H%st as @ell be cons%med prod%cti8ely as
indi8id%ally, eD%ally @ell as capital or re8en%e0 ?s a conseD%ence o! its nat%ral !orm, some o! it
m%st be prod%cti8ely cons%med0 &t is, tere!ore, e8ident tat te ann%ally added labo%r creates
capital as @ell as re8en%e# as becomes e8ident in te process o! acc%m%lation0 6o@e8er, te
portion o! labo%r-po@er employed in te creation o! ne@ capital Bt%s analogo%s to tat portion o!
te @orking-day employed by a sa8age, not !or acD%iring s%bsistence, b%t to !asion tools @it
@ic to acD%ire is s%bsistenceC becomes in8isible in tat te entire prod%ct o! s%rpl%s-labo%r
!irst appears in te !orm o! pro!it# a designation @ic indeed as noting to do @it tis s%rpl%s-
prod%ct itsel!, b%t re!ers merely to te indi8id%al relation o! te capitalist to te s%rpl%s-8al%e
pocketed by im0 &n !act, te s%rpl%s-8al%e created by te labo%rer is di8ided into re8en%e and
capital# i0e0, into articles o! cons%mption and additional means o! prod%ction0 A%t !ormer constant
capital taken o8er !rom te pre8io%s year Blea8ing aside te portion impaired and t%s pro tanto
destroyed, t%s so !ar as it does not a8e to be reprod%ced I and s%c dist%rbances in te process
o! reprod%ction !all %nder ins%ranceC is not reprod%ced as concerns 8al%e by te ne@ly added
labo%r0
We see, !%rtermore, tat a portion o! te ne@ly added labo%r is contin%ally absorbed in te
reprod%ction and replacement o! cons%med constant capital, alto%g tis ne@ly added labo%r
resol8es itsel! solely into re8en%e, into @ages, pro!it and rent0 A%t it is tereby o8erlooked 1C tat
one 8al%e portion o! te prod%ct o! tis labo%r is no prod%ct o! tis ne@ additional labo%r, b%t
rater pre-existing and cons%med constant capital# tat te portion o! te prod%ct in @ic tis
part o! 8al%e appears is t%s also not trans!ormed into re8en%e, b%t replaces te means o!
prod%ction o! tis constant capital in kind# <C tat te portion o! 8al%e in @ic tis ne@ly added
labo%r act%ally appears is not cons%med as re8en%e in kind, b%t replaces te constant capital in
anoter spere, @ere it is trans!ormed into a nat%ral !orm, in @ic it may be cons%med as
re8en%e, b%t @ic in its t%rn is again not entirely a prod%ct o! ne@ly added labo%r0
&n so !ar as reprod%ction obtains on te same scale, e8ery cons%med element o! constant capital
m%st be replaced in kind by a ne@ specimen o! te same kind, i! not in D%antity and !orm, ten at
+*= ;apter J'&J
least in e!!ecti8eness0 &! te prod%cti8eness o! labo%r remains te same, ten tis replacement in
kind implies replacing te same 8al%e @ic te constant capital ad in its old !orm0 A%t so%ld
te prod%cti8eness o! labo%r increase, so tat te same material elements may be reprod%ced @it
less labo%r, ten a smaller portion o! te 8al%e o! te prod%ct can completely replace te constant
part in kind0 5e excess may ten be employed to !orm ne@ additional capital or a larger portion
o! te prod%ct may be gi8en te !orm o! articles o! cons%mption, or te s%rpl%s-labo%r may be
red%ced0 3n te oter and, so%ld te prod%cti8eness o! labo%r decrease, ten a larger portion o!
te prod%ct m%st be %sed !or te replacement o! te !ormer capital, and te s%rpl%s-prod%ct
decreases0
5e recon8ersion o! pro!it, or generally o! any !orm o! s%rpl%s-8al%e, into capital so@s I lea8ing
aside te istorically de!ined economic !orm and considering it merely as te simple !ormation o!
ne@ means o! prod%ction I tat te sit%ation still pre8ails @ereby te labo%rer per!orms labo%r
to prod%ce means o! prod%ction beyond te labo%r !or acD%iring is immediate means o!
s%bsistence0 5rans!ormation o! pro!it into capital is no more tan employing a portion o! excess
labo%r to !orm ne@, additional means o! prod%ction0 5at tis takes place in te sape o! a
trans!ormation o! pro!it into capital signi!ies merely tat it is te capitalist rater tan te labo%rer
@o disposes o! excess labo%r0 5at tis excess labo%r m%st !irst pass tro%g a stage in @ic it
appears as re8en%e B@ereas, e0g0, in te case o! a sa8age it appears as excess labo%r directly
destined !or te prod%ction o! means o! prod%ctionC means simply tat tis labo%r, or its prod%ct,
is appropriated by te non-@orker0 6o@e8er, @at is act%ally trans!ormed into capital is not pro!it
as s%c0 5rans!ormation o! s%rpl%s-8al%e into capital signi!ies merely tat te s%rpl%s-8al%e and
s%rpl%s-prod%ct are not cons%med indi8id%ally as re8en%e by te capitalist0 A%t, @at is act%ally
so trans!ormed is 8al%e, materialised labo%r, or te prod%ct in @ic tis 8al%e is directly
mani!ested, or !or @ic it is excanged a!ter a8ing been pre8io%sly trans!ormed into money0
?nd @en te pro!it is trans!ormed back into capital, tis de!inite !orm o! s%rpl%s-8al%e, or pro!it,
does not !orm te so%rce o! te ne@ capital0 5e s%rpl%s-8al%e is tereby merely canged !rom
one !orm into anoter0 A%t it is not tis cange o! !orm @ic t%rns it into capital0 &t is te
commodity and its 8al%e @ic no@ !%nction as capital0 6o@e8er, tat te 8al%e o! te
commodity is not paid !or I and only by tis means does it become s%rpl%s-8al%e I is D%ite
irrele8ant !or te materialisation o! labo%r, te 8al%e itsel!0
5e mis%nderstanding is expressed in 8ario%s !orms0 For instance, tat te commodities @ic
compose te constant capital also contain elements o! @ages, pro!it and rent0 3r, on te oter
and, tat @at is re8en%e !or te one is capital !or anoter, and tat tere!ore tese are b%t
s%bHecti8e relations0 5%s te yarn o! te spinner contains a portion o! 8al%e representing pro!it
!or im, $o%ld te @ea8er b%y te yarn, e realises te pro!it o! te spinner, b%t !or imsel! tis
yarn is merely a part o! is constant capital0
?side !rom te pre8io%s remarks made concerning te relations bet@een re8en%e and capital, te
!ollo@ing is to be noted: 5at @ic, as regards 8al%e, passes along @it te yarn as a constit%ent
element into te capital o! te @ea8er, is te 8al%e o! te yarn0 &n @at manner te parts o! tis
8al%e a8e been resol8ed !or te spinner imsel! into capital and re8en%e, or, in oter @ords, into
paid and %npaid labo%r, is completely irrele8ant !or te 8al%e determination o! te commodity
itsel! Baside !rom modi!ications tro%g te a8erage pro!itC0 Aack o! tis still l%rks te idea tat
te pro!it, or s%rpl%s-8al%e in general, is an excess abo8e te 8al%e o! te commodity, @ic can
only be made by an extra carge, m%t%al ceating, or gain tro%g selling0 Wen te price o!
prod%ction is paid, or e8en te 8al%e o! te commodity, te component 8al%es o! te commodity
@ic appear to te seller in te !orm o! re8en%e are nat%rally also paid0 Monopoly prices, o!
co%rse, are not re!erred to ere0
$econdly, it is D%ite correct to say tat te component parts o! commodities @ic make %p te
constant capital, like any oter commodity-8al%e, may be red%ced to portions o! 8al%e @ic
resol8e temsel8es !or te prod%cers and te o@ners o! te means o! prod%ction into @ages,
+*1 ;apter J'&J
pro!it and rent0 5is is merely a capitalist !orm o! expression !or te !act tat all commodity-8al%e
is b%t te meas%re o! te socially necessary labo%r contained in a commodity0 A%t it as already
been so@n in Aook & tat tis no@ise pre8ents te commodity-prod%ct o! any capital !rom being
split into separate parts, o! @ic one represents excl%si8ely te constant portion o! capital,
anoter te 8ariable portion o! capital, and a tird solely s%rpl%s-8al%e0
$torc expresses te opinion o! many oters @en e says:
K5e saleable prod%cts @ic make %p te national
re8en%e m%st be considered in political economy in
t@o di!!erent @ays: relati8e to indi8id%als as 8al%es,
and relati8e to te nation as goods# !or te re8en%e o!
a nation is not appraised, like tat o! an indi8id%al, by
its 8al%e, b%t by its %tility or by te @ants @ic it can
satis!y0L BConsid7rations sur le revenu national, p0
1*0C
&n te !irst place, it is a !alse abstraction to regard a nation @ose mode o! prod%ction is based
%pon 8al%e, and !%rtermore is capitalistically organised, as an aggregate body @orking merely
!or te satis!action o! te national @ants0
$econdly, a!ter te abolition o! te capitalist mode o! prod%ction, b%t still retaining social
prod%ction, te determination o! 8al%e contin%es to pre8ail in te sense tat te reg%lation o!
labo%r-time and te distrib%tion o! social labo%r among te 8ario%s prod%ction gro%ps, %ltimately
te book-keeping encompassing all tis, become more essential tan e8er0
Chapter 50. Illusions Created By Competition
&t as been so@n tat te 8al%e o! commodities, or te price o! prod%ction reg%lated by teir
total 8al%e, resol8es itsel! into:
1C ? portion o! 8al%e replacing constant capital, or representing past labo%r, @ic @as %sed %p in
te !orm o! means o! prod%ction in making te commodity# in a @ord, te 8al%e, or price, @ic
tese means o! prod%ction carried into te prod%ction process o! te commodities0 We are not
re!erring at all ere to indi8id%al commodities, b%t to commodity-capital, tat is, te !orm in
@ic te prod%ct o! te capital d%ring a de!inite period o! time, say a year, mani!ests itsel!# te
indi8id%al commodity !orms one element o! commodity-capital, @ic, moreo8er, so !ar as its
8al%e is concerned, resol8es itsel! into te same analogo%s constit%ents0
<C 5e portion o! 8al%e representing 8ariable capital, @ic meas%res te income o! te labo%rer
and is trans!ormed into @ages !or im# i0e0, te labo%rer as reprod%ced tese @ages in tis
8ariable portion o! 8al%e# in sort, te portion o! 8al%e @ic represents te paid portion o! ne@
labo%r added to te abo8e constant portion in te prod%ction o! te commodities0
3C $%rpl%s-8al%e, i0e0, te portion o! 8al%e o! te prod%ced commodities in @ic te %npaid
labo%r, or s%rpl%s-labo%r, is incorporated0 5is last portion o! 8al%e, in its t%rn, ass%mes te
independent !orms @ic are at te same time !orms o! re8en%e: te !orms o! pro!it on capital
Binterest on capital as s%c and pro!it o! enterprise on capital as !%nctioning capitalC and gro%nd-
rent, @ic is claimed by te o@ner o! te land participating in te prod%ction process0 5e
components <C and 3C, tat is, te portion o! 8al%e @ic al@ays ass%mes te re8en%e !orms o!
@ages Bo! co%rse only a!ter te latter a8e !irst gone tro%g te !orm o! 8ariable capitalC, pro!it
and rent, is disting%ised !rom te constant component 1C by te !act tat in it is embodied tat
entire 8al%e in @ic te ne@ additional labo%r added to te constant part, to te means o!
prod%ction o! te commodities, is materialised0 -o@, apart !rom te constant portion, it is correct
to say tat te 8al%e o! a commodity, i0e0, to te extent tat it represents ne@ly added labo%r,
contin%ally resol8es itsel! into tree parts, @ic constit%te tree !orms o! re8en%e, namely,
@ages, pro!it and rent,
lx8ii
te respecti8e magnit%des o! @ose 8al%e, tat is, te aliD%ot portions
@ic tey constit%te in te total 8al%e, are determined by 8ario%s speci!ic la@s de8eloped abo8e0
A%t, it @o%ld be a mistake to state te con8erse, namely, tat te 8al%e o! @ages, rate o! pro!it and
rate o! rent !orm independent constit%ent elements o! 8al%e, @ose syntesis gi8es rise to te
8al%e o! commodities, apart !rom te constant component# in oter @ords, it @o%ld be a mistake
to say tat tey are constit%ent elements o! te 8al%e o! commodities, or o! te price o!
prod%ction0
lx8iii

5e di!!erence is easily seen0
'et %s ass%me tat te 8al%e o! te prod%ct o! a capital o! +== is eD%al to 2==c U 1==8 U 1+=s R
6+=# let te 1+=s in t%rn, be di8ided into >+ pro!it U >+ rent0 We @ill also ass%me, in order to
!orestall %seless di!!ic%lties, tat tis is a capital o! a8erage composition, so tat its price o!
prod%ction and its 8al%e coincide# tis coincidence al@ays takes place @ene8er te prod%ct o!
s%c an indi8id%al capital may be considered as te prod%ct o! some portion I corresponding to
its magnit%de I o! te total capital0
6ere @ages, meas%red by 8ariable capital, !orm <=T o! te ad8anced capital# s%rpl%s-8al%e,
calc%lated on te total capital, !orms 3=T, namely 1+T pro!it and 1+T rent0 5e entire 8al%e
component o! te commodity representing te ne@ly added labo%r is eD%al to 1==8 U 1+=s R <+=0
&ts magnit%de does not depend %pon its di8ision into @ages, pro!it and rent0 We see !rom te
+*3 ;apter '
relation o! tese parts to eac oter tat labo%r-po@er, @ic is paid @it 1== in money, say V1==,
as s%pplied a D%antity o! labo%r represented by money to te amo%nt o! V<+=0 We see !rom tis
tat te labo%rer per!ormed 1Z times as m%c s%rpl%s-labo%r as e did labo%r !or imsel!0 &! te
@orking-day R 1= o%rs, ten e @orked 2 o%rs !or imsel! and 6 o%rs !or te capitalist0
5ere!ore, te labo%r o! te labo%rers paid @it V1== is expressed in a money-8al%e o! V<+=0
?part !rom tis 8al%e o! V<+=, tere is noting to di8ide bet@een labo%rer and capitalist, bet@een
capitalist and landlord0 &t is te total 8al%e ne@ly added to te 8al%e o! te means o! prod%ction,
i0e0, 2==0 5e speci!ic commodity-8al%e o! <+= t%s prod%ced and determined by te D%antity o!
labo%r materialised in it constit%tes te limit, tere!ore, !or te di8idends @ic te labo%rer,
capitalist and landlord @ill be able to dra@ !rom tis 8al%e in te !orm o! re8en%e I @ages, pro!it
and rent0
'et %s ass%me tat a capital o! te same organic composition, tat is, te same proportion
bet@een employed li8ing labo%r-po@er and constant capital set in motion, is compelled to pay
V1+= instead o! V1== !or te same labo%r-po@er @ic sets in motion te constant capital o! 2==0
?nd let %s !%rter ass%me tat pro!it and rent sare in te s%rpl%s-8al%e in di!!erent proportions0
$ince @e a8e ass%med tat te 8ariable capital o! V1+= sets te same D%antity o! labo%r in
motion as did te 8ariable capital o! V1==, te ne@ly prod%ced 8al%e @o%ld R <+=, as be!ore, and
te 8al%e o! te total prod%ct @o%ld be 6+=, also as be!ore, b%t @e @o%ld ten a8e 2==c U 1+=8 U
1==s and tese 1==s @o%ld di8ide, say, into 2+ pro!it and ++ rent0 5e proportion in @ic te
ne@ly prod%ced total 8al%e @o%ld be distrib%ted as @ages, pro!it and rent @o%ld no@ be 8ery
di!!erent# similarly, te magnit%de o! te ad8anced total capital @o%ld be di!!erent, alto%g it
only sets te same total D%antity o! labo%r in motion0 Wages @o%ld amo%nt to <> 3N11T, pro!it I
8 <N11T, and rent I 1=T o! te ad8anced capital# t%s, te total s%rpl%s-8al%e @o%ld be some@at
o8er 18T0
?s a res%lt o! te increase in @ages, te %npaid portion o! total labo%r @o%ld be di!!erent and
tereby te s%rpl%s-8al%e too0 &! te @orking-day contained 1= o%rs, te labo%rer @o%ld a8e
@orked 6 o%rs !or imsel! and only 2 o%rs !or te capitalist0 5e proportions o! pro!it and rent
@o%ld also be di!!erent# te red%ced s%rpl%s-8al%e @o%ld be di8ided in a di!!erent proportion
bet@een te capitalist and te landlord0 Finally, since te 8al%e o! te constant capital @o%ld a8e
remained te same and te 8al%e o! te ad8anced 8ariable capital @o%ld a8e risen, te red%ced
s%rpl%s-8al%e @o%ld express itsel! in a still more red%ced rate o! gross pro!it, by @ic @e mean
in tis case te ratio o! te total s%rpl%s-8al%e to te total ad8anced capital0
5e cange in te 8al%e o! @ages, in te rate o! pro!it, and in te rate o! rent, @ate8er te e!!ect
o! te la@s reg%lating te proportions o! tese parts to eac oter, co%ld only mo8e @itin te
limits set by te ne@ly prod%ced commodity-8al%e o! <+=0 ?n exception co%ld only take place i!
rent so%ld be based on a monopoly price0 5is @o%ld no@ise alter te la@, b%t merely
complicate te analysis0 For i! @e consider only te prod%ct itsel! in tis case, ten only te
di8ision o! s%rpl%s-8al%e @o%ld be di!!erent0 A%t i! @e consider its relati8e 8al%e as compared
@it oter commodities, ten @e so%ld !ind solely tis di!!erence I tat a portion o! te s%rpl%s-
8al%e ad been trans!erred !rom tem to tis partic%lar commodity0
5o recapit%late:
4al%e o! te ,rod%ct -e@
4al%e
)ate o!
$%rpl%s
4al%e
)ate o!
:ross
,ro!it
First ;ase: 2==c U 1==8 U
1+=+ R 6+=
<+= 1+=T 3=T
$econd 2==c U 1+=8 U <+= 66WT 18 <N11T
+*2 ;apter '
;ase: 1==s R 6+=
&n te !irst place, te s%rpl%s-8al%e !alls one-tird o! @at it @as, i0e0, !rom 1+= to 1==0 5e rate o!
pro!it !alls by a little more tan one-tird, i0e0, !rom 3=T to 18T, beca%se te red%ced s%rpl%s-
8al%e m%st be calc%lated on an increased total ad8anced capital0 A%t it by no means !alls in te
same proportion as te rate o! s%rpl%s-8al%e0 5e latter !alls !rom 1+=N1== to 1==N1+=, tat is,
!rom 1+=T to 66WT, @ereas te rate o! pro!it only !alls !rom 1+=N+== to 1==N++=, or !rom 3=T
to 18 <N11T0 5e rate o! pro!it, ten, !alls proportionately more tan te mass o! s%rpl%s-8al%e,
b%t less tan te rate o! s%rpl%s-8al%e0 We !ind, !%rtermore, tat 8al%e, as @ell as mass o!
prod%cts, remains te same, so long as te same D%antity o! labo%r is employed, alto%g te
ad8anced capital as increased d%e to te a%gmentation o! its 8ariable component0 5is increase
in ad8anced capital @o%ld indeed be 8ery m%c !elt by a capitalist %ndertaking a ne@ enterprise0
A%t considering reprod%ction as a @ole, a%gmentation o! te 8ariable capital merely means tat
a larger portion o! te 8al%e ne@ly created by ne@ly added labo%r is con8erted into @ages, and
t%s, in te !irst place, into 8ariable capital instead o! into s%rpl%s-8al%e and s%rpl%s-prod%ct0 5e
8al%e o! te prod%ct t%s remains te same, beca%se it is limited on te one and by te 8al%e o!
te constant capital R 2==, and on te oter by te n%mber <+=, in @ic te ne@ly added labo%r
is represented0 Aot, o@e8er, remain %naltered0 5is prod%ct @o%ld, as be!ore, represent te
same amo%nt o! %se-8al%e in te same magnit%de o! 8al%e, to te extent tat it @o%ld itsel! again
enter into te constant capital# t%s, te same mass o! elements o! constant capital @o%ld retain
te same 8al%e0 5e matter @o%ld be di!!erent i! @ages @ere to rise not beca%se te labo%rer
recei8ed a larger sare o! is o@n labo%r, b%t i! e recei8ed a larger portion o! is o@n labo%r
beca%se te labo%r prod%cti8ity ad decreased0 &n tis case, te total 8al%e in @ic te same
labo%r, paid and %npaid, @o%ld be incorporated, @o%ld remain te same0 A%t te mass o! prod%cts
in @ic tis D%antity o! labo%r @o%ld be incorporated @o%ld a8e decreased so tat te price o!
eac aliD%ot portion o! tis prod%ct @o%ld rise, beca%se eac portion @o%ld contain more labo%r0
5e increased @ages o! 1+= @o%ld not represent any more prod%ct tan te @ages o! 1== did
be!ore# te red%ced s%rpl%s-8al%e o! 1== @o%ld represent merely W te !ormer prod%ct, i0e0, 66W
T o! te mass o! %se-8al%es !ormerly represented by 1==0 &n tis case, te constant capital @o%ld
also become dearer to te extent tat tis prod%ct @o%ld enter into it0 6o@e8er, tis @o%ld not be
te res%lt o! te increase in @ages, b%t rater te increase in @ages @o%ld be a res%lt o! te
increase in te price o! commodities and a res%lt o! te diminised prod%cti8ity o! te same
D%antity o! labo%r0 &t appears ere as to%g te increase in @ages ad made te prod%ct dearer#
o@e8er, tis increase is not te ca%se, b%t rater te res%lt, o! a cange in te 8al%e o! te
commodities, d%e to te decreased prod%cti8ity o! labo%r0
3n te oter and, all oter circ%mstances remaining te same, i0e0, i! te same D%antity o!
employed labo%r is still represented by <+=, ten, i! te 8al%e o! te means o! prod%ction
employed so%ld rise or !all, te 8al%e o! te same D%antity o! prod%cts @o%ld rise or !all by te
same magnit%de0 2+=c U 1==8 U 1+=s gi8es a prod%ct-8al%e R >==# b%t 3+=c U 1==8 U 1+=s gi8es a
8al%e !or te same D%antity o! prod%cts o! only 6==, as against a !ormer 6+=0 6ence, i! te
ad8anced capital, set in motion by te same D%antity o! labo%r, increases or decreases, ten te
8al%e o! te prod%ct rises or !alls, oter circ%mstances remaining te same, i! te increase or
decrease in ad8anced capital is d%e to a cange in te magnit%de o! te 8al%e o! te constant
portion o! capital0 3n te oter and, te 8al%e o! te prod%ct remains %ncanged i! te increase
or decrease in ad8anced capital is ca%sed by a cange in te magnit%de o! te 8al%e o! te
8ariable portion o! capital, ass%ming te labo%r prod%cti8ity remains te same0 &n te case o! te
constant capital, te increase or decrease in its 8al%e is not compensated !or by any opposite
mo8ement0 A%t in te case o! te 8ariable capital, ass%ming te labo%r prod%cti8ity remains te
same, an increase or decrease in its 8al%e is compensated !or by te opposite mo8ement on te
part o! te s%rpl%s-8al%e, so tat te 8al%e o! te 8ariable capital pl%s te s%rpl%s-8al%e, i0e0, te
+*+ ;apter '
8al%e ne@ly added by labo%r to te means o! prod%ction and ne@ly incorporated in te prod%ct,
remains te same0
A%t i! te increase or decrease in te 8al%e o! te 8ariable capital or @ages is d%e to a rise or !all
in te price o! commodities, i0e0, a decrease or increase in te prod%cti8eness o! te labo%r
employed by tis in8estment o! capital ten te 8al%e o! te prod%ct is a!!ected0 A%t te rise or
!all in @ages in tis case is not a ca%se, b%t merely an e!!ect0
3n te oter and, ass%ming te constant capital in te abo8e ill%stration to remain R 2==c, i! te
cange !rom 1==8 U 1+=s to 1+=8 U 1==s, i0e0, te increase in 8ariable capital, so%ld be d%e to a
decrease in te prod%cti8eness o! labo%r, not in tis partic%lar branc o! ind%stry, say, cotton
spinning, b%t peraps in agric%lt%re @ic pro8ides te labo%rerGs !oodst%!!s, i0e0, d%e to a rise in
te price o! tese !oodst%!!s, ten te 8al%e o! te prod%ct @o%ld remain %ncanged0 5e 8al%e o!
6+= @o%ld still be represented by te same D%antity o! cotton yarn0
&t !ollo@s, !%rtermore, !rom te abo8e: &! te decrease in te expendit%re o! constant capital is
d%e to economies, etc0, in lines o! prod%ction @ose prod%cts enter into te labo%rerGs
cons%mption, ten tis, H%st like te direct increase in te prod%cti8ity o! te employed labo%r
itsel!, may lead to a decrease in @ages d%e to a ceapening o! te means o! s%bsistence o! te
labo%rer, and may lead, tere!ore, to an increase in te s%rpl%s-8al%e# so tat te rate o! pro!it in
tis case @o%ld gro@ !or t@o reasons, namely, on te one and, beca%se te 8al%e o! te constant
capital decreases, and on te oter and, beca%se te s%rpl%s-8al%e increases0 &n o%r consideration
o! te trans!ormation o! s%rpl%s-8al%e into pro!it, @e ass%med tat @ages do not !all, b%t remain
constant, beca%se tere @e ad to in8estigate te !l%ct%ations in te rate o! pro!it, independent o!
te canges in te rate o! s%rpl%s-8al%e0 Moreo8er, te la@s de8eloped tere are general ones, and
also apply to in8estments o! capital @ose prod%cts do not enter into te labo%rerGs cons%mption,
@ereby canges in te 8al%e o! te prod%ct, tere!ore, are @ito%t in!l%ence %pon te @ages0
5%s, te separation and resol%tion o! ne@ 8al%e ann%ally added by ne@ labo%r to te means o!
prod%ction, or to te constant part o! capital, into te 8ario%s !orms o! re8en%e, 8iE0, @ages, pro!it
and rent, do not at all alter te limits o! te 8al%e itsel!, te total 8al%e to be distrib%ted among
tese 8ario%s categories# any more tan a cange in te m%t%al relations o! tese indi8id%al parts
can cange teir total, tis gi8en magnit%de o! 8al%e0 5e gi8en n%mber 1== al@ays remains te
same, @eter it is di8ided into += U +=, or into <= U >= U 1=, or into 2= U 3= U 3=0 5e portion o!
te 8al%e o! te prod%ct @ic is resol8ed into tese re8en%es is determined, H%st like te constant
portion o! te 8al%e o! capital, by te 8al%e o! te commodities, i0e0, by te D%antity o! labo%r
incorporated in tem in eac case0 :i8en !irst, ten, is te D%antity o! 8al%e o! commodities to be
di8ided among @ages, pro!it and rent# in oter @ords, te absol%te limit o! te s%m o! te portions
o! 8al%e o! tese commodities0 $econdly, as concerns te indi8id%al categories temsel8es, teir
a8erage and reg%lating limits are like@ise gi8en0 Wages !orm te basis in tis limitation0 5ey are
reg%lated on te one and by a nat%ral la@# teir lo@er limit is determined by te pysical
minim%m o! means o! s%bsistence reD%ired by te labo%rer !or te conser8ation o! is labo%r-
po@er and !or its reprod%ction# i0e0, by a de!inite D%antity o! commodities0 5e 8al%e o! tese
commodities is determined by te labo%r-time reD%ired !or teir reprod%ction# and t%s by te
portion o! ne@ labo%r added to te means o! prod%ction, or by te portion o! eac @orking-day
reD%ired by te labo%rer !or te prod%ction and reprod%ction o! an eD%i8alent !or te 8al%e o!
tese necessary means o! s%bsistence0 For instance, i! is a8erage daily means o! s%bsistence
a8e a 8al%e R 6 o%rs o! a8erage labo%r, ten e m%st @ork on an a8erage six o%rs per day !or
imsel!0 5e act%al 8al%e o! is labo%r-po@er de8iates !rom tis pysical minim%m# it di!!ers
according to climate and le8el o! social de8elopment# it depends not merely %pon te pysical,
b%t also %pon te istorically de8eloped social needs, @ic become second nat%re0 A%t in e8ery
co%ntry, at a gi8en time, tis reg%lating a8erage @age is a gi8en magnit%de0 5e 8al%e o! all oter
+*6 ;apter '
re8en%e t%s as its limit0 &t is al@ays eD%al to te 8al%e in @ic te total @orking-day B@ic
coincides in te present case @it te a8erage @orking-day, since it comprises te total D%antity
o! labo%r set in motion by te total social capitalC is incorporated min%s te portion o! te
@orking-day incorporated in @ages0 &ts limit is tere!ore determined by te limit o! te 8al%e in
@ic te %npaid labo%r is expressed, tat is, by te D%antity o! tis %npaid labo%r0 Wile te
portion o! te @orking-day @ic is reD%ired by te labo%rer !or te reprod%ction o! te 8al%e o!
is @ages !inds its %ltimate limit in te pysical minim%m o! @ages, te oter portion o! te
@orking-day, in @ic s%rpl%s-labo%r is incorporated, and t%s te portion o! 8al%e representing
s%rpl%s-8al%e, !inds its limit in te pysical maxim%m o! te @orking-day, i0e0, in te total
D%antity o! daily labo%r-time d%ring @ic te labo%rer can, in general, be acti8e and still
preser8e and reprod%ce is labo%r-po@er0 $ince @e are ere concerned @it te distrib%tion o! te
8al%e @ic represents te total labo%r ne@ly added per year, te @orking-day may be regarded
ere as a constant magnit%de, and is ass%med as s%c, no matter o@ m%c or o@ little it may
de8iate !rom its pysical maxim%m0 5e absol%te limit o! te portion o! 8al%e @ic !orms
s%rpl%s-8al%e, and @ic resol8es itsel! into pro!it and gro%nd-rent, is t%s gi8en0 &t is determined
by te excess o! te %npaid portion o! te @orking-day o8er its paid portion, i0e0, by te portion o!
te 8al%e o! te total prod%ct in @ic tis s%rpl%s-labo%r exists0 &! @e call te s%rpl%s-8al%e t%s
limited and calc%lated on te ad8anced total capital I te pro!it, as & a8e done, ten tis pro!it, so
!ar as its absol%te magnit%de is concerned, is eD%al to te s%rpl%s-8al%e and, tere!ore, its limits
are H%st as m%c determined by la@ as te latter0 3n te oter and, te le8el o! te rate o! pro!it
is like@ise a magnit%de eld @itin certain speci!ic limits determined by te 8al%e o!
commodities0 &t is te ratio o! te total s%rpl%s-8al%e to te total social capital ad8anced in
prod%ction0 &! tis capital R +== Bsay millionsC and te s%rpl%s-8al%e R 1==, ten <=T constit%tes
te absol%te limit o! te rate o! pro!it0 5e distrib%tion o! te social pro!it according to tis rate
among te capitals in8ested in te 8ario%s speres o! prod%ction creates prices o! prod%ction
@ic de8iate !rom te 8al%es o! commodities and @ic are te real reg%lating a8erage market-
prices0 A%t tis de8iation abolises neiter te determination o! prices by 8al%es nor te reg%lar
limits o! pro!it0 &nstead o! te 8al%e o! a commodity being eD%al to te capital cons%med in its
prod%ction pl%s te s%rpl%s-8al%e contained in it, its price o! prod%ction is no@ eD%al to te
capital, c, cons%med in its prod%ction pl%s te s%rpl%s-8al%e !alling to its sare as a res%lt o! te
general rate o! pro!it, !or instance <=T on te capital ad8anced in its prod%ction, co%nting bot
te cons%med and te merely employed capital0 A%t tis additional amo%nt o! <=T is itsel!
determined by te s%rpl%s-8al%e created by te total social capital and its relation to te 8al%e o!
tis capital# and !or tis reason it is <=T and not 1= or 1==0 5e trans!ormation o! 8al%es into
prices o! prod%ction, ten, does not remo8e te limits on pro!it, b%t merely alters its distrib%tion
among te 8ario%s partic%lar capitals @ic make %p te social capital, i0e0, it distrib%tes it
%ni!ormly among tem in te proportion in @ic tey !orm parts o! te 8al%e o! tis total capital0
5e market-prices rise abo8e and !all belo@ tese reg%lating prices o! prod%ction, b%t tese
!l%ct%ations m%t%ally balance eac oter0 &! one examines price lists o8er a more or less long
period o! time, and i! one disregards tose cases in @ic te act%al 8al%e o! commodities is
altered by a cange in te prod%cti8ity o! labo%r, and like@ise tose cases in @ic te process o!
prod%ction as been dist%rbed by nat%ral or social accidents, one @ill be s%rprised, in te !irst
place, by te relati8ely narro@ limits o! te de8iations, and, secondly, by te reg%larity o! teir
m%t%al compensation0 5e same domination o! te reg%lating a8erages @ill be !o%nd ere tat
M%etelet pointed o%t in te case o! social penomena0 &! te eD%alisation o! te 8al%es o!
commodities into prices o! prod%ction does not meet any obstacles, ten te rent resol8es itsel!
into di!!erential rent, i0e0, it is limited to te eD%alisation o! te s%rpl%s-pro!its @ic @o%ld e
gi8en to some capitalists by te reg%lating prices o! prod%ction and @ic are no@ appropriated
by te landlord0 6ere, ten, rent as its de!inite limit o! 8al%e in te de8iations o! te indi8id%al
rates o! pro!it, @ic are ca%sed by te reg%lation o! prices o! prod%ction by te general rate o!
pro!it0 &! landed property obstr%cts eD%alisation o! te 8al%es o! commodities into prices o!
+*> ;apter '
prod%ction, and appropriates absol%te rent, ten te latter is limited by te excess o! te 8al%e o!
te agric%lt%ral prod%cts o8er teir price o! prod%ction, i0e0, by te excess o! te s%rpl%s-8al%e
contained in tem o8er te rate o! pro!it assigned to te capitals by te general rate o! pro!it0 5is
di!!erence, ten, !orms te limit o! te rent, @ic, as be!ore, is b%t a de!inite portion o! te gi8en
s%rpl%s-8al%e contained in te commodities0
Finally, i! eD%alisation o! s%rpl%s-8al%e into a8erage pro!it meets @it obstacles in te 8ario%s
speres o! prod%ction in te !orm o! arti!icial or nat%ral monopolies, and partic%larly monopoly in
landed property, so tat a monopoly price becomes possible, @ic rises abo8e te price o!
prod%ction and abo8e te 8al%e o! te commodities a!!ected by s%c a monopoly, ten te limits
imposed by te 8al%e o! te commodities @o%ld not tereby be remo8ed0 5e monopoly price o!
certain commodities @o%ld merely trans!er a portion o! te pro!it o! te oter commodity-
prod%cers to te commodities a8ing te monopoly price0 ? local dist%rbance in te distrib%tion
o! te s%rpl%s-8al%e among te 8ario%s speres o! prod%ction @o%ld indirectly take place, b%t it
@o%ld lea8e te limit o! tis s%rpl%s-8al%e itsel! %naltered0 $o%ld te commodity a8ing te
monopoly price enter into te necessary cons%mption o! te labo%rer, it @o%ld increase te @age
and tereby red%ce te s%rpl%s-8al%e, ass%ming te labo%rer recei8es te 8al%e o! is labo%r-
po@er as be!ore0 &t co%ld depress @ages belo@ te 8al%e o! labo%r-po@er, b%t only to te extent
tat te !ormer exceed te limit o! teir pysical minim%m0 &n tis case te monopoly price @o%ld
be paid by a ded%ction !rom real @ages Bi0e00 te D%antity o! %se-8al%es recei8ed by te labo%rer
!or te same D%antity o! labo%rC and !rom te pro!it o! te oter capitalists0 5e limits @itin
@ic te monopoly price @o%ld a!!ect te normal reg%lation o! te prices o! commodities @o%ld
be !irmly !ixed and acc%rately calc%lable0
5%s H%st as te di8ision o! te ne@ly added 8al%e o! commodities, and, in general, 8al%e
resol8able into re8en%e, !inds its gi8en and reg%lating limits in te relation bet@een necessary and
s%rpl%s labo%r, @ages and s%rpl%s-8al%e, so does te di8ision o! s%rpl%s-8al%e itsel! into pro!it
and gro%nd-rent !ind its limits in te la@s reg%lating te eD%alisation o! te rate o! pro!it0 ?s
regards te di8ision into interest and pro!it o! enterprise, te a8erage pro!it itsel! !orms te limit
!or bot taken togeter0 &t !%rnises te gi8en magnit%de o! 8al%e @ic tey may split among
temsel8es and @ic alone can be so di8ided0 5e speci!ic ratio o! tis di8ision is ere
!ort%ito%s, i0e0, it is determined excl%si8ely by conditions o! competition0 @ereas in oter cases
te balancing o! s%pply and demand is eD%i8alent to elimination o! te de8iations in market-
prices !rom teir reg%lating a8erage prices, i0e0, elimination o! te in!l%ence o! competition, it is
ere te only determinant0 A%t @yQ Aeca%se te same prod%ction !actor, capital, as to di8ide its
sare o! te s%rpl%s-8al%e bet@een t@o o@ners o! te same prod%ction !actor0 A%t te !act tat
tere is no de!inite, reg%lar limit ere !or te di8ision o! te a8erage pro!it does not remo8e its
limit as part o! te commodity-8al%e# H%st as te !act tat t@o partners in a certain b%siness di8ide
teir pro!it %neD%ally d%e to di!!erent external circ%mstances does not a!!ect te limits o! tis
pro!it in any @ay0
6ence, alto%g te portion o! te commodity-8al%e in @ic te ne@ labo%r added to te 8al%e
o! te means o! prod%ction is incorporated is di8ided into 8ario%s parts, @ic in te !orm o!
re8en%e ass%me m%t%ally independent !orms, tis is no reason !or no@ considering @ages, pro!it
and gro%nd-rent as te constit%ent elements @ic, in combination or taken all togeter, are te
so%rce o! te reg%lating price Bnat%ral price, pri necessaireC o! te commodities temsel8es# so
tat it is not te commodity-8al%e, a!ter ded%cting te constant portion o! 8al%e, @ic @o%ld be
te original %nit tat di8ides into tese tree parts, b%t rater, con8ersely, te price o! eac o!
tese tree parts @o%ld be independently determined, and te price o! te commodities @o%ld
ten be !ormed by adding tese tree independent magnit%des togeter0 &n reality, te commodity-
8al%e is te magnit%de @ic precedes te s%m o! te total 8al%es o! @ages, pro!it and rent,
regardless o! te relati8e magnit%des o! te latter0 &n te abo8e erroneo%s conception, @ages,
+*8 ;apter '
pro!it and rent are tree independent magnit%des o! 8al%e, @ose total magnit%de prod%ces, limits
and determines te magnit%de o! te commodity-8al%e0
&n te !irst place it is e8ident tat i! @ages, pro!it and rent @ere to !orm te price o! commodities,
tis @o%ld apply as m%c to te constant portion o! te commodity-8al%e as to te oter portion,
in @ic 8ariable capital and s%rpl%s-8al%e are incorporated0 5%s, tis constant portion may ere
be le!t entirely o%t o! consideration, since te 8al%e o! te commodities o! @ic it is composed
@o%ld like@ise resol8e itsel! into te s%m o! te 8al%es o! @ages, pro!it and rent0 ?s already
noted, tis conception, ten, denies te 8ery existence o! s%c a constant portion o! 8al%e0
&t is !%rtermore e8ident tat 8al%e loses all meaning ere0 3nly te conception o! price still
remains, in te sense tat a certain amo%nt o! money is paid to te o@ner o! labo%r-po@er, capital
and land0 A%t @at is moneyQ Money is not a ting, b%t a de!inite !orm o! 8al%e, ence, 8al%e is
again pres%pposed0 'et %s say, ten, tat a de!inite amo%nt o! gold or sil8er is paid !or tese
elements o! prod%ction, or tat it is mentally eD%ated to tem0 A%t gold and sil8er Band te
enligtened economist is pro%d o! tis disco8eryC are temsel8es commodities like all oter
commodities0 5e price o! gold and sil8er is tere!ore like@ise determined by @ages, pro!it and
rent0 6ence @e cannot determine @ages, pro!it and rent by eD%ating tem to a certain amo%nt o!
gold and sil8er, !or te 8al%e o! tis gold and sil8er, by means o! @ic tey so%ld be e8al%ated
as in teir eD%i8alent, so%ld be !irst determined precisely by tem, independently o! gold and
sil8er, i0e0, independently o! te 8al%e o! any commodity, @ic 8al%e is precisely te prod%ct o!
te abo8e tree !actors0 5%s, to say tat te 8al%e o! @ages, pro!it and rent consists in teir being
eD%i8alent to a certain D%antity o! gold and sil8er, @o%ld merely be saying tat tey are eD%al to a
certain D%antity o! @ages, pro!it and rent0
5ake @ages !irst0 For it is necessary to make labo%r te point o! depart%re, e8en in tis 8ie@ o!
te matter0 6o@, ten, is te reg%lating price o! @ages determined, te price abo%t @ic its
market-prices oscillateQ
'et %s say tat it is determined by te s%pply and demand o! labo%r-po@er0 A%t @at sort o!
labo%r-po@er demand is tisQ &t is a demand made by capital0 5e demand !or labo%r is tere!ore
tantamo%nt to te s%pply o! capital0 &n order to speak o! a s%pply o! capital, @e so%ld kno@
abo8e all @at capital is0 3! @at does capital consistQ &! @e take its simplest aspect, it consists o!
money and commodities0 A%t money is merely a commodity-!orm0 ;apital, ten, consists o!
commodities0 A%t te 8al%e o! commodities, according to o%r ass%mption, is determined, in te
!irst instance, by te price o! te labo%r prod%cing te commodities, by @ages0 Wages are ere
pres%pposed and are treated as a constit%ent element o! te price o! commodities0 5is price ten
so%ld be determined by te ratio o! a8ailable labo%r to capital0 5e price o! te capital itsel! is
eD%al to te price o! te commodities o! @ic it is composed0 5e demand by capital !or labo%r
is eD%al to te s%pply o! capital0 ?nd te s%pply o! capital is eD%al to te s%pply o! a D%antity o!
commodities o! gi8en price, and tis price is reg%lated in te !irst place by te price o! labo%r, and
te price o! labo%r in t%rn is eD%al to tat portion o! te commodity-price constit%ting te 8ariable
capital, @ic is granted to te labo%rer in excange !or is labo%r# and te price o! te
commodities constit%ting tis 8ariable capital is again determined, in t%rn, primarily by te price
o! labo%r# !or it is determined by te prices o! @ages, pro!it and rent0 &n order to determine @ages,
@e cannot, tere!ore, pres%ppose capital, !or te 8al%e o! te capital is itsel! determined in part by
@ages0
Moreo8er, dragging competition into tis problem does not elp at all0 ;ompetition makes te
market-prices o! labo%r rise or !all0 A%t s%ppose s%pply and demand o! labo%r are balanced0 6o@
are @ages ten determinedQ Ay competition0 A%t @e a8e H%st ass%med tat competition ceases to
act as a determinant, tat its in!l%ence is cancelled d%e to eD%ilibri%m bet@een its t@o m%t%ally
opposing !orces0 &ndeed, it is precisely te nat%ral price o! @ages tat @e @is to !ind, i0e0, te
price o! labo%r tat is not reg%lated by competition, b%t @ic, on te contrary, reg%lates te
latter0
+** ;apter '
-oting remains b%t to determine te necessary price o! labo%r by te necessary means o!
s%bsistence o! te labo%rer0 A%t tese means o! s%bsistence are commodities, @ic a8e a price0
5e price o! labo%r is tere!ore determined by te price o! te necessary means o! s%bsistence
and te price o! te means o! s%bsistence, like tat o! all oter commodities, is determined
primarily by te price o! labo%r0 5ere!ore, te price o! labo%r determined by te price o! te
means o! s%bsistence is determined by te price o! labo%r0 5e price o! labo%r is determined by
itsel!0 &n oter @ords, @e do not kno@ o@ te price o! labo%r is determined0 'abo%r in tis case
as a price in general, beca%se it is considered as a commodity0 &n order, tere!ore, to speak o! te
price o! labo%r, @e m%st kno@ @at price in general is0 A%t @e do not learn at all in tis @ay @at
price in general is0
-e8erteless, let %s ass%me tat te necessary price o! labo%r is determined in tis agreeable
manner0 5en o@ is te a8erage pro!it determined, te pro!it o! e8ery capital %nder normal
conditions, @ic constit%tes te second element in te price o! commoditiesQ 5e a8erage pro!it
m%st be determined by an a8erage rate o! pro!it# o@ is tis rate determinedQ Ay competition
among te capitalistsQ A%t te competition already pres%pposes te existence o! pro!it0 &t
pres%pposes 8ario%s rates o! pro!it, and t%s 8ario%s pro!its I eiter in te same or in di!!erent
speres o! prod%ction0 ;ompetition can in!l%ence te rate o! pro!it only to te extent tat it a!!ects
te prices o! commodities0 ;ompetition can only make te prod%cers @itin te same spere o!
prod%ction sell teir commodities at te same prices, and make tem sell teir commodities in
di!!erent speres o! prod%ction at prices @ic @ill gi8e tem te same pro!it, te same
proportional addition to te price o! commodities @ic as already been partially determined by
@ages0 6ence competition can only eD%alise ineD%alities in te rate o! pro!it0 &n order to eD%alise
%neD%al rates o! pro!it, pro!it m%st exist as an element in te price o! commodities0 ;ompetition
does not create it0 &t lo@ers or raises its le8el, b%t does not create te le8el @ic is establised
@en eD%alisation as been acie8ed0 ?nd @en @e speak o! a necessary rate o! pro!it, @at @e
@is to kno@ is precisely te rate o! pro!it independent o! te mo8ements o! competition, @ic
in t%rn reg%lates competition itsel!0 5e a8erage rate o! pro!it sets in @en tere is an eD%ilibri%m
o! !orces among te competing capitalists0 ;ompetition may establis tis eD%ilibri%m b%t not te
rate o! pro!it @ic makes its appearance @it tis eD%ilibri%m0 Wen tis eD%ilibri%m is
establised, @y is te general rate o! pro!it no@ 1=, or <=, or 1==TQ Aeca%se o! competitionQ
-o, on te contrary, competition as eliminated te ca%ses prod%cing de8iations !rom 1=, <=, or
1==T0 &t as bro%gt abo%t a commodity-price @ereby e8ery capital yields te same pro!it in
proportion to its magnit%de0 5e magnit%de o! tis pro!it itsel!, o@e8er, is independent o!
competition0 5e latter merely red%ces, again and again, all de8iations to tis magnit%de0 3ne
person competes @it anoter, and competition compels im to sell is commodities at te same
price as te oter0 A%t @y is tis price 1= or <= or 1==Q
5%s, noting remains b%t to declare rate o! pro!it, and tere!ore pro!it, to be in some
%nacco%ntable manner a de!inite extra carge added to te price o! commodities, @ic %p to tis
point @as determined by @ages0 5e only ting tat competition tells %s is tat tis rate o! pro!it
m%st be a gi8en magnit%de0 A%t @e kne@ tis be!ore I @en @e dealt @it general rate o! pro!it
and Knecessary priceL o! pro!it0
&t is D%ite %nnecessary to @ade tro%g tis abs%rd process ane@ in te case o! gro%nd-rent0 3ne
can see @ito%t doing tis tat, @en carried o%t more or less consistently, it makes pro!it and
rent merely appear as de!inite extra carges added by %nacco%ntable la@s to te price o!
commodities, a price primarily determined by @ages0 &n sort, competition as to so%lder te
responsibility o! explaining all te meaningless ideas o! te economists, @ereas it so%ld rater
be te economists @o explain competition0
-o@, disregarding ere te ill%sion o! a pro!it and rent being created by circ%lation, i0e0, price
components arising tro%g sale I and circ%lation can ne8er gi8e @at it did not !irst recei8e I
te matter simply amo%nts to tis:
6== ;apter '
'et te price o! a commodity determined by @ages R 1==# let te rate o! pro!it be 1=T o! @ages,
and te rent 1+T o! @ages0 5en te price o! te commodity determined by te s%m o! @ages,
pro!it and rent R 1<+0 5is additional <+ cannot arise !rom te sale o! te commodity0 For all @o
sell one anoter commodities sell at 1<+ tat @ic costs 1== in @ages# @ic is te same as i!
tey ad all sold at 1==0 5%s, te operation m%st be considered independently o! te circ%lation
process0
&! te tree sare te commodity itsel!, @ic no@ costs 1<+ I and it does not alter matters any i!
te capitalist !irst sells at 1<+, and ten pays 1== to te labo%rer, 1= to imsel!, and 1+ to te
landlord I te labo%rer recei8es 2N+ R 1== o! te 8al%e and o! te prod%ct0 5e capitalist recei8es
<N<+ o! te 8al%e and o! te prod%ct, and te landlord 3N<+0 $ince te capitalist sells at 1<+ instead
o! 1==, e gi8es te labo%rer only 2N+ o! te prod%ct incorporating te latterGs labo%r0 5%s, it
@o%ld be H%st te same as i! e ad gi8en 8= to te labo%rer and retained <= I o! @ic 8 @o%ld
!all to is sare and 1< to te landlord0 &n tis case e @o%ld a8e sold te commodity at its
8al%e, since in !act te additions to te price represent increases tat are independent o! te 8al%e
o! te commodity, @ic %nder te ass%mption made abo8e is determined by te 8al%e o! @ages0
5is, in a ro%ndabo%t @ay, amo%nts to saying tat according to tis conception te term K@ages,L
ere 1==, means te 8al%e o! te prod%ct, i0e0, te s%m o! money in @ic tis de!inite D%antity o!
labo%r is represented# b%t tat tis 8al%e in t%rn di!!ers !rom te real @age and tere!ore lea8es a
s%rpl%s0 A%t, ere te s%rpl%s is realised by a nominal addition to te price0 6ence, i! @ages @ere
eD%al to 11= instead o! 1==, te pro!it @o%ld a8e to be R 11 and te gro%nd-rent R 16Z, so tat
te price o! te commodity @o%ld R 13>Z0 5is @o%ld lea8e te proportions %naltered0 A%t since
te di8ision @o%ld al@ays be obtained by @ay o! a nominal addition o! de!inite percentages to
@ages, te price @o%ld rise and !all @it te @ages0 Wages are ere !irst set eD%al to te 8al%e o!
te commodity, and ten di8orced !rom it again0 &n !act, o@e8er, tis amo%nts to saying in a
ro%ndabo%t and meaningless @ay tat te 8al%e o! te commodity is determined by te D%antity
o! labo%r contained in it, @ereas te 8al%e o! @ages is determined by te price o! te necessary
means o! s%bsistence, and te excess o! 8al%e abo8e te @age !orms pro!it and rent0
5e splitting o! te 8al%e o! commodities a!ter s%btracting te 8al%e o! te means o! prod%ction
cons%med in teir creation# te splitting o! tis gi8en D%antity o! 8al%e, determined by te
D%antity o! labo%r incorporated in te prod%ced commodities, into tree component parts, @ic
ass%me, as @ages, pro!it and rent, independent and m%t%ally %nrelated !orms o! re8en%e I tis
splitting appears in a per8erted !orm on te s%r!ace o! capitalist prod%ction, and conseD%ently in
te minds o! tose capti8ated by te latter0
'et te total 8al%e o! a certain commodity R 3==, o! @ic <== is te 8al%e o! te means o!
prod%ction, or elements o! constant capital, cons%med in its prod%ction0 5is lea8es 1== as te
amo%nt o! ne@ 8al%e added to te commodity d%ring its process o! prod%ction0 5is ne@ 8al%e o!
1== is all tat is a8ailable !or di8ision among te tree !orms o! re8en%e0 &! @e let @ages R x,
pro!it R y and gro%nd-rent R E, ten te s%m o! x U y U E @ill al@ays R 1== in o%r case0 A%t to te
ind%strialists, mercants and bankers, and to te 8%lgar economists, tis appears D%ite di!!erent0
For tem, te 8al%e o! te commodity, a!ter s%btracting te 8al%e o! te means o! prod%ction
cons%med by it, is not gi8en R 1==, tis 1== ten being di8ided into x, y and E0 A%t rater, te
price o! te commodity simply consists o! te 8al%e o! @ages, te 8al%e o! pro!it and te 8al%e o!
rent, @ic magnit%des are determined independently o! te 8al%e o! te commodity and o! eac
oter, so tat x, y and E are eac gi8en and determined independently, and only !rom te s%m o!
tese magnit%des, @ic te may be smaller or larger tan 1==, is te magnit%de o! 8al%e o! te
commodity itsel! obtained by adding tese component 8al%es togeter0 5is 3uid pro 3uo is
ine8itable beca%se:
'irst: 5e component parts o! te 8al%e o! a commodity, appear as independent re8en%es in
relation to one anoter, and as s%c are related to tree 8ery dissimilar prod%ction !actors, namely
labo%r, capital and land, and tere!ore tey seem to arise !rom te latter0 3@nersip o! labo%r-
6=1 ;apter '
po@er, capital and land is te ca%se !or tese 8ario%s component 8al%es o! commodities !alling to
te sare o! te respecti8e o@ners, and t%s trans!orming temsel8es into re8en%e !or tem0 A%t
te 8al%e does not arise !rom a trans!ormation into re8en%e# it m%st rater exist be!ore it can be
con8erted into re8en%e, be!ore it can ass%me tis !orm0 5e ill%sion tat te opposite is tr%e is
strengtened all te more as te determination o! te relati8e magnit%des o! tese tree
components in relation to one anoter !ollo@s di!!erent la@s, @ose connection @it, and
limitation by, te 8al%e o! te commodities temsel8es no@ise appear on te s%r!ace0
Secondly: We a8e seen tat a general rise or !all in @ages, by ca%sing a mo8ement o! te general
rate o! pro!it in te opposite direction I oter circ%mstances remaining te same I canges te
prices o! prod%ction o! te 8ario%s commodities, i0e0, raises some and lo@ers oters, depending
on te a8erage composition o! capital in te respecti8e speres o! prod%ction0 5%s, experience
so@s ere tat in some speres o! prod%ction, at any rate, te a8erage price o! a commodity rises
beca%se @ages a8e risen, and !alls beca%se @ages a8e !allen0 A%t KexperienceL does not so@
tat te 8al%e o! commodities, @ic is independent o! @ages, secretly reg%lates tese canges0
6o@e8er, i! te rise in @ages is local, i! it only takes place in partic%lar speres o! prod%ction as a
res%lt o! special circ%mstances, ten a corresponding nominal rise in te prices o! tese
commodities may occ%r0 5is rise in te relati8e 8al%e o! one kind o! commodity in relation to te
oters, !or @ic @ages a8e remained %ncanged, is ten merely a reaction against te local
dist%rbance in te %ni!orm distrib%tion o! s%rpl%s-8al%e among te 8ario%s speres o! prod%ction,
a means o! eD%alising te partic%lar rates o! pro!it into te general rate0 KExperienceL so@s in
tis case tat @ages again determine te price0 5%s, in bot o! tese cases experience so@s tat
@ages determine te prices o! commodities0 A%t KexperienceL does not so@ te idden ca%se o!
tis interrelation0 F%rtermore: 5e a8erage price o! labo%r, i0e0, te 8al%e o! labo%r-po@er, is
determined by te prod%ction price o! te necessary means o! s%bsistence0 &! te latter rises or
!alls, te !ormer rises or !alls accordingly0 5%s, experience again so@s te existence o! a
connection bet@een @ages and te price o! commodities0 A%t te ca%se may appear as an e!!ect,
and te e!!ect as a ca%se, @ic is also te case in te mo8ements o! market-prices, @ere a rise
o! @ages abo8e teir a8erage corresponds to te rise o! market-prices abo8e te prices o!
prod%ction d%ring periods o! prosperity, and te s%bseD%ent !all o! @ages belo@ teir a8erage
corresponds to a !all o! market-prices belo@ te prices o! prod%ction0 5o te dependence o! prices
o! prod%ction %pon te 8al%es o! commodities prima facie tere @o%ld al@ays a8e to
correspond, apart !rom te oscillatory mo8ements o! market-prices, te experience tat @ene8er
@ages rise te rate o! pro!it !alls, and 8ice 8ersa0 A%t @e a8e seen tat te rate o! pro!it may be
determined by mo8ements in te 8al%e o! constant capital, independently o! te mo8ements o!
@ages# so tat @ages and rate o! pro!it, instead o! mo8ing in opposite directions, may mo8e in te
same direction, may rise or !all togeter0 &! te rate o! s%rpl%s-8al%e @ere to directly coincide @it
te rate o! pro!it, tis @o%ld not be possible0 $imilarly i! @ages so%ld rise as a res%lt o! a rise in
te prices o! te means o! s%bsistence, te rate o! pro!it may remain te same, or e8en rise, d%e to
greater intensity o! labo%r or prolongation o! te @orking-day0 ?ll tese experiences bear o%t te
ill%sion created by te independent and distorted !orm o! te component 8al%es, namely, tat
eiter @ages alone, or @ages and pro!it togeter, determine te 8al%e o! commodities0 3nce s%c
an ill%sion appears @it respect to @ages, once te price o! labo%r and te 8al%e created by labo%r
seem to coincide, te same a%tomatically applies to pro!it and rent0 5eir prices, i0e0, teir money-
expression, m%st ten be reg%lated independently o! labo%r and o! te 8al%e created by te latter0
4hirdly: 'et %s ass%me tat according to direct experience te 8al%es o! a commodity, or te
prices o! prod%ction I @ic merely appear to be independent o! te 8al%es I al@ays coincide
@it te market-prices o! te commodity rater tan merely pre8ailing as te reg%lating a8erage
prices by constant compensation o! te contin%al !l%ct%ations in market-price0 'et %s ass%me,
!%rtermore, tat reprod%ction al@ays takes place %nder te same %naltered conditions, i0e0,
labo%r prod%cti8ity remains constant in all elements o! capital0 Finally, let %s ass%me tat te
6=< ;apter '
component 8al%e o! te commodity-prod%ct, @ic is !ormed in e8ery spere o! prod%ction by
te addition o! a ne@ D%antity o! labo%r I i0e0, a ne@ly prod%ced 8al%e I to te 8al%e o! te means
o! prod%ction, al@ays split into constant proportions o! @ages, pro!it and rent, so tat te @age
act%ally paid al@ays directly coincides @it te 8al%e o! labo%r-po@er, te pro!it act%ally realised
I @it te portion o! te total s%rpl%s-8al%e @ic !alls to te sare o! e8ery independently
!%nctioning part o! te total capital by 8irt%e o! te a8erage rate o! pro!it, and te act%al rent is
al@ays limited by te bo%nds @itin @ic gro%nd-rent on tis basis is normally con!ined0 &n a
@ord, let %s ass%me tat te di8ision o! te socially prod%ced 8al%es and te reg%lation o! te
prices o! prod%ction takes place on a capitalist basis, b%t tat competition is eliminated0
5%s, %nder tese ass%mptions, namely, i! te 8al%e o! commodities @ere constant and appeared
so, i! te component 8al%e o! te commodity-prod%ct @ic resol8es itsel! into re8en%es @ere to
remain a constant magnit%de and al@ays appeared as s%c, and !inally, i! tis gi8en and constant
component 8al%e al@ays split into constant proportions o! @ages, pro!it and rent I e8en %nder
tese ass%mptions, te real mo8ement @o%ld necessarily appear in distorted !orm# not as te
splitting o! a pre8io%sly gi8en magnit%de o! 8al%e into tree parts @ic ass%me m%t%ally
independent !orms o! re8en%e, b%t, on te contrary, as te !ormation o! tis magnit%de o! 8al%e
!rom te s%m o! te independent and separately determined, eac by itsel!, constit%ent elements I
@ages, pro!it and gro%nd-rent0 5is ill%sion @o%ld necessarily arise, beca%se in te act%al
mo8ement o! indi8id%al capitals, and te commodities prod%ced by tem, not te 8al%e o!
commodities @o%ld appear to be a precondition o! its splitting b%t, con8ersely, te components
into @ic it is split !%nction as a precondition o! te 8al%e o! te commodities0 &n te !irst place,
@e a8e seen tat to e8ery capitalist te cost-price o! is commodities appears as a gi8en
magnit%de and contin%ally appears as s%c in te act%al price o! prod%ction0 5e cost-price,
o@e8er, is eD%al to te 8al%e o! te constant capital, te ad8anced means o! prod%ction, pl%s te
8al%e o! labo%r-po@er, @ic, o@e8er, appears to te agent o! prod%ction in te irrational !orm
o! te price o! labo%r, so tat @ages sim%ltaneo%sly appear as re8en%e o! te labo%rer0 5e
a8erage price o! labo%r is a gi8en magnit%de, beca%se te 8al%e o! labo%r-po@er, like tat o! any
oter commodity, is determined by te necessary labo%r-time reD%ired !or its reprod%ction0 A%t as
concerns tat portion o! te 8al%e o! commodities @ic is embodied in @ages, it does not arise
!rom te !act tat it ass%mes tis !orm o! @ages, tat te capitalist ad8ances to te labo%rer is
sare o! is o@n prod%ct in te !orm o! @ages, b%t !rom te !act tat te labo%rer prod%ces an
eD%i8alent !or is @ages, i0e0, tat a portion o! is daily or ann%al labo%r prod%ces te 8al%e
contained in te price o! is labo%r-po@er0 A%t @ages are stip%lated by contract, be!ore teir
corresponding 8al%e eD%i8alent as been prod%ced0 ?s an element o! price, @ose magnit%de is
gi8en be!ore te commodity and its 8al%e a8e been prod%ced, as a constit%ent part o! te cost-
price, @ages tereby do not appear as a portion @ic detaces itsel! in independent !orm !rom
te total 8al%e o! te commodity, b%t rater, con8ersely, as a gi8en magnit%de, @ic
predetermines tis 8al%e, i0e0, as a creator o! price and 8al%e0 ? role similar to tat o! @ages in te
cost-price o! commodities is played by te a8erage pro!it in teir price o! prod%ction, !or te price
o! prod%ction is eD%al to cost-price pl%s a8erage pro!it on te ad8anced capital0 5is a8erage
pro!it !ig%res practically, in te mind and calc%lation o! te capitalist imsel!, as a reg%lating
element, not merely in so !ar as it determines te trans!er o! capitals !rom one spere o!
in8estment into anoter, b%t also in all sales and contracts @ic embrace a process o!
reprod%ction extending o8er long periods0 A%t so !ar as it !ig%res in tis manner, it is a pre-
existent magnit%de, @ic is in !act independent o! te 8al%e and s%rpl%s-8al%e prod%ced in any
partic%lar spere o! prod%ction, and t%s e8en more so in te case o! any indi8id%al in8estment o!
capital in any spere o! prod%ction0 )ater tan appearing as a res%lt o! a splitting o! 8al%e, it
mani!ests itsel! m%c more as a magnit%de independent o! te 8al%e o! te prod%ced
commodities, as pre-existing in te process o! prod%ction o! commodities and itsel! determining
te a8erage price o! te commodities, i0e0, as a creator o! 8al%e0 &ndeed, te s%rpl%s-8al%e, o@ing
6=3 ;apter '
to te separation o! its 8ario%s portions into m%t%ally, completely %nrelated !orms, appears in still
more concrete !orm as a prereD%isite !or creating commodity-8al%e0 ? part o! te a8erage pro!it in
te !orm o! interest con!ronts te !%nctioning capitalist independently as an ass%med element in
te prod%ction o! commodities and o! teir 8al%e0 -o matter o@ m%c te magnit%de o! te
interest !l%ct%ates, at eac moment and !or e8ery capitalist it is a gi8en magnit%de entering into
te cost-price o! te commodities prod%ced by im as indi8id%al capitalist0 5e same role is
played by gro%nd-rent in te !orm o! lease money !ixed by contract !or te agric%lt%ral capitalist,
and in te !orm o! rent !or b%siness premises in te case o! oter entreprene%rs0 5ese portions
into @ic s%rpl%s-8al%e is split, being gi8en as elements o! cost-price !or te indi8id%al
capitalist, appear con8ersely tere!ore as creators o! s%rpl%s-8al%e# creators o! a portion o! te
price o! commodities, H%st as @ages create te oter0 5e secret @ere!ore tese prod%cts o! te
splitting o! commodity-8al%e constantly appear as prereD%isites !or te !ormation o! 8al%e itsel! is
simply tis, tat te capitalist mode o! prod%ction, like any oter, does not merely constantly
reprod%ce te material prod%ct, b%t also te social and economic relations, te caracteristic
economic !orms o! its creation0 &ts res%lt, tere!ore, appears H%st as constantly pres%pposed by it,
as its pres%ppositions appear as its res%lts0 ?nd it is tis contin%al reprod%ction o! te same
relations @ic te indi8id%al capitalist anticipates as sel!-e8ident, as an ind%bitable !act0 $o long
as te capitalist mode o! prod%ction persists as s%c, a portion o! te ne@ly added labo%r
contin%ally resol8es itsel! into @ages, anoter into pro!it Binterest and pro!it o! enterpriseC, and a
tird into rent0 &n contracts bet@een te o@ners o! 8ario%s agencies o! prod%ction tis is al@ays
ass%med, and tis ass%mption is correct, o@e8er m%c te relati8e proportions may !l%ct%ate in
indi8id%al cases0 5e de!inite !orm in @ic te parts o! 8al%e con!ront eac oter is pres%pposed
beca%se it is contin%ally reprod%ced, and it is contin%ally reprod%ced beca%se it is contin%ally
pres%pposed0
5o be s%re, experience and appearance no@ also demonstrate tat market-prices, in @ose
in!l%ence te capitalist act%ally sees te only determination o! 8al%e, are by no means dependent
%pon s%c anticipation, so !ar as teir magnit%de is concerned# tat tey do not correspond to
@eter te interest or rent @ere set ig or lo@0 A%t te market-prices are constant only in teir
8ariation, and teir a8erage o8er longer periods res%lts precisely in te respecti8e a8erages o!
@ages, pro!it and rent as te constant magnit%des, and tere!ore, in te last analysis, tose
dominating te market-prices0
3n te oter and, it seems plain on re!lection tat i! @ages, pro!it and rent are creators o! 8al%e
since tey seem to be pres%pposed in te prod%ction o! 8al%e, and are ass%med by te indi8id%al
capitalist in is cost-price and price o! prod%ction, ten te constant portion, @ose 8al%e enters
as gi8en into te prod%ction o! e8ery commodity, is also a creator o! 8al%e0 A%t te constant
portion o! capital is no more tan a s%m o! commodities and, tere!ore, o! commodity-8al%es0
5%s @e so%ld arri8e at te abs%rd ta%tology tat commodity-8al%e is te creator and ca%se o!
commodity-8al%e0
6o@e8er, i! te capitalist @ere at all interested in re!lecting abo%t tis I and is re!lections as
capitalist are dictated excl%si8ely by is interests and sel!-interested moti8es I experience @o%ld
so@ im tat te prod%ct @ic e imsel! prod%ces enters into oter speres o! prod%ction as a
constant portion o! capital, and tat prod%cts o! tese oter prod%ction speres enter into is o@n
prod%ct as constant portions o! capital0 $ince te additional 8al%e, so !ar as is ne@ prod%ction is
concerned, seems to be !ormed, !rom is point o! 8ie@, by te magnit%des o! @ages, pro!it and
rent, ten tis also olds good !or te constant portion consisting o! te prod%cts o! oter
capitalists0 ?nd t%s, te price o! te constant portion o! capital, and tereby te total 8al%e o! te
commodities, red%ces itsel! in te !inal analysis, alto%g in a manner @ic is some@at
%nacco%ntable, to a s%m o! 8al%es res%lting !rom te addition o! independent creators o! 8al%e I
@ages, pro!it and rent I @ic are reg%lated according to di!!erent la@s and arise !rom di!!erent
so%rces0
6=2 ;apter '
'ourthly: Weter te commodities are sold at teir 8al%es or not, and ence te determination o!
8al%e itsel!, is D%ite immaterial !or te indi8id%al capitalist0 &t is, !rom te 8ery o%tset, a process
tat takes place beind is back and is controlled by te !orce o! circ%mstances independent o!
imsel!, beca%se it is not te 8al%es, b%t te di8ergent prices o! prod%ction, @ic !orm te
reg%lating a8erage prices in e8ery spere o! prod%ction0 5e determination o! 8al%e as s%c
interests and as a determining e!!ect on te indi8id%al capitalist and te capital in eac partic%lar
spere o! prod%ction only in so !ar as te red%ced or increased D%antity o! labo%r reD%ired to
prod%ce commodities, as a conseD%ence o! a rise or !all in prod%cti8eness o! labo%r, enables im
in one instance to make an extra pro!it, at te pre8ailing market-prices, and compels im in
anoter to raise te price o! is commodities, beca%se more @ages, more constant capital, and
t%s more interest, !all %pon eac portion o! te prod%ct, or indi8id%al commodity0 &t interests im
only in so !ar as it raises or lo@ers te cost o! prod%ction o! commodities !or imsel!, t%s only in
so !ar as it makes is position exceptional0
3n te oter and, @ages, interest and rent appear to im as reg%lating limits not only o! te price
at @ic e can realise te pro!it o! enterprise, te portion o! pro!it !alling to is sare as
!%nctioning capitalist, b%t also at @ic e m%st generally be able to sell is commodities, i!
contin%ed reprod%ction is to take place0 &t is D%ite immaterial to im @eter or not e realises,
tro%g sale, te 8al%e and s%rpl%s-8al%e incorporated in is commodities, pro8ided only tat e
makes te c%stomary, or larger, pro!it o! enterprise at gi8en prices, o8er and abo8e is indi8id%al
cost-price determined by @ages, interest and rent0 ?part !rom te constant portion o! capital-
@ages, interest and rent appear to im, tere!ore, as te limiting and tereby prod%cti8e
determining elements o! te commodity-price0 $o%ld e s%cceed, e0g0, in depressing @ages
belo@ te 8al%e o! labo%r-po@er, i0e0, belo@ its normal le8el, in obtaining capital at a lo@er
interest rate, and in paying less lease money tan te normal amo%nt !or rent, ten it is completely
irrele8ant to im @eter e sells is prod%ct belo@ its 8al%e, or e8en belo@ te general price o!
prod%ction, tereby gi8ing a@ay gratis a portion o! te s%rpl%s-labo%r contained in te
commodities0 5is also applies to te constant portion o! capital0 &! an ind%strialist, e0g0, can b%y
is ra@ material belo@ its price o! prod%ction, ten tis b%!!ers im against loss, e8en so%ld e
sell it in te !inised prod%ct %nder its price o! prod%ction0 6is pro!it o! enterprise may remain te
same, or e8en increase, i! only te excess o! te commodity-price o8er its elements, @ic m%st
e paid, replaced by an eD%i8alent, remains te same or increases0 A%t aside !rom te 8al%e o! te
means o! prod%ction @ic enter into te prod%ction o! is commodities as a gi8en price
magnit%de, it is precisely @ages, interest and rent @ic enter into tis prod%ction as limiting and
reg%lating price magnit%des0 ;onseD%ently tey appear to im as te elements determining te
price o! te commodities0 ,ro!it o! enterprise, !rom tis standpoint, seems to be eiter determined
by te excess o! market-prices, dependent %pon accidental conditions o! competition, o8er te
immanent 8al%e o! commodities determined by te abo8e-mentioned elements o! price# or, to te
extent tat tis pro!it itsel! exerts a determining in!l%ence %pon market-prices, it seems itsel!, in
t%rn, dependent %pon te competition bet@een b%yers and sellers0
&n te competition o! indi8id%al capitalists among temsel8es as @ell as in te competition on te
@orld-market, it is te gi8en and ass%med magnit%des o! @ages, interest and rent @ic enter into
te calc%lation as constant and reg%lating magnit%des# constant not in te sense o! being
%nalterable magnit%des, b%t in te sense tat tey are gi8en in eac indi8id%al case and constit%te
te constant limit !or te contin%ally !l%ct%ating market-prices0 For instance, in competition on
te @orld-market it is solely a D%estion o! @eter commodities can be sold ad8antageo%sly @it
existing @ages, interest and rent at, or belo@, existing general market-prices, i0e0, realising a
corresponding pro!it o! enterprise0 &! @ages and te price o! land are lo@ in one co%ntry, @ile
interest on capital is ig, beca%se te capitalist mode o! prod%ction as not been de8eloped
generally, @ereas in anoter co%ntry @ages and te price o! land are nominally ig, @ile
interest on capital is lo@, ten te capitalist employs more labo%r and land in te one co%ntry, and
6=+ ;apter '
in te oter relati8ely more capital0 5ese !actors enter into calc%lation as determining elements
in so !ar as competition bet@een tese t@o capitalists is possible0 6ere, ten, experience so@s
teoretically, and te sel!-interested calc%lation o! te capitalist so@s practically, tat te prices
o! commodities are determined by @ages, interest and rent, by te price o! labo%r, capital and
land, and tat tese elements o! price are indeed te reg%lating constit%ent !actors o! price0
3! co%rse, tere al@ays remains an element ere @ic is not ass%med, b%t @ic res%lts !rom
te market-price o! commodities, namely, te excess abo8e te cost-price !ormed by te addition
o! te a!orementioned elements: @ages, interest and rent0 5is !o%rt element seems to be
determined by competition in eac indi8id%al case, and in te a8erage case by te a8erage pro!it,
@ic in its t%rn is reg%lated by tis same competition, only o8er longer periods0
'ifthly: 3n te basis o! te capitalist mode o! prod%ction, it becomes so m%c a matter o! co%rse
to split %p te 8al%e, in @ic ne@ly added labo%r is represented, into te !orms o! re8en%e, o!
@ages, pro!it and gro%nd-rent, tat tis metod is applied Blea8ing aside earlier stages o! istory,
!rom @ic @e ga8e ill%strations in o%r st%dy o! gro%nd-rentC e8en @ere te preconditions !or
tese !orms o! re8en%e are missing0 5at is, all is s%bs%med by analogy %nder tese !orms o!
re8en%e0
Wen an independent labo%rer I let %s take a small !armer, since all tree !orms o! re8en%e may
ere be applied I @orks !or imsel! and sells is o@n prod%ct, e is !irst considered as is o@n
employer BcapitalistC, @o makes %se o! imsel! as a labo%rer, and second as is o@n landlord,
@o makes %se o! imsel! as is o@n tenant0 5o imsel! as @age-@orker e pays @ages, to
imsel! as capitalist e gi8es te pro!it, and to imsel! as landlord e pays rent0 ?ss%ming te
capitalist mode o! prod%ction and te relations corresponding to it to be te general basis o!
society, tis s%bs%mption is correct, in so !ar as it is not tanks to is labo%r, b%t to is o@nersip
o! means o! prod%ction I @ic a8e ass%med ere te general !orm o! capital I tat e is in a
position to appropriate is o@n s%rpl%s-labo%r0 ?nd !%rtermore, to te extent tat e prod%ces
is prod%ct as commodities, and t%s depends %pon its price Band e8en i! not, tis price is
calc%lableC, te D%antity o! s%rpl%s-labo%r @ic e can realise depends not on its o@n
magnit%de, b%t on te general rate o! pro!it# and like@ise any e8ent%al excess abo8e te amo%nt
o! s%rpl%s-8al%e determined by te general rate o! pro!it is, in t%rn, not determined by te
D%antity o! labo%r per!ormed by im, b%t can be appropriated by im only beca%se e is o@ner o!
te land0 $ince s%c a !orm o! prod%ction not corresponding to te capitalist mode o! prod%ction
may t%s be s%bs%med %nder its !orms o! re8en%e I and to a certain extent not incorrectly I te
ill%sion is all te more strengtened tat capitalist relations are te nat%ral relations o! e8ery
mode o! prod%ction0
3! co%rse, i! @ages are red%ced to teir general basis, namely, to tat portion o! te prod%ct o! te
prod%cerGs o@n labo%r @ic passes o8er into te indi8id%al cons%mption o! te labo%rer# i! @e
relie8e tis portion o! its capitalist limitations and extend it to tat 8ol%me o! cons%mption @ic
is permitted, on te one and, by te existing prod%cti8ity o! society Btat is, te social
prod%cti8ity o! is o@n indi8id%al labo%r as act%ally socialC, and @ic, on te oter and, te
!%ll de8elopment o! te indi8id%ality reD%ires# i!, !%rtermore, @e red%ce te s%rpl%s-labo%r and
s%rpl%s-prod%ct to tat meas%re @ic is reD%ired %nder pre8ailing conditions o! prod%ction o!
society, on te one side to create an ins%rance and reser8e !%nd, and on te oter to constantly
expand reprod%ction to te extent dictated by social needs# !inally, i! @e incl%de in -o0 1 te
necessary labo%r, and in -o0 < te s%rpl%s-labo%r, te D%antity o! labo%r @ic m%st al@ays be
per!ormed by te able-bodied in beal! o! te immat%re or incapacitated members o! society, i0e0,
i! @e strip bot @ages and s%rpl%s-8al%e, bot necessary and s%rpl%s labo%r, o! teir speci!ically
capitalist caracter, ten certainly tere remain not tese !orms, b%t merely teir r%diments, @ic
are common to all social modes o! prod%ction0
Moreo8er, tis metod o! s%bs%mption @as also caracteristic o! pre8io%s dominant modes o!
prod%ction, e0g0, !e%dalism0 ,rod%ction relations @ic no@ise corresponded to it, standing
6=6 ;apter '
entirely beyond it, @ere s%bs%med %nder !e%dal relations, e0g0, in England, te ten%res in common
socage Bas distinct !rom ten%res on knigtGs ser8iceC, @ic comprised merely monetary
obligations and @ere !e%dal in name only0
Chapter 51. Distribution Relations and
Production Relations
5e ne@ 8al%e added by te ann%al ne@ly added labo%r I and t%s also tat portion o! te ann%al
prod%ct in @ic tis 8al%e is represented and @ic may be dra@n o%t o! te total o%tp%t and
separated !rom it I is t%s split into tree parts, @ic ass%me tree di!!erent !orms o! re8en%e,
into !orms @ic express one portion o! tis 8al%e as belonging or !alling to te sare o! te
o@ner o! labo%r-po@er, anoter portion to te o@ner o! capital, and a tird portion to te o@ner
o! landed property0 5ese, ten, are relations, or !orms o! distrib%tion, !or tey express te
relations %nder @ic te ne@ly prod%ced total 8al%e is distrib%ted among te o@ners o! te
8ario%s prod%ction !actors0
From te common 8ie@point tese distrib%tion relations appear as nat%ral relations, as relations
arising directly !rom te nat%re o! all social prod%ction, !rom te la@s o! %man prod%ction in
general0 &t cannot, indeed, be denied tat pre-capitalist societies disclose oter modes o!
distrib%tion, b%t te latter are interpreted as %nde8eloped, %nper!ected and disg%ised, not red%ced
to teir p%rest expression and teir igest !orm and di!!erently saded modes o! te nat%ral
distrib%tion relations0
5e only correct aspect o! tis conception is: ?ss%ming some !orm o! social prod%ction to exist
Be0g0, primiti8e &ndian comm%nities, or te more ingenio%sly de8eloped comm%nism o! te
,er%8iansC, a distinction can al@ays be made bet@een tat portion o! labo%r @ose prod%ct is
directly cons%med indi8id%ally by te prod%cers and teir !amilies and I aside !rom te part
@ic is prod%cti8ely cons%med I tat portion o! labo%r @ic is in8ariably s%rpl%s-labo%r,
@ose prod%ct ser8es constantly to satis!y te general social needs no matter o@ tis s%rpl%s-
prod%ct may be di8ided, and no matter @o may !%nction as representati8e o! tese social needs0
5%s, te identity o! te 8ario%s modes o! distrib%tion amo%nts merely to tis: tey are identical i!
@e abstract !rom teir di!!erences and speci!ic !orms and keep in mind only teir %nity as distinct
!rom teir dissimilarity0
? more ad8anced, more critical mind, o@e8er, admits te istorically de8eloped caracter o!
distrib%tion relations,
lxix
b%t ne8erteless clings all te more tenacio%sly to te %ncanging
caracter o! prod%ction relations temsel8es, arising !rom %man nat%re and t%s independent o!
all istorical de8elopment0
3n te oter and, scienti!ic analysis o! te capitalist mode o! prod%ction demonstrates te
contrary, tat it is a mode o! prod%ction o! a special kind, @it speci!ic istorical !eat%res# tat,
like any oter speci!ic mode o! prod%ction, it pres%pposes a gi8en le8el o! te social prod%cti8e
!orces and teir !orms o! de8elopment as its istorical precondition: a precondition @ic is itsel!
te istorical res%lt and prod%ct o! a preceding process, and !rom @ic te ne@ mode o!
prod%ction proceeds as its gi8en basis# tat te prod%ction relations corresponding to tis speci!ic,
istorically determined mode o! prod%ction I relations @ic %man beings enter into d%ring te
process o! social li!e, in te creation o! teir social li!e I possess a speci!ic, istorical and
transitory caracter# and, !inally, tat te distrib%tion relations essentially coincident @it tese
prod%ction relations are teir opposite side, so tat bot sare te same istorically transitory
caracter0
&n te st%dy o! distrib%tion relations, te initial point o! depart%re is te alleged !act tat te
ann%al prod%ct is apportioned among @ages, pro!it and rent0 A%t i! so expressed, it is a
misstatement0 5e prod%ct is apportioned on one side to capital, on te oter to re8en%e0 3ne o!
6=8 ;apter '&
tese re8en%es, @ages, ne8er itsel! ass%mes te !orm o! re8en%e, re8en%e o! te labo%rer, %ntil
a!ter it as !irst con!ronted tis labo%rer in te form of capital. 5e con!rontation o! prod%ced
conditions o! labo%r and o! te prod%cts o! labo%r generally, as capital, @it te direct prod%cers
implies !rom te o%tset a de!inite social caracter o! te material conditions o! labo%r in relation
to te labo%rers, and tereby a de!inite relationsip into @ic tey enter @it te o@ners o! te
means o! prod%ction and among temsel8es d%ring prod%ction itsel!0 5e trans!ormation o! tese
conditions o! labo%r into capital implies in t%rn te expropriation o! te direct prod%cers !rom te
land, and t%s a de!inite !orm o! landed property0
&! one portion o! te prod%ct @ere not trans!ormed into capital, te oter @o%ld not ass%me te
!orms o! @ages, pro!it and rent0
3n te oter and, i! te capitalist mode o! prod%ction pres%pposes tis de!inite social !orm o! te
conditions o! prod%ction, so does it reprod%ce it contin%ally0 &t prod%ces not merely te material
prod%cts, b%t reprod%ces contin%ally te prod%ction relations in @ic te !ormer are prod%ced,
and tereby also te corresponding distrib%tion relations0
&t may be said, o! co%rse, tat capital itsel! Band landed property @ic it incl%des as its
antitesisC already pres%pposes a distrib%tion: te expropriation o! te labo%rer !rom te
conditions o! labo%r, te concentration o! tese conditions in te ands o! a minority o!
indi8id%als, te excl%si8e o@nersip o! land by oter indi8id%als, in sort, all te relations @ic
a8e been described in te part dealing @it primiti8e acc%m%lation BA%c &, Kap0 JJ&4C
/Englis edition: ,art 4&&& I 0d10 A%t tis distrib%tion di!!ers altogeter !rom @at is %nderstood
by distrib%tion relations @en te latter are endo@ed @it a istorical caracter in
contradistinction to prod%ction relations0 Wat is meant tereby are te 8ario%s titles to tat
portion o! te prod%ct @ic goes into indi8id%al cons%mption0 5e a!orementioned distrib%tion
relations, on te contrary, are te basis o! special social !%nctions per!ormed @itin te
prod%ction relations by certain o! teir agents, as opposed to te direct prod%cers0 5ey imb%e te
conditions o! prod%ction temsel8es and teir representati8es @it a speci!ic social D%ality0 5ey
determine te entire caracter and te entire mo8ement o! prod%ction0
;apitalist prod%ction is disting%ised !rom te o%tset by t@o caracteristic !eat%res0
'irst. &t prod%ces its prod%cts as commodities0 5e !act tat it prod%ces commodities does not
di!!erentiate it !rom oter modes o! prod%ction# b%t rater te !act tat being a commodity is te
dominant and determining caracteristic o! its prod%cts0 5is implies, !irst and !oremost, tat te
labo%rer imsel! comes !or@ard merely as a seller o! commodities, and t%s as a !ree @age-
labo%rer, so tat labo%r appears in general as @age-labo%r0 &n 8ie@ o! @at as already been said,
it is s%per!l%o%s to demonstrate ane@ tat te relation bet@een capital and @age-labo%r
determines te entire caracter o! te mode o! prod%ction0 5e principal agents o! tis mode o!
prod%ction itsel!, te capitalist and te @age-labo%rer, are as s%c merely embodiments,
personi!ications o! capital and @age-labo%r# de!inite social caracteristics stamped %pon
indi8id%als by te process o! social prod%ction# te prod%cts o! tese de!inite social prod%ction
relations0
5e caracteristic 1C o! te prod%ct as a commodity, and <C o! te commodity as a prod%ct o!
capital, already implies all circ%lation relations, i0e0, a de!inite social process tro%g @ic te
prod%cts m%st pass and in @ic tey ass%me de!inite social caracteristics# it like@ise implies
de!inite relations o! te prod%ction agents, by @ic te 8al%e-expansion o! teir prod%ct and its
recon8ersion, eiter into means o! s%bsistence or into means o! prod%ction, are determined0 A%t
e8en apart !rom tis, te entire determination o! 8al%e and te reg%lation o! te total prod%ction
by 8al%e res%lts !rom te abo8e t@o caracteristics o! te prod%ct as a commodity, or o! te
commodity as a capitalistically prod%ced commodity0 &n tis entirely speci!ic !orm o! 8al%e,
labo%r pre8ails on te one and solely as social labo%r# on te oter and, te distrib%tion o! tis
social labo%r and te m%t%al s%pplementing and intercanging o! its prod%cts, te s%bordination
6=* ;apter '&
%nder, and introd%ction into, te social mecanism, are le!t to te accidental and m%t%ally
n%lli!ying moti8es o! indi8id%al capitalists0 $ince tese latter con!ront one anoter only as
commodity-o@ners, and e8eryone seeks to sell is commodity as dearly as possible Bapparently
e8en g%ided in te reg%lation o! prod%ction itsel! solely by is o@n !ree @illC, te inner la@
en!orces itsel! only tro%g teir competition, teir m%t%al press%re %pon eac oter, @ereby te
de8iations are m%t%ally cancelled0 3nly as an inner la@, 8is-O-8is te indi8id%al agents, as a blind
la@ o! -at%re, does te la@ o! 8al%e exert its in!l%ence ere and maintain te social eD%ilibri%m
o! prod%ction amidst its accidental !l%ct%ations0
F%rtermore, already implicit in te commodity, and e8en more so in te commodity as a prod%ct
o! capital, is te materialisation o! te social !eat%res o! prod%ction and te personi!ication o! te
material !o%ndations o! prod%ction, @ic caracterise te entire capitalist mode o! prod%ction0
5e second distincti8e !eat%re o! te capitalist mode o! prod%ction is te prod%ction o! s%rpl%s-
8al%e as te direct aim and determining moti8e o! prod%ction0 ;apital prod%ces essentially
capital, and does so only to te extent tat it prod%ces s%rpl%s-8al%e0 We a8e seen in o%r
disc%ssion o! relati8e s%rpl%s-8al%e, and !%rter in considering te trans!ormation o! s%rpl%s-
8al%e into pro!it, o@ a mode o! prod%ction pec%liar to te capitalist period is !o%nded ereon I a
special !orm o! de8elopment o! te social prod%cti8e po@ers o! labo%r, b%t con!ronting te
labo%rer as po@ers o! capital rendered independent, and standing in direct opposition tere!ore to
te labo%rerGs o@n de8elopment0 ,rod%ction !or 8al%e and s%rpl%s-8al%e implies, as as been
so@n in te co%rse o! o%r analysis, te constantly operating tendency to red%ce te labo%r-time
necessary !or te prod%ction o! a commodity, i0e0, its 8al%e, belo@ te act%ally pre8ailing social
a8erage0 5e press%re to red%ce cost-price to its minim%m becomes te strongest le8er !or raising
te social prod%cti8eness o! labo%r, @ic, o@e8er, appears ere only as a contin%al increase in
te prod%cti8eness o! capital0
5e a%tority ass%med by te capitalist as te personi!ication o! capital in te direct process o!
prod%ction, te social !%nction per!ormed by im in is capacity as manager and r%ler o!
prod%ction, is essentially di!!erent !rom te a%tority exercised on te basis o! prod%ction by
means o! sla8es, ser!s, etc0
Wereas, on te basis o! capitalist prod%ction, te mass o! direct prod%cers is con!ronted by te
social caracter o! teir prod%ction in te !orm o! strictly reg%lating a%tority and a social
mecanism o! te labo%r-process organised as a complete ierarcy I tis a%tority reacing its
bearers, o@e8er, only as te personi!ication o! te conditions o! labo%r in contrast to labo%r, and
not as political or teocratic r%lers as %nder earlier modes o! prod%ction I among te bearers o!
tis a%tority, te capitalists temsel8es, @o con!ront one anoter only as commodity-o@ners,
tere reigns complete anarcy @itin @ic te social interrelations o! prod%ction assert
temsel8es only as an o8er@elming nat%ral la@ in relation to indi8id%al !ree @ill0
3nly beca%se labo%r pre-exists in te !orm o! @age-labo%r, and te means o! prod%ction in te
!orm o! capital I i0e0, solely beca%se o! tis speci!ic social !orm o! tese essential prod%ction
!actors I does a part o! te 8al%e Bprod%ctC appear as s%rpl%s-8al%e and tis s%rpl%s-8al%e as pro!it
BrentC, as te gain o! te capitalist, as additional a8ailable @ealt belonging to im0 A%t only
beca%se tis s%rpl%s-8al%e t%s appears as his profit do te additional means o! prod%ction, @ic
are intended !or te expansion o! reprod%ction, and @ic constit%te a part o! tis pro!it, present
temsel8es as ne@ additional capital, and te expansion o! te process o! reprod%ction in general
as a process o! capitalist acc%m%lation0
?lto%g te !orm o! labo%r as @age-labo%r is decisi8e !or te !orm o! te entire process and te
speci!ic mode o! prod%ction itsel!, it is not @age-labo%r @ic determines 8al%e0 &n te
determination o! 8al%e, it is a D%estion o! social labo%r-time in general, te D%antity o! labo%r
@ic society generally as at its disposal, and @ose relati8e absorption by te 8ario%s prod%cts
determines, as it @ere, teir respecti8e social importance0 5e de!inite !orm in @ic te social
61= ;apter '&
labo%r-time pre8ails as decisi8e in te determination o! te 8al%e o! commodities is o! co%rse
connected @it te !orm o! labo%r as @age-labo%r and @it te corresponding !orm o! te means
o! prod%ction as capital, in so !ar as solely on tis basis does commodity-prod%ction become te
general !orm o! prod%ction0
'et %s moreo8er consider te so-called distrib%tion relations temsel8es0 5e @age pres%pposes
@age-labo%r, and pro!it I capital0 5ese de!inite !orms o! distrib%tion t%s pres%ppose de!inite
social caracteristics o! prod%ction conditions, and de!inite social relations o! prod%ction agents0
5e speci!ic distrib%tion relations are t%s merely te expression o! te speci!ic istorical
prod%ction relations0
?nd no@ let %s consider pro!it0 5is speci!ic !orm o! s%rpl%s-8al%e is te precondition !or te !act
tat te ne@ creation o! means o! prod%ction takes place in te !orm o! capitalist prod%ction# t%s,
a relation dominating reprod%ction, alto%g it seems to te indi8id%al capitalist as i! e co%ld in
reality cons%me is entire pro!it as re8en%e0 6o@e8er, e tereby meets barriers e8en in te !orm
o! ins%rance and reser8e !%nds la@s o! competition, etc0, @ic amper im and pro8e to im in
practice tat pro!it is not a mere distrib%tion category o! te indi8id%ally cons%mable prod%ct0
5e entire process o! capitalist prod%ction is !%rtermore reg%lated by te prices o! te prod%cts0
A%t te reg%lating prices o! prod%ction are temsel8es in t%rn reg%lated by te eD%alisation o! te
rate o! pro!it and its corresponding distrib%tion o! capital among te 8ario%s social speres o!
prod%ction0 ,ro!it, ten, appears ere as te main !actor, not o! te distrib%tion o! prod%cts, b%t o!
teir prod%ction itsel!, as a !actor in te distrib%tion o! capitals and labo%r itsel! among te
8ario%s speres o! prod%ction0 5e di8ision o! pro!it into pro!it o! enterprise and interest appears
as te distrib%tion o! te same re8en%e0 A%t it arises, to begin @it, !rom te de8elopment o!
capital as a sel!-expanding 8al%e, a creator o! s%rpl%s-8al%e, i0e0, !rom tis speci!ic social !orm o!
te pre8ailing process o! prod%ction0 &t e8ol8es credit and credit instit%tions o%t o! itsel!, and
tereby te !orm o! prod%ction0 ?s interest, etc0, te ostensible distrib%tion !orms enter into te
price as determining prod%ction !actors0
:ro%nd-rent migt seem to be a mere !orm o! distrib%tion, beca%se landed property as s%c does
not per!orm any, or at least any normal, !%nction in te process o! prod%ction itsel!0 A%t te
circ%mstance tat 1C rent is limited to te excess abo8e te a8erage pro!it, and tat <C te landlord
is red%ced !rom te manager and master o! te process o! prod%ction and o! te entire process o!
social li!e to te position o! mere lessor o! land, %s%rer in land and mere collector o! rent, is a
speci!ic istorical res%lt o! te capitalist mode o! prod%ction0 5e !act tat te eart recei8ed te
!orm o! landed property is a istorical precondition !or tis0 5e !act tat landed property ass%mes
!orms @ic permit te capitalist mode o! operation in agric%lt%re is a prod%ct o! te speci!ic
caracter o! tis mode o! prod%ction0 5e income o! te landlord may be called rent, e8en %nder
oter !orms o! society0 A%t it di!!ers essentially !rom rent as it appears in tis mode o! prod%ction0
5e so-called distrib%tion relations, ten, correspond to and arise !rom istorically determined
speci!ic social !orms o! te process o! prod%ction and m%t%al relations entered into by men in te
reprod%ction process o! %man li!e0 5e istorical caracter o! tese distrib%tion relations is te
istorical caracter o! prod%ction relations, o! @ic tey express merely one aspect0 ;apitalist
distrib%tion di!!ers !rom tose !orms o! distrib%tion @ic arise !rom oter modes o! prod%ction,
and e8ery !orm o! distrib%tion disappears @it te speci!ic !orm o! prod%ction !rom @ic it is
descended and to @ic it corresponds0
5e 8ie@ @ic regards only distrib%tion relations as istorical, b%t not prod%ction relations, is,
on te one and, solely te 8ie@ o! te initial, b%t still andicapped, criticism o! bo%rgeois
economy0 3n te oter and, it rests on te con!%sion and identi!ication o! te process o! social
prod%ction @it te simple labo%r-process, s%c as migt e8en be per!ormed by an abnormally
isolated %man being @ito%t any social assistance0 5o te extent tat te labo%r-process is solely
a process bet@een man and -at%re, its simple elements remain common to all social !orms o!
de8elopment0 A%t eac speci!ic istorical !orm o! tis process !%rter de8elops its material
611 ;apter '&
!o%ndations and social !orms0 Wene8er a certain stage o! mat%rity as been reaced, te speci!ic
istorical !orm is discarded and makes @ay !or a iger one0 5e moment o! arri8al o! s%c a
crisis is disclosed by te dept and breadt attained by te contradictions and antagonisms
bet@een te distrib%tion relations, and t%s te speci!ic istorical !orm o! teir corresponding
prod%ction relations, on te one and, and te prod%cti8e !orces, te prod%ction po@ers and te
de8elopment o! teir agencies, on te oter and0 ? con!lict ten ens%es bet@een te material
de8elopment o! prod%ction and its social !orm0
lxx

Chapter 52. Classes
5e o@ners merely o! labo%r-po@er, o@ners o! capital, and land-o@ners, @ose respecti8e
so%rces o! income are @ages, pro!it and gro%nd-rent, in oter @ords, @age-labo%rers, capitalists
and land-o@ners, constit%te ten tree big classes o! modern society based %pon te capitalist
mode o! prod%ction0
&n England, modern society is indisp%tably most igly and classically de8eloped in economic
str%ct%re0 -e8erteless, e8en ere te strati!ication o! classes does not appear in its p%re !orm0
Middle and intermediate strata e8en ere obliterate lines o! demarcation e8ery@ere Balto%g
incomparably less in r%ral districts tan in te citiesC0 6o@e8er, tis is immaterial !or o%r
analysis0 We a8e seen tat te contin%al tendency and la@ o! de8elopment o! te capitalist mode
o! prod%ction is more and more to di8orce te means o! prod%ction !rom labo%r, and more and
more to concentrate te scattered means o! prod%ction into large gro%ps, tereby trans!orming
labo%r into @age-labo%r and te means o! prod%ction into capital0 ?nd to tis tendency, on te
oter and, corresponds te independent separation o! landed property !rom capital and labo%r,
lxxi
or te trans!ormation o! all landed property into te !orm o! landed property corresponding to te
capitalist mode o! prod%ction0
5e !irst D%estion to e ans@ered is tis: Wat constit%tes a classQ I and te reply to tis !ollo@s
nat%rally !rom te reply to anoter D%estion, namely: Wat makes @age-labo%rers, capitalists and
landlords constit%te te tree great social classesQ
?t !irst glance I te identity o! re8en%es and so%rces o! re8en%e0 5ere are tree great social
gro%ps @ose members, te indi8id%als !orming tem, li8e on @ages, pro!it and gro%nd-rent
respecti8ely, on te realisation o! teir labo%r-po@er, teir capital, and teir landed property0
6o@e8er, !rom tis standpoint, pysicians and o!!icials, e0g0, @o%ld also constit%te t@o classes,
!or tey belong to t@o distinct social gro%ps, te members o! eac o! tese gro%ps recei8ing teir
re8en%e !rom one and te same so%rce0 5e same @o%ld also be tr%e o! te in!inite !ragmentation
o! interest and rank into @ic te di8ision o! social labo%r splits labo%rers as @ell as capitalists
and landlords-te latter, e0g0, into o@ners o! 8ineyards, !arm o@ners, o@ners o! !orests, mine
o@ners and o@ners o! !iseries0
/6ere te man%script breaks o!!01
Supplement
by Frederick Engels
Introduction
5e tird book o! Capital is recei8ing many and 8ario%s interpretations e8er since it as been
s%bHect to p%blic H%dgement0 &t @as not to be oter@ise expected0 &n p%blising it, @at & @as
cie!ly concerned @it @as to prod%ce as a%tentic a text as possible, to demonstrate te ne@
res%lts obtained by Marx in MarxGs o@n @ords as !ar as possible, to inter8ene mysel! only @ere
absol%tely %na8oidable, and e8en ten to lea8e te reader in no do%bt as to @o @as talking to
im0 5is as been deprecated0 &t as been said tat & so%ld a8e con8erted te material a8ailable
to me into a systematically @ritten book, en faire un livre, as te Frenc say# in oter @ords,
sacri!ice te a%tenticity o! te text to te readerGs con8enience0 A%t tis @as not o@ & concei8ed
my task0 & lacked all H%sti!ication !or s%c a re8ision, a man like Marx as te rigt to be eard
imsel!, to pass on is scienti!ic disco8eries to posterity in te !%ll gen%ineness o! is o@n
presentation0 Moreo8er, & ad no desire t%s to in!ringe I as it m%st seem to me I %pon te legacy
o! so pre-eminent a man# it @o%ld a8e meant to me a breac o! !ait0 ?nd tird, it @o%ld a8e
been D%ite %seless0 For te people @o cannot or do not @ant to read, @o, e8en in 4ol%me &, took
more tro%ble to %nderstand it @rongly tan @as necessary to %nderstand it correctly I !or s%c
people it is altogeter %seless to p%t onesel! o%t in any @ay0 A%t !or tose @o are interested in a
real %nderstanding, te original text itsel! @as precisely te most important ting# !or tem my
recasting @o%ld a8e ad at most te 8al%e o! a commentary, and, @at is more, a commentary on
someting %np%blised and inaccessible0 5e original text @o%ld a8e ad to be re!erred to at te
!irst contro8ersy, and at te second and tird its p%blication in etenso @o%ld a8e become D%ite
%na8oidable0
$%c contro8ersies are a matter o! co%rse in a @ork tat contains so m%c tat is ne@, and in a
astily sketced and partly incomplete !irst dra!t to boot0 ?nd ere my inter8ention, o! co%rse,
can be o! %se: to eliminate di!!ic%lties in %nderstanding, to bring more to te !ore important
aspects @ose signi!icance is not strikingly eno%g e8ident in te text, and to make some
important additions to te text @ritten in 186+ to !it te state o! a!!airs in 18*+0 &ndeed, tere are
already t@o points @ic seem to me to reD%ire a brie! disc%ssion0
La$ of Value and )ate of Pro-t
&t @as to be expected tat te sol%tion o! te apparent contradiction bet@een tese t@o !actors
@o%ld lead to debates H%st as m%c a!ter, as be!ore, te p%blication o! Marx"s text0 $ome @ere
prepared !or a complete miracle, and !ind temsel8es disappointed beca%se tey see a simple,
rational, prosaically-sober sol%tion o! te contradiction, instead o! te oc%s-poc%s tey ad
expected0 Most Hoy!%lly disappointed, o! co%rse, is te @ell-kno@n, ill%strio%s 'oria0 6e as at
last !o%nd te ?rcimedian !%lcr%m !rom @ic e8en a gnome o! is calibre can li!t te solidly
b%ilt, gigantic Marxian str%ct%re into te air and explode it0 WatS e declaims indignantly0 &s tat
s%pposed to be a sol%tionQ 5at is p%re mysti!icationS Wen economists speak o! 8al%e, tey
mean 8al%e tat is act%ally establised in excange0
K-o economist @it any trace o! sense as e8er
concerned imsel! or @ill e8er @ant to concern
612 $%pplement: Engels
imsel! @it a 8al%e @ic commodities do not sell
!or and ne8er can sell !or )ne possono vendersi mai*0000
&n asserting tat te 8al%e !or @ic commodities
never sell is proportional to te labor tey contain,
@at does Marx do except repeat in an in8erted !orm
te tesis o! te ortodox economists, tat te 8al%e
!or @ic commodities sell is not proportional to te
labor expended on temQ 000 Matters are not elped by
Marx"s saying tat despite te di8ergency o!
indi8id%al prices !rom indi8id%al 8al%es, te total
price o! all commodities al@ays coincides @it teir
total 8al%e, or te amo%nt o! labor contained in te
totality o! te commodities0 For inasm%c as 8al%e is
noting more tan te excange ratio bet@een one
commodity and anoter, te 8ery concept o! a total
8al%e is an abs%rdity, nonsense 000 a contradiction in
abYecto0000L
?t te 8ery beginning o! te book, e arg%es, Marx says tat excange can eD%ate t@o
commodities only by 8irt%e o! a similar and eD%ally large element contained in tem I namely,
te eD%al amo%nt o! labor0 ?nd no@ e most solemnly rep%diates imsel! by asserting tat
commodities excange @it one anoter in a totally di!!erent ratio tan tat o! te amo%nt o!
labor contained in tem0
KWas tere e8er s%c an %tter reductio ad absurdum,
s%c complete teoretical bankr%ptcyQ Was e8er
scienti!ic s%icide committed @it greater pomp and
more solemnitySL B$ouva +ntologia, Feb01, 18*+,
pp02>8->*0C
We see: o%r 'oria is more tan appy0 Wasn"t e rigt in treating Marx as one o! is o@n, as an
ordinary carlatanQ 5ere yo% see it I Marx sneers at is p%blic H%st like 'oria# e li8es on
mysti!ication H%st like te most insigni!icant &talian pro!essor o! economics0 A%t, @ereas
7%lcamara can a!!ord tat beca%se e kno@s is trade, te cl%msy -orterner, Marx, commits
noting b%t ineptit%des, @rites nonsense and abs%rdities, so tat tere is noting le!t !inally !or
im b%t solemn s%icide0
'et %s sa8e !or later te statement tat commodities a8e ne8er been sold, nor can e8er be sold, at
te 8al%es determined by labor0 'et %s deal ere merely @it Mr0 'oria"s ass%rance tat
K8al%e is noting more tan te excange ratio
bet@een one commodity and anoter,L and tat
tere!ore Kte 8ery concept o! a total 8al%e is an
abs%rdity, nonsense000L
61+ $%pplement: Engels
5e ratio in @ic t@o commodities are excanged !or eac oter, teir 8al%e, is tere!ore
someting p%rely accidental, st%ck on to te commodities !rom te o%tside, @ic can be one
ting today and someting else tomorro@0 Weter a metric %ndred@eigt o! @eat is
excanged !or a gramme or a kilogramme o! gold does not in te least depend %pon conditions
inerent in tat @eat or gold0 For oter@ise tese conditions @o%ld also a8e to assert
temsel8es in te excange, dominate te latter on te @ole, and also a8e an independent
existence apart !rom excange, so tat one co%ld speak o! a total 8al%e o! commodities0 5at is
nonsense, says te ill%strio%s 'oria0 -o matter in @at ratio t@o commodities may be excanged
!or eac oter, tat is teir 8al%e I and tat"s all tere is to it0 6ence, 8al%e is identical @it price,
and e8ery commodity as as many 8al%es as te prices it can get0 ?nd price is determined by
s%pply and demand# and any one asking any more D%estions is a !ool to expect an ans@er0
A%t tere is a little itc to te matter0 &n te normal state, s%pply and demand balance0 5ere!ore,
let %s di8ide all te commodities in te @orld into t@o al8es, te s%pply gro%p and te eD%ally
large demand gro%p0 'et %s ass%me tat eac represents a price o! 1,=== billion marks, !rancs,
po%nds, or @at yo% @ill0 ?ccording to elementary aritmetic, tat makes a price o! <,===
billions0 -onsense, abs%rd, says Mr0 'oria0 5e t@o gro%ps togeter may represent a price o!
<,=== billions0 A%t it is oter@ise @it 8al%e0 &! @e say price: 1,=== U 1,=== R <,===0 A%t i! @e
say 8al%e: 1,=== U 1,=== R =0 ?t least in tis case, @ere te totality o! commodities is in8ol8ed0
For ere te commodities o! eac o! te t@o gro%ps are @ort 1,=== billion only beca%se eac o!
te t@o can and @ill gi8e tis s%m !or te commodities o! te oter0 A%t i! @e %nite te totality o!
te commodities o! te t@o in te ands o! a tird person, te !irst as no 8al%e in is and any
longer, nor te second, and te tird certainly not I in te end, no one as anyting0 ?nd again @e
mar8el at te s%periority @it @ic o%r so%tern ;agliostro as manandled te concept o!
8al%e in s%c a !asion tat not te sligtest trace o! it as been le!t0 5is is te acme o! 8%lgar
economicsS
&n Ara%n"s +rchiv fr so#iale Geset#gebung, 4ol0 4&&, -o02, Werner $ombart gi8es an o%tline o!
te Marxian system @ic, taken all in all, is excellent0 &t is te !irst time tat a :erman
%ni8ersity pro!essor s%cceeds on te @ole in seeing in Marx"s @ritings @at Marx really says,
stating tat te criticism o! te Marxian system cannot consist o! a re!%tation I
Klet te political careerist deal @it tatL
I b%t merely in a !%rter de8elopment0 $ombart, too, deals @it o%r s%bHect, as is to be expected0
6e in8estigates te importance o! 8al%e in te Marxian system, and arri8es at te !ollo@ing
res%lts0 4al%e is not mani!est in te excange relation o! capitalistically prod%ced commodities# it
does not li8e in te conscio%sness o! te agents o! capitalist prod%ction# it is not an empirical, b%t
a mental, a logical !act# te concept o! 8al%e in its material de!initeness in Marx is noting b%t te
economic expression !or te !act o! te social prod%cti8e po@er o! labor as te basis o! economic
existence# in te !inal analysis, te la@ o! 8al%e dominates economic processes in a capitalist
economic system, and !or tis economic system D%ite generally as te !ollo@ing content: te
8al%e o! commodities is te speci!ic and istorical !orm in @ic te prod%cti8e po@er o! labor,
in te last analysis dominating all economic processes, asserts itsel! as a determining !actor0 $o,
says $ombart, it cannot be said tat tis conception o! te signi!icance o! te la@ o! 8al%e !or te
capitalist !orm o! prod%ction is @rong0 A%t it does seem to me to be too broad, and s%sceptible o!
a narro@er, more precise !orm%lation: in my opinion it by no means exa%sts te entire
signi!icance o! te la@ o! 8al%e !or te economic stages o! society"s de8elopment dominated by
tis la@0
5ere is a like@ise excellent article by ;onrad $cmidt on te tird 8ol%me o! Capital in Ara%n"s
So#ialpolitisches %entralblatt, Febr%ary <+, 18*+, -o0<<0 Especially to be empasiEed ere is te
proo! o! o@ te Marxian deri8ation o! a8erage pro!it !rom s%rpl%s-8al%e !or te !irst time gi8es
an ans@er to te D%estion not e8en posed by economics %p to no@: o@ te magnit%de o! tis
616 $%pplement: Engels
a8erage rate o! pro!it is determined, and o@ it comes abo%t tat it is, say, 1= or 1+ per cent and
not += or 1== per cent0 $ince @e kno@ tat te s%rpl%s-8al%e !irst appropriated by te ind%strial
capitalist is te sole and excl%si8e so%rce !rom @ic pro!it and rent !lo@, tis D%estion sol8es
itsel!0 5is passage o! $cmidt"s article migt be directly @ritten !or economists a la 'oria, i! it
@ere not labor in 8ain to open te eyes o! tose @o do not @ant to see0
$cmidt, too, as is !ormal misgi8ings regarding te la@ o! 8al%e0 6e calls it a scienti!ic
hypothesis, set %p to explain te act%al excange process, @ic pro8es to be te necessary
teoretical starting point, ill%minating and indispensable, e8en in respect o! te penomena o!
competiti8e prices @ic seem in absol%te contradiction to it0 ?ccording to im, @ito%t te la@
o! 8al%e all teoretical insigt into te economic macinery o! capitalist reality ceases0 ?nd in a
pri8ate letter tat e permits me to D%ote, $cmidt declares te la@ o! 8al%e @itin te capitalist
!orm o! prod%ction to be a p%re, alto%g teoretically necessary, !iction0 5is 8ie@, o@e8er, is
D%ite incorrect in my opinion0 5e la@ o! 8al%e as a !ar greater and more de!inite signi!icance
!or capitalist prod%ction tan tat o! a mere ypotesis, not to mention a !iction, e8en to%g a
necessary one0
$ombart, as @ell as $cmidt, I & mention te ill%strio%s 'oria merely as an am%sing 8%lgar-
economist !oil I does not make s%!!icient allo@ance !or te !act tat @e are dealing ere not only
@it a p%rely logical process, b%t @it a istorical process, and its explanatory re!lection in
to%gt, te logical p%rs%ance o! its inner connections0
5e decisi8e passage is to be !o%nd in Marx, 4ol0 &&&,:
K5e @ole di!!ic%lty arises !rom te !act tat
commodities are not excanged simply as
commodities, b%t as products of capitals, @ic claim
participation in te total amo%nt o! s%rpl%s-8al%e,
proportional to teir magnit%de, or eD%al i! tey are o!
eD%al magnit%de0L
5o ill%strate tis di!!erence, it is s%pposed tat te @orkers are in possession o! teir means o!
prod%ction, tat tey @ork on te a8erage !or eD%ally long periods o! time and @it eD%al
intensity, and excange teir commodities @it one anoter directly0 5en, in one day, t@o
@orkers @o%ld a8e added by teir labor an eD%al amo%nt o! ne@ 8al%e to teir prod%cts, b%t te
prod%ct o! eac @o%ld a8e di!!erent 8al%e, depending on te labor already embodied in te
means o! prod%ction0 5is latter part o! te 8al%e @o%ld represent te constant capital o! capitalist
economy, @ile tat part o! te ne@ly-added 8al%e employed !or te @orker"s means o!
s%bsistence @o%ld represent te 8ariable capital, and te portion o! te ne@ 8al%e still remaining
@o%ld represent te s%rpl%s-8al%e, @ic in tis case @o%ld belong to te @orker0 5%s, a!ter
ded%cting te amo%nt to replace te KconstantL part o! 8al%e only ad8anced by tem, bot
@orkers @o%ld get eD%al 8al%es# b%t te ratio o! te part representing s%rpl%s-8al%e to te 8al%e o!
te means o! prod%ction I @ic correspond to te capitalist rate o! pro!it I @o%ld be di!!erent in
eac case0 A%t since eac o! tem gets te 8al%e o! te means o! prod%ction replaced tro%g te
excange, tis @o%ld be a @olly immaterial circ%mstance0
K5e excange o! commodities at teir 8al%es, or
approximately at teir 8al%es, t%s reD%ires a much
lower stage tan teir excange at teir prices o!
prod%ction, @ic reD%ires a de!inite le8el o!
capitalist de8elopment0000 ?part !rom te domination
61> $%pplement: Engels
o! prices and price mo8ement by te la@ o! 8al%e, it is
D%ite appropriate to regard te 8al%es o! commodities
as not only theoretically b%t also historically
antecedent Bpri%sC to te prices o! prod%ction0 5is
applies to conditions in which the laborer owns his
own means of production, and tis is te condition o!
te land-o@ning @orking !armer and te cra!tsman, in
te ancient as @ell as in te modern @orld0 5is
agrees also @it te 8ie@ @e expressed pre8io%sly,
tat te e8ol%tion o! prod%cts into commodities arises
tro%g excange bet@een di!!erent comm%nities, not
bet@een te members o! te same comm%nity0 &t
olds not only !or tis primiti8e condition, b%t also
!or s%bseD%ent conditions, based on sla8ery and
ser!dom, and !or te g%ild organiEation o! andicra!ts,
so long as te means o! prod%ction in8ol8ed in eac
branc o! prod%ction can be trans!erred !rom one
spere to anoter only @it di!!ic%lty and tere!ore
te 8ario%s speres o! prod%ction are related to one
anoter, @itin certain limits, as !oreign co%ntries or
comm%nist comm%nities0L
6ad Marx an opport%nity to go o8er te tird 8ol%me once more, e @o%ld do%btless a8e
extended tis passage considerably0 ?s it stands, it gi8es only a sketcy o%tline o! @at is to be
said on te point in D%estion0 'et %s, tere!ore, examine it some@at closer0
We all kno@ tat at te beginning o! society, prod%cts are cons%med by te prod%cers temsel8es,
and tat tese prod%cers are spontaneo%sly organiEed in more or less comm%nistic comm%nities#
tat te excange o! te s%rpl%s o! tese prod%cts @it strangers, @ic %sers in te con8ersion
o! prod%cts into commodities, is o! a later date# tat it takes places at !irst only bet@een
indi8id%al comm%nities o! di!!erent tribes, b%t later also pre8ails @itin te comm%nity, and
contrib%tes considerably to te latter"s dissol%tion into bigger or smaller !amily gro%ps0 A%t e8en
a!ter tis dissol%tion, te excanging !amily eads remain @orking peasants, @o prod%ce almost
all tey reD%ire @it te aid o! teir !amilies on teir o@n !armsteads, and get only a sligt
portion o! te reD%ired necessities !rom te o%tside in excange !or s%rpl%s prod%cts o! teir o@n0
5e !amily is engaged not only in agric%lt%re and li8estock-raising# it also @orks teir prod%cts
%p into !inised articles o! cons%mption# no@ and ten it e8en does its o@n milling @it te and-
mill# it bakes bread, spins, dyes, @ea8es !lax and @ool, tans leater, b%ilds and repairs @ooden
b%ildings, makes tools and %tensils, and not in!reD%ently does Hoinery and blacksmiting# so tat
te !amily, or !amily gro%p, is in te main sel!-s%!!icient0
5e little tat s%c a !amily ad to obtain by barter or b%y !rom o%tside, e8en %p to te beginning
o! te 1*t cent%ry in :ermany, consisted principally o! te obHects o! andicra!t prod%ction I
tat is, s%c tings te nat%re o! @ose man%!act%re @as by no means %nkno@n to te peasant,
618 $%pplement: Engels
and @ic e did not prod%ce imsel! only beca%se e lacked te ra@ material or beca%se te
p%rcased article @as m%c better or 8ery m%c ceaper0 6ence, te peasant o! te Middle ?ges
kne@ !airly acc%rately te labor-time reD%ired !or te man%!act%re o! te articles obtained by im
in barter0 5e smit and te cart@rigt o! te 8illage @orked %nder is eyes# like@ise, te tailor
and soemaker I @o in my yo%t still paid teir 8isits to o%r )ine peasants, one a!ter anoter,
t%rning ome-made materials into soes and cloting0 5e peasants, as @ell as te people !rom
@om tey bo%gt, @ere temsel8es @orkers# te excanged articles @ere eac one"s o@n
prod%cts0 Wat ad tey expended in making tese prod%ctsQ 'abor and labor alone: to replace
tools, to prod%ce ra@ material, and to process it, tey spent noting b%t teir o@n labor-po@er#
o@ ten co%ld tey excange tese prod%cts o! teirs !or tose o! oter laboring prod%cers
oter@ise tan in te ratio o! labor expended on temQ -ot only @as te labor-time spent on tese
prod%cts te only s%itable meas%re !or te D%antitati8e determination o! te 8al%es to be
excanged: no oter @ay @as at all possible0 3r is it belie8ed tat te peasant and te artisan @ere
so st%pid as to gi8e %p te prod%ct o! 1= o%rs" labor o! one person !or tat o! a single o%rs" labor
o! anoterQ -o oter excange is possible in te @ole period o! peasant nat%ral economy tan
tat in @ic te excanged D%antities o! commodities tend to be meas%red more and more
according to te amo%nts o! labor embodied in tem0 From te moment money penetrates into
tis mode o! economy, te tendency to@ards adaptation to te la@ o! 8al%e Bin te Marxian
!orm%lation, nota beneSC gro@s more prono%nced on te one and, @ile on te oter it is already
interr%pted by te inter!erence o! %s%rers" capital and !leecing by taxation# te periods !or @ic
prices, on a8erage, approac to @itin a negligible margin o! 8al%es, begin to gro@ longer0
5e same olds good !or excange bet@een peasant prod%cts and tose o! te %rban artisans0 ?t
te beginning, tis barter takes places directly, @ito%t te medi%m o! te mercant, on te cities"
market days, @en te peasant sells and makes is p%rcases0 6ere, too, not only does te peasant
kno@ te artisan"s @orking conditions, b%t te latter kno@s tose o! te peasant as @ell0 For te
artisan is imsel! still a bit o! a peasant I e not only as a 8egetable and !r%it garden, b%t 8ery
o!ten also as a small piece o! land, one or t@o co@s, pigs, po%ltry, etc0 ,eople in te Middle
?ges @ere t%s able to ceck %p @it considerable acc%racy on eac oter"s prod%ction costs !or
ra@ material, a%xiliary material, and labor-time I at least in respect o! articles o! daily general
%se0
A%t o@, in tis barter on te basis o! te D%antity o! labor, @as te latter to be calc%lated, e8en i!
only indirectly and relati8ely, !or prod%cts reD%iring a longer labor, interr%pted at reg%lar
inter8als, and %ncertain in yield I grain or cattle, !or exampleQ ?nd among people, to boot, @o
co%ld not calc%lateQ 3b8io%sly, only by means o! a lengty process o! EigEag approximation,
o!ten !eeling te @ay ere and tere in te dark, and, as is %s%al, learning only tro%g mistakes0
A%t eac one"s necessity !or co8ering is o@n o%tlay on te @ole al@ays elped to ret%rn to te
rigt direction# and te small n%mber o! kinds o! articles in circ%lation, as @ell as te o!ten
cent%ry-long stable nat%re o! teir prod%ction, !acilitated te attaining o! tis goal0 ?nd tat it by
no means took so long !or te relati8e amo%nt o! 8al%e o! tese prod%cts to be !ixed !airly closely
is already pro8ed by te !act tat cattle, te commodity !or @ic tis appears to be most di!!ic%lt
beca%se o! te long time o! prod%ction o! te indi8id%al ead, became te !irst rater generally
accepted money commodity0 5o accomplis tis, te 8al%e o! cattle, its excange ratio to a large
n%mber o! oter commodities, m%st already a8e attained a relati8ely %n%s%al stabiliEation,
ackno@ledged @ito%t contradiction in te territories o! many tribes0 ?nd te people o! tat time
@ere certainly cle8er eno%g I bot te cattlebreeders and teir c%stomers I not to gi8e a@ay te
labor-time expended by tem @ito%t an eD%i8alent in barter0 3n te contrary, te closer people
are to te primiti8e state o! commodity prod%ction I te )%ssians and 3rientals, !or example I
te more time do tey still @aste today, in order to sD%eeEe o%t, tro%g long tenacio%s
bargaining, te !%ll compensation !or teir labor-time expended on a prod%ct0
61* $%pplement: Engels
$tarting @it tis determination o! 8al%e by labor-time, te @ole o! commodity prod%ction
de8eloped, and @it it, te m%lti!ario%s relations in @ic te 8ario%s aspects o! te la@ o! 8al%e
assert temsel8es, as described in te !irst part o! 4ol0 & o! Capital# tat is, in partic%lar, te
conditions %nder @ic labor alone is 8al%e-creating0 5ese are conditions @ic assert
temsel8es @ito%t entering te conscio%sness o! te participants and can temsel8es be
abstracted !rom daily practice only tro%g laborio%s, teoretical in8estigation# @ic act,
tere!ore, like nat%ral la@s, as Marx pro8ed to !ollo@ necessarily !rom te nat%re o! commodity
prod%ction0 5e most important and most incisi8e ad8ance @as te transition to metallic money,
te conseD%ence o! @ic, o@e8er, @as tat te determination o! 8al%e by labor-time @as no
longer 8isible %pon te s%r!ace o! commodity excange0 From te practical point o! 8ie@, money
became te decisi8e meas%re o! 8al%e, all te more as te commodities entering trade became
more 8aried, te more tey came !rom distant co%ntries, and te less, tere!ore, te labor-time
necessary !or teir prod%ction co%ld be cecked0 Money itsel! %s%ally came !irst !rom !oreign
parts# e8en @en precio%s metals @ere obtained @itin te co%ntry, te peasant and artisan @ere
partly %nable to estimate approximately te labor employed terein, and partly teir o@n
conscio%sness o! te 8al%e-meas%ring property o! labor ad been !airly @ell dimmed by te abit
o! reckoning @it money# in te pop%lar mind, money began to represent absol%te 8al%e0
&n a @ord: te Marxian la@ o! 8al%e olds generally, as !ar as economic la@s are 8alid at all, !or
te @ole period o! simple commodity prod%ction I tat is, %p to te time @en te latter s%!!ers
a modi!ication tro%g te appearance o! te capitalist !orm o! prod%ction0 (p to tat time, prices
gra8itate to@ards te 8al%es !ixed according to te Marxian la@ and oscillate aro%nd tose 8al%es,
so tat te more !%lly simple commodity prod%ction de8elops, te more te a8erage prices o8er
long periods %ninterr%pted by external 8iolent dist%rbances coincide @it 8al%es @itin a
negligible margin0 5%s, te Marxian la@ o! 8al%e as general economic 8alidity !or a period
lasting !rom te beginning o! excange, @ic trans!orms prod%cts into commodities, do@n to
te 1+t cent%ry o! te present era0 A%t te excange o! commodities dates !rom a time be!ore all
@ritten istory I @ic in Egypt goes back to at least <+== A0;0, and peraps +=== A0;0, and in
Aabylon to 2=== A0;0, peraps to 6=== A0;0# t%s, te la@ o! 8al%e as pre8ailed d%ring a period
o! !rom !i8e to se8en to%sand years0 ?nd no@, let %s admire te toro%gness o! Mr0 'oria, @o
calls te 8al%e generally and directly 8alid d%ring tis period a 8al%e at @ic commodities are
ne8er sold nor can e8er be sold, and @it @ic no economist a8ing a spark o! common sense
@o%ld e8er occ%py imsel!S
We a8e not spoken o! te mercant %p to no@0 We co%ld sa8e te consideration o! tis
inter8ention !or no@, @en @e pass to te trans!ormation o! simple into capitalist commodity
prod%ction0 5e mercant @as te re8ol%tionary element in tis society @ere e8eryting else
@as stable I stable, as it @ere, tro%g ineritance# @ere te peasant obtained not only is ide
o! land, b%t is stat%s as a !reeold proprietor, as a !ree or entralled D%it-rent peasant or ser!, and
te %rban artisan is trade and g%ild pri8ileges by ineritance and almost inalienably, and eac o!
tem, in addition, is c%stomer, is market, as @ell as is skill, trained !rom cildood !or te
inerited cra!t0 &nto tis @orld ten entered te mercant, @it @om its re8ol%tion @as to start0
A%t not as a conscio%s re8ol%tionary# on te contrary, as !les o! its !les, bone o! its bone0 5e
mercant o! te Middle ?ges @as by no means an indi8id%alist# e @as essentially an associate
like all is contemporaries0 5e mark association, gro@n o%t o! primiti8e comm%nism, pre8ailed
in te co%ntryside0 Eac peasant originally ad an eD%al ide, @it eD%al pieces o! land o! eac
D%ality, and a corresponding, eD%al sare in te rigts o! te mark0 ?!ter te mark ad become a
closed association, and no ne@ ides @ere allocated any longer, s%bdi8ision o! te ides occ%rred
tro%g ineritance, etc0, @it corresponding s%bdi8isions o! te common rigts in te mark# b%t
te !%ll ide remained te %nit, so tat tere @ere al!, D%arter and eigt-ides @it al!, D%arter
and eigt-rigts in te mark0 ?ll later prod%cti8e associations, partic%larly te g%ilds in te
cities, @ose stat%tes @ere noting b%t te application o! te mark constit%tion to a cra!t pri8ilege
6<= $%pplement: Engels
instead o! to a restricted area o! land, !ollo@ed te pattern o! te mark association0 5e central
point o! te @ole organiEation @as te eD%al participation o! e8ery member in te pri8ileges and
prod%ce ass%red to te g%ild, as is strikingly expressed in te 1+<> licence o! te Elber!eld and
Aarmen yarn trade0 B5%n:Dndustrie am $iederrhein, 4ol0 &&, 162 !!0C 5e same olds tr%e o! te
mine g%ilds, @ere eac sare participated eD%ally and @as also di8isible, togeter @it its rigts
and obligations, like te ide o! te mark member0 ?nd te same olds good in no less degree o!
te mercant companies, @ic initiated o8erseas trade0 5e 4enetians and te :enoese in te
arbor o! ?lexandria or ;onstantinople, eac KnationL in its o@n fondaco I d@elling, inn,
@areo%se, exibition and salesrooms, togeter @it central o!!ices I !ormed complete trade
associations# tey @ere closed to competitors and c%stomers# tey sold at prices !ixed among
temsel8es# teir commodities ad a de!inite D%ality g%aranteed by p%blic inspection and o!ten by
stamp# tey deliberated in common on te prices to be paid by te nati8es !or teir prod%cts, etc0
-or did 6anseatic mercants act oter@ise on te :erman Aridge B5ydske AryggenC in Aergen,
-or@ay# te same olds tr%e o! teir 7%tc and Englis competitors0 Woe to te man @o sold
%nder te price or bo%gt abo8e te priceS 5e boycott tat str%ck im meant at tat time
ine8itable r%in, not co%nting te direct penalties imposed by te association %pon te g%ilty0 ?nd
e8en close associations @ere !o%nded !or de!inite p%rposes, s%c as te Maona o! :enoa in te
12t and 1+t cent%ries, !or years te r%ler o! te al%m mines in ,ocaea in ?sia Minor, as @ell as
o! te &sland o! ;ios# !%rtermore, te great )a8ensberg 5rading ;ompany, @ic dealt @it
&taly and $pain since te end o! te 12t cent%ry, !o%nding brances in tose co%ntries# te
:erman company o! te ?%gsb%rgers: F%gger, Welser, 4dlin, 6dcstetter, etc# tat o! te
-ernbergers: 6irsc8ogel and oters, @ic participated @it a capital o! 66,=== d%cats and tree
sips in te 1+=+-=6 ,ort%g%ese expedition to &ndia, making a net pro!it o! 1+= per cent,
according to oters 1>+ per cent B6eyd# ,evantehandel, 4ol0 &&, p0+<2C# and a large n%mber o!
oter companies, KMonopolia,L o8er @ic '%ter @axes so indignant0
6ere, !or te !irst time, @e meet @it a pro!it and a rate o! pro!it0 5e mercant"s e!!orts are
deliberately and conscio%sly aimed at making tis rate o! pro!it eD%al !or all participants0 5e
4enetians in te 'e8ant, and te 6anseatics in te -ort, eac paid te same prices !or is
commodities as is neigbor# is transport carges @ere te same, e got te same prices as e8ery
oter mercant o! is KnationL0 5%s, te rate o! pro!it @as eD%al !or all0 &n te big trading
companies, te allocation o! pro!it pro rata o! te paid-in capital sare is as m%c a matter o!
co%rse as te participation in mark rigts pro rata o! te entitled ide sare, or as te mining
pro!it pro rata o! te mining sare0 5e eD%al rate o! pro!it, @ic in its !%lly de8eloped !orm is
one o! te !inal res%lts o! capitalist prod%ction, t%s mani!ests itsel! ere in its simplest !orm as
one o! te points !rom @ic capital started istorically, as a direct o!!soot in !act o! te mark
association, @ic in t%rn is a direct o!!soot o! primiti8e comm%nism0
5is original rate o! pro!it @as necessarily 8ery ig0 5e b%siness @as 8ery risky, not only
beca%se o! @ide-spread piracy# te competing nations also permitted temsel8es all sorts o! acts
o! 8iolence @en te opport%nity arose# !inally, sales and marketing conditions @ere based %pon
licences granted by !oreign princes, @ic @ere broken or re8oked o!ten eno%g0 6ence, te
pro!it ad to incl%de a ig ins%rance premi%m0 5e t%rno8er @as slo@, te andling o!
transactions protracted, and in te best periods I @ic, admittedly, @ere seldom o! long d%ration
I te b%siness @as a monopoly trade @it monopoly pro!it0 5e 8ery ig interest rates pre8ailing
at te time, @ic al@ays ad to be lo@er on te @ole tan te percentage o! %s%al commercial
pro!it, also pro8e tat te rate o! pro!it @as on te a8erage 8ery ig0
A%t tis ig rate o! pro!it, eD%al !or all participants and obtained tro%g Hoint labor o! te
comm%nity, eld only locally @itin te associations I tat is, in tis case te Knation,L 4enetians,
:enoese, 6anseatics, and 7%tcmen eac ad a special rate o! pro!it, and at te beginning more
or less eac indi8id%al market areas, as @ell0 ED%aliEation o! tese di!!erent company pro!it rates
took place in te opposite @ay, tro%g competition0 First, te pro!it rates o! te di!!erent markets
6<1 $%pplement: Engels
!or one and te same nation0 &! ?lexandria o!!ered more pro!it !or 4enetian goods tan ;ypr%s,
;onstantinople, or 5rebiEond, te 4enetians @o%ld start more capital mo8ing to@ards ?lexandria,
@itdra@ing it !rom trade @it oter markets0 5en, te grad%al eD%aliEation o! pro!it rates
among te di!!erent nations, exporting te same or similar goods to te same markets, ad to
!ollo@, and some o! tese nations @ere 8ery o!ten sD%eeEed to te @all and disappeared !rom te
scene0 A%t tis process @as being contin%ally interr%pted by political e8ents, H%st as all 'e8antine
trade collapsed o@ing to te Mongolian and 5%rkis in8asions# te great geograpic-commercial
disco8eries a!ter 12*< only accelerated tis decline and ten made it !inal0
5e s%dden expansion o! te market area tat !ollo@ed te re8ol%tion in comm%nications
connected @it it, introd%ced no essential cange at !irst in te nat%re o! trade operations0 ?t te
beginning, co-operati8e companies also dominated trade @it &ndia and ?merica0 A%t in te !irst
place, bigger nations stood beind tese companies0 &n trade @it ?merica, te @ole o! great
%nited $pain took te place o! te ;atalonians trading @it te 'e8ant# alongside it, t@o co%ntries
like England and France# and e8en 6olland and ,ort%gal, te smallest, @ere still at least as large
and strong as 4enice, te greatest and strongest trading nation o! te preceding period0 5is ga8e
te tra8eling mercant, te mercant ad8ent%rer o! te 16t and 1>t cent%ries, a backing tat
made te company, @ic protected its companions @it arms, also, more and more s%per!l%o%s,
and its expenses an o%trigt b%rden0 Moreo8er, te @ealt in a single and gre@ considerably
!aster, so tat single mercants soon co%ld in8est as large s%ms in an enterprise as !ormerly an
entire company0 5e trading companies, @ere8er still existent, @ere %s%ally con8erted into
armed corporations, @ic conD%ered and monopolistically exploited @ole ne@ly disco8ered
co%ntries %nder te protection and te so8ereignty o! te moter co%ntry0 A%t te more colonies
@ere !o%nded in te ne@ areas, largely by te state, te more did company trade recede be!ore
tat o! te indi8id%al mercant, and te eD%aliEation o! te pro!it rate became tere@it more and
more a matter o! competition excl%si8ely0
(p to no@, @e a8e become acD%ainted @it a rate o! pro!it only !or mercant capital0 For only
mercant and %s%rers" capital ad existed %p to tat time# ind%strial capital @as yet to be
de8eloped0 ,rod%ction @as still predominantly in te ands o! @orkers o@ning teir o@n means
o! prod%ction, @ose @ork tere!ore yielded no s%rpl%s-8al%e to any capital0 &! tey ad to
s%rrender a part o! te prod%ct to tird parties @ito%t compensation, it @as in te !orm o! trib%te
to !e%dal lords0 Mercant capital, tere!ore, co%ld only make its pro!it, at least at te beginning,
o%t o! te !oreign b%yers o! domestic prod%cts, or te domestic b%yers o! !oreign prod%cts# only
to@ard te end o! tis period I !or &taly, tat is, @it te decline o! 'e8antine trade I @ere !oreign
competition and te di!!ic%lty o! marketing able to compel te andicra!t prod%cers o! export
commodities to sell te commodity %nder its 8al%e to te exporting mercant0 ?nd t%s @e !ind
ere tat commodities are sold at teir 8al%e, on te a8erage, in te domestic retail trade o!
indi8id%al prod%cers @it one anoter, b%t, !or te reasons gi8en, not in international trade as a
r%le0 M%ite te opposite o! te present-day @orld, @ere te prod%ction prices old good in
international and @olesale trade, @ile te !ormations o! prices in %rban retail trade is go8erned
by D%ite oter rates o! pro!it0 $o tat te meat o! an ox, !or example, experiences today a greater
rise in price on its @ay !rom te 'ondon @olesaler to te indi8id%al 'ondon cons%mer tan !rom
te @olesaler in ;icago, incl%ding transport, to te 'ondon @olesaler0
5e instr%ment tat grad%ally bro%gt abo%t tis re8ol%tion in price !ormation @as ind%strial
capital0 )%diments o! te latter ad been !ormed as early as te Middle ?ges, in tree !ields I
sipping, mining, and textiles0 $ipping on te scale practiced by te &talian and 6anseatic
maritime rep%blics @as impossible @ito%t sailors, i0e0, @age-laborers B@ose @age relationsip
may a8e been concealed %nder association !orms @it pro!it-saringC, or @ito%t oarsmen I
@age-laborers or sla8es I !or te galleys o! tat day0 5e g%ilds in te ore mines, originally
associated @orkers, ad already been con8erted in almost e8ery case into stock companies !or
exploiting te deposits by means o! @age-laborers0 ?nd in te textile ind%stry, te mercant ad
6<< $%pplement: Engels
beg%n to place te little master-@ea8er directly in is ser8ice, by s%pplying im @it yarn and
a8ing it made into clot !or is acco%nt in ret%rn !or a !ixed @age I in sort, by imsel!
canging !rom a mere b%yer into a so-called contractor0
6ere @e a8e te !irst beginnings o! te !ormation o! capitalist s%rpl%s-8al%e0 We can ignore te
mining g%ilds as closed monopoly corporations0 Wit regard to te sip-o@ners, it is ob8io%s tat
teir pro!it ad to be at least as ig as te c%stomary one in te co%ntry, pl%s an extra increment
!or ins%rance, depreciation o! sips, etc0 A%t o@ @ere matters @it te textile contractors, @o
!irst bro%gt commodities, directly man%!act%red !or capitalist acco%nt, into competition @it te
commodities o! te same sort made !or andicra!t acco%ntQ
Mercant capital"s rate o! pro!it @as at and to start @it0 'ike@ise, it ad already been eD%aliEed
to an approximate a8erage rate, at least !or te locality in D%estion0 -o@, @at co%ld ind%ce te
mercant to take on te extra b%siness o! a contractorQ 3nly one ting: te prospect o! greater
pro!it at te same selling price as te oters0 ?nd e ad tis prospect0 Ay taking te little master
into is ser8ice, e broke tro%g te traditional bonds o! prod%ction @itin @ic te prod%cer
sold is !inised prod%ct and noting else0 5e mercant capitalist bo%gt te labor-po@er, @ic
still o@ned its prod%ction instr%ments b%t no longer te ra@ material0 Ay t%s g%aranteeing te
@ea8er reg%lar employment, e co%ld depress te @ea8er"s @age to s%c a degree tat a part o!
te labor-time !%rnised remained %npaid !or0 5e contractor t%s became an appropriator o!
s%rpl%s-8al%e o8er and abo8e is commercial pro!it0 ?dmittedly, e ad to employ additional
capital to b%y yarn, etc0, and lea8e it in te @ea8er"s ands %ntil te article !or @ic e !ormerly
ad to pay !%ll price only %pon p%rcasing it, @as !inised0 A%t, in te !irst place, e ad already
%sed extra capital in most cases !or ad8ances to te @ea8er, @o as a r%le s%bmitted to te ne@
prod%ction conditions only %nder te press%re o! debt0 ?nd, secondly, apart !rom tat, te
calc%lation took te !ollo@ing !orm:
?ss%me tat o%r mercant operates is export b%siness @it capital o! 3=,=== d%cats, seD%ins,
po%nds sterling or @ate8er is te case0 3! tat, say 1=,=== are engaged in te p%rcase o!
domestic goods, @ereas <=,=== are %sed in te o8erseas market0 $ay te capital is t%rned o8er
once in t@o years0 ?nn%al t%rno8er R 1+,===0 -o@, o%r mercant @ants to become a contractor, to
a8e clot @o8en !or is o@n acco%nt0 6o@ m%c additional capital m%st e in8estQ 'et %s
ass%me tat te prod%ction time o! te piece o! clot, s%c as e sells, a8erages t@o monts I
@ic is certainly 8ery ig0 'et %s !%rter ass%me tat e as to pay !or e8eryting in cas0
6ence, e m%st ad8ance eno%g capital to s%pply is @ea8ers @it yarn !or t@o monts0 $ince
is t%rno8er is 1+,=== a year, e b%ys clot !or <,+== in t@o monts0 'et %s say tat <,=== o! tat
represents te 8al%e o! yarn, and +== @ea8ers" @ages# ten o%r mercant reD%ires an additional
capital o! <,===0 We ass%me tat te s%rpl%s-8al%e e appropriates !rom te @ea8er by te ne@
metod totals only + per cent o! te 8al%e o! te clot, @ic constit%tes te certainly 8ery
modest s%rpl%s-8al%e rate o! <+ per cent0 B <,===c U +==8 U 1<+s# s" R 1<+N+== R <+T, p" R
1<+N<,+== R +TC0 3%r man ten makes an extra pro!it o! >+= on is ann%al t%rno8er o! 1+,===,
and as t%s got is additional capital back in <W years0
A%t in order to accelerate is sales and ence is t%rno8er, t%s making te same pro!it @it te
same capital in a sorter period o! time, and ence a greater pro!it in te same time, e @ill
donate a small portion o! is s%rpl%s-8al%e to te b%yer I e @ill sell ceaper tan is
competitors0 5ese @ill also grad%ally be con8erted into contractors, and ten te extra pro!it !or
all o! tem @ill be red%ced to te ordinary pro!it, or e8en to a lo@er pro!it on te capital tat as
been increased !or all o! tem0 5e eD%ality o! te pro!it rate is re-establised, alto%g possibly
on anoter le8el, by a part o! te s%rpl%s-8al%e made at ome being t%rned o8er to te !oreign
b%yers0
5e next step in te s%bH%gation o! ind%stry by capital takes place tro%g te introd%ction o!
man%!act%re0 5is, too, enable te man%!act%rer, @o is most o!ten is o@n export trader in te
1>t and 18t cent%ries I generally in :ermany do@n to 18+=, and still today ere and tere I to
6<3 $%pplement: Engels
prod%ce ceaper tan is old-!asioned competitor, te andicra!tsman0 5e same process is
repeated# te s%rpl%s-8al%e appropriated by te man%!act%ring capitalist enables im Bor te
export mercant @o sares @it imC to sell ceaper tan is competitors, %ntil te general
introd%ction o! te ne@ mode o! prod%ction, @en eD%aliEation against takes place0 5e already
existing mercantile rate o! pro!it, e8en i! it is le8elled o%t only locally, remains te ,rocr%stean
bed in @ic te excessi8e ind%strial s%rpl%s-8al%e is lopped o!! @ito%t mercy0
&! man%!act%ring spr%ng aead by ceapening its prod%cts, tis is e8en more tr%e o! modern
ind%stry, @ic !orces te prod%ction costs o! commodities lo@er and lo@er tro%g its repeated
re8ol%tions in prod%ction, relentlessly eliminating all !ormer modes o! prod%ction0 &t is large-
scale ind%stry, too, tat t%s !inally conD%ers te domestic market !or capital, p%ts an end to te
small-scale prod%ction and nat%ral economy o! te sel!-s%!!icient peasant !amily, and places te
entire nation in ser8ice o! capital0 'ike@ise, it eD%aliEes te pro!it rate o! te di!!erent commercial
and ind%strial brances o! b%siness into onegeneral rate o! pro!it, and !inally ens%res ind%stry te
position o! po@er d%e to it in tis eD%aliEation by eliminating most o! te obstacles !ormerly
indering te trans!er o! capital !rom one branc to anoter0 5ereby te con8ersion o! 8al%es
into prod%ction prices is accomplised !or all excange as a @ole0 5is con8ersion tere!ore
proceeds according to obHecti8e la@s, @ito%t te conscio%sness or te intent o! te participants0
5eoretically, tere is no di!!ic%lty at all in te !act tat competition red%ces to te general le8el
pro!its @ic exceed te general rate, t%s again depri8ing te !irst ind%strial appropriator o! te
s%rpl%s-8al%e exceeding te a8erage0 ?ll te more so in practice, o@e8er, !or te speres o!
prod%ction @it excessi8e s%rpl%s-8al%e, @it ig 8ariable and lo@ constant capital I i0e0, @it
lo@ capital composition I are by teir 8ery nat%re te ones tat are last and least completely
s%bHected to capitalist prod%ction, especially agric%lt%re0 3n te oter and, te rise o! prod%ction
prices abo8e commodity 8al%es, @ic is reD%ired to raise te belo@-a8erage s%rpl%s-8al%e,
contained in te prod%cts o! te speres o! ig capital composition, to te le8el o! te a8erage
rate o! pro!it, appears to be extremely di!!ic%lt teoretically, b%t is soonest and most easily
e!!ected in practice, as @e a8e seen0 For @en commodities o! tis class are !irst prod%ced
capitalistically and enter capitalist commerce, tey compete @it commodities o! te same nat%re
prod%ced by per-capitalist metods and ence dearer0 5%s, e8en i! te capitalist prod%cer
reno%nces a part o! te s%rpl%s-8al%e, e can still obtain te rate o! pro!it pre8ailing in is
locality, @ic originally ad no direct connection @it s%rpl%s-8al%e beca%se it ad arisen !rom
mercant capital long be!ore tere @as any capitalist prod%ction at all, and tere!ore be!ore an
ind%strial rate o! pro!it @as possible0
The Stoc4 !change
10 5e position o! te stock excange in capitalist prod%ction in general is clear !rom 4ol0 &&&, ,art
+, especially ;apter /<>10 A%t since 186+, @en te book @as @ritten, a cange as taken place
@ic today assigns a considerably increased and constantly gro@ing role to te stock excange,
and @ic, as it de8elops, tends to concentrate all prod%ction, ind%strial as @ell as agric%lt%ral,
and all commerce, te means o! comm%nication as @ell as te !%nctions o! excange, in te ands
o! stock excange operators, so tat te stock excange becomes te most prominent
representati8e o! capitalist prod%ction itsel!0
<0 &n 186+ te stock excange @as still a secondary element in te capitalist system0 :o8ernment
bonds represented te b%lk o! excange sec%rities, and e8en teir s%m-total @as still relati8ely
small0 Aesides, tere @ere Hoint-stock banks, predominant on te continent and in ?merica, and
H%st beginning to absorb te aristocratic pri8ate banks in England, b%t still relati8ely insigni!icant
en masse. )ail@ay sares @ere still comparati8ely @eak compared to te present time0 5ere
@ere still only !e@ directly prod%cti8e establisments in stock company !orm I and, like te
banks, most o! all in te poorerco%ntries: :ermany, ?%stria, ?merica, etc0 5e KministerGs eyeL
@as still an %nconD%ered s%perstition0
6<2 $%pplement: Engels
?t tat time, te stock excange @as still a place @ere te capitalists took a@ay eac oterGs
acc%m%lated capital, and @ic directly concerned te @orkers only as ne@ proo! o! te
demoralising general e!!ect o! capitalist economy and as con!irmation o! te ;al8inist doctrine
tat predestination Balias canceC decides, e8en in tis li!e, blessedness and damnation, @ealt,
i0e0, enHoyment and po@er, and po8erty, i0e0, pri8ation and ser8it%de0
30 -o@ it is oter@ise0 $ince te crisis o! 1866 acc%m%lation as proceeded @it e8er-increasing
rapidity, so tat in no ind%strial co%ntry, least o! all in England, co%ld te expansion o! prod%ction
keep %p @it tat o! acc%m%lation, or te acc%m%lation o! te indi8id%al capitalist be completely
%tilised in te enlargement o! is o@n b%siness# Englis cotton ind%stry as early as 182+# te
rail@ay s@indles0 A%t @it tis acc%m%lation te n%mber o! rentiers, people @o @ere !ed %p
@it te reg%lar tension in b%siness and tere!ore @anted merely to am%se temsel8es or to
!ollo@ a mild p%rs%it as directors or go8ernors o! companies, also rose0 ?nd tird, in order to
!acilitate te in8estment o! tis mass !loating aro%nd as money-capital, ne@ legal !orms o! limited
liability companies @ere establised @ere8er tat ad not yet been done, and te liability o! te
sareolder, !ormerly %nlimited, @as also red%ced Y /more or less1 BHoint-stock companies in
:ermany, 18*=0 $%bscription 2= per centSC0
20 5erea!ter, grad%al con8ersion o! ind%stry into stock companies0 3ne branc a!ter anoter
s%!!ers tis !ate0 First iron, @ere giant plants are no@ necessary Bbe!ore tat, mines, @ere not
already organised on saresC0 5en te cemical ind%stry, like@ise macinery plants0 3n te
continent, te textile ind%stry# in England, only in a !e@ areas in 'ancasire B3ldam $pinning
Mill, A%rnley Wea8ing Mill, etc0, tailor co-operati8es, b%t tis is only a preliminary stage @ic
@ill again !all into te mastersG ands at te next crisisC, bre@eries Bte ?merican ones sold a !e@
years ago to Englis capital, ten :%inness, Aass, ?llsoppC0 5en te tr%sts, @ic create gigantic
enterprises %nder common management Bs%c as (nited ?lkaliC0 5e ordinary indi8id%al !irm is
more and more only a preliminary stage to bring te b%siness to te point @ere it is big eno%g
to be K!o%nded0L
'ike@ise in trade: 'ea!s, ,arsons, Morleys, Morrison, 7illon I all !o%nded0 5e same in retail
stores by no@, and not merely %nder te cloak o! co-operation . la Lstores0L
'ike@ise banks and oter credit establisments e8en in England0 ? tremendo%s n%mber o! ne@
banks, all sares delimited0 E8en old banks etc0, are con8erted, @it se8en pri8ate sareolders,
into limited companies0
+0 5e same in te !ield o! agric%lt%re0 5e enormo%sly expanded banks, especially in :ermany
%nder all sorts o! b%rea%cratic names, more and more te olders o! mortgages# @it teir sares
te act%al iger o@nersip o! landed property is trans!erred to te stock excange, and tis is
e8en more tr%e @en te !arms !all into te creditorsG ands0 6ere te agric%lt%ral re8ol%tion o!
prairie c%lti8ation is 8ery impressi8e# i! it contin%es, te time can be !oreseen @en EnglandGs
and FranceGs land @ill also be in te ands o! te stock excange0
60 -o@ all !oreign in8estments in te !orm o! sares0 5o mention England alone: ?merican
rail@ays, -ort and $o%t Bcons%lt te stock excange listC, :oldberger, etc0
>0 5en colonisation0 5oday tis is p%rely a s%bsidiary o! te stock excange, in @ose interests
te E%ropean po@ers di8ided ?!rica a !e@ years ago, and te Frenc conD%ered 5%nis and 5onkin0
?!rica leased directly to companies B-iger, $o%t ?!rica, :erman $o%t-West and :erman East
?!ricaC, and Masonaland and -atal seiEed by )odes !or te stock excange0
1
&n Aook & BKap0 4&&, 3, $0 <16N<=6 !!0C /Englis edition: ;0 &J, 3, <<+ !!0 I Ed01 @e a8e gi8en te example o! -0 W0
$enior to so@ @at con!%sion tis may create in te mind o! te economist0
<
KFrom @at as gone be!ore, @e kno@ tat s%rpl%s-8al%e is p%rely te res%lt o! a 8ariation in te 8al%e o! 8, o! tat
portion o! te capital @ic is trans!ormed into labo%r-po@er# conseD%ently, 8 U s R 8 U 78 Bor 8 pl%s an increment o!
8C0 A%t te !act tat it is 8 alone tat 8aries, and te conditions o! tat 8ariation, are obsc%red by te circ%mstance tat
in conseD%ence o! te increase in te 8ariable component o! te capital, tere is also an increase in te s%m total o! te
ad8anced capital0 &t @as originally V+==, and becomes V+*=0L BA%c &, Kap0 4& &, 1, $0 <=3N1*+0C /Englis edition: ;0
&J, 1, p0 <120 I Ed01
3
Malt%s, ,rinciples o! ,olitical Economy, <nd ed0, 'ondon, 1836, p0 <680
2
K;apital is tat @ic is expended @it a 8ie@ to pro!it0L Malt%s, 7e!initions in ,olitical Economy, 'ondon, 18<>,
p0 860
+
;!0 A%c &0 Kap0 J4&&&, 1, $0 +>1N+61 !!0 /Englis edition: ;0 JJ, 1, p0 +2* !!0 I Ed01
6
)0 5orrens, ?n Essay on te ,rod%ction o! Wealt, 'ondon, 18<1, pp0 +1-+3, and 32*0
>
Malt%s, 7e!initions in ,olitical Economy, 'ondon, 18+3, pp0 >=, >10
8
K5e masses o! 8al%e and o! s%rpl%s-8al%e prod%ced by di!!erent capitals I te 8al%e o! labo%r-po@er being gi8en
and its degree o! exploitation being eD%al I 8ary directly as te amo%nts o! te 8ariable constit%ents o! tese capitals,
i0e0, as teir constit%ents trans!ormed into li8ing labo%r-po@er0L BA%c 1, Kap0 &J0 $0 31<N3=30C /Englis edition: ;0
J&, pp0 3=6N3=>0 I Ed01
1
5e man%script as te !ollo@ing note at tis point: K&n8estigate later in @at manner tis case is connected @it
gro%nd-rent0L '. 0.
<
5e man%script contains also 8ery detailed calc%lations o! te di!!erence bet@een te rate o! s%rpl%s-8al%e and te
rate o! pro!it Bs"-p"C, @ic as 8ery interesting pec%liarities, and @ose mo8ement indicates @ere te t@o rates dra@
apart or approac one anoter0 5ese mo8ements may also be represented by c%r8es0 & am not reprod%cing tis
material, beca%se it is o! less importance to te immediate p%rposes o! tis @ork, and beca%se it is eno%g ere to call
attention to tis !act !or readers @o @is to p%rs%e tis point !%rter0 I F0E0
1
K$ince in all !actories tere is a 8ery large amo%nt o! !ixed capital in b%ildings and macinery, te greater te n%mber
o! o%rs tat macinery can be kept at @ork te greater @ill be te ret%rn0L B)eports o! &nsp0 o! Fact0, 31st 3ctober,
18+8, p0 80C
<
;!0 (re on te progress in !actory constr%ction0
1
5e Factory M%estion and te 5en 6o%rs" Aill by )0 60 :reg, 'ondon, 183>, p0 11+0
<
5e report errs in te !inal sentence0 &nstead o! 6d0 it so%ld be 3d0 !or loss tro%g @aste0 5is loss amo%nts to <+T
in te case o! $%rat, and only 1<Z to 1+T in te case o! ?merican cotton, and tis latter is meant, te same percentage
a8ing been correctly calc%lated !or te price o! + to 6d0 &t is tr%e, o@e8er, tat also in te case o! ?merican cotton
bro%gt to E%rope d%ring te latter years o! te ;i8il War te proportion o! @aste o!ten rose considerably iger tan
be!ore0 I F0 E0
3
For examples see Aabbage /3n te Economy o! Macinery and Man%!act%res, 'ondon, 183<, pp0 <8=-810IEd0 1,
among oters0 5e %s%al expedient I a red%ction o! @ages I is also employed in tis instance, so tat tis contin%al
depreciation acts D%ite contrary to te dreams o! Mr0 ;arey"s Karmonio%s brainL0
2
$ince te abo8e @as @ritten B186+C, competition on te @orld-market as been considerably intensi!ied by te rapid
de8elopment o! ind%stry in all ci8ilised co%ntries, especially in ?merica and :ermany0 5e !act tat te rapidly and
enormo%sly expanding prod%cti8e !orces today o%tgro@ te control o! te la@s o! te capitalist mode o! commodity
excange, @itin @ic tey are s%pposed to operate, impresses itsel! more and more e8en on te minds o! te
capitalists0 5is is disclosed especially by t@o symptoms0 First, by te ne@ general mania !or a protecti8e tari!!, @ic
di!!ers !rom te old protectionism in tat no@ articles !it !or export are tose best protected0 ?nd secondly, by te
tr%sts o! man%!act%rers o! @ole speres o! prod%ction @ic reg%late prod%ction, and t%s prices and pro!its0 &t goes
@ito%t saying tat tese experiments are practicable only so long as te economic climate is relati8e !a8o%rable0 5e
!irst storm m%st %pset tem and pro8e tat, alto%g prod%ction ass%redly needs reg%lation, it is certainly not te
capitalist class @ic is !itted !or tat task0 Mean@ile, te tr%sts a8e no oter mission b%t to see to it tat te little
!is are s@allo@ed by te big !is still more rapidly tan be!ore0 I F0E0
+
&t goes @ito%t saying tat @e do not, like Mr0 Aaker, explain te @ool crisis o! 18+> on te basis o! te
disproportion bet@een te prices o! ra@ material and prod%ct0 5is disproportion @as itsel! b%t a symptom, and te
crisis @as a general one0 I F0E0
6
? sarp distinction is made in England bet@een @oollen man%!act%re, @ic spins carded yarn !rom sort @ool and
@ea8es it Bmain centre 'eedsC, and @orsted man%!act%re, @ic makes @orsted yarn !rom long @ool and @ea8es it
Bmain seat Arad!ord, in .orksireC0 I F0E0
>
5is rapid expansion o! o%tp%t o! macine-made linen yarn in &reland dealt a deat-blo@ to exports o! linen made o!
and-made yarn in :ermany B$ilesia, '%satia, and WestpaliaC0 I F0E0
1
/&t !ollo@s !rom ;apter &4 tat te abo8e statement correctly applies only @en capitals ? and A are di!!erently
composed in respect to teir 8al%es, b%t tat te percentages o! teir 8ariable parts are proportionate to teir periods o!
t%rno8er, i0 e0, in8ersely proportionate to teir n%mber o! t%rno8ers0 'et capital ? a8e te !ollo@ing percentages o!
composition: <=c !ixed U >=c circ%lating and t%s *=c U 1=8 R 1==0 ?t a rate o! s%rpl%s-8al%e o! 1==T te l=8
prod%ces 1=s in one t%rno8er, yielding a rate o! pro!it !or one t%rno8er R 1=T0 'et capital A R 6=c !ixed U <=c
circ%lating, and t%s 8=c U <=8 R 1==0 5e <=8 prod%ce <=s in one t%rno8er at te abo8e rate o! s%rpl%s-8al%e,
yielding a rate o! pro!it !or one t%rno8er R <=T, @ic is do%ble tat o! ?0 A%t i! ? is t%rned o8er t@ice per year, and
A only once, ten < \ 1= also make <=s per year, and te ann%al rate o! pro!it is te same !or bot, namely <=T0 I
F0E01
1
5e contro8ersy bet@een $torc and )icardo @it regard to gro%nd-rent Ba contro8ersy pertaining only to te
s%bHect# in !act, te t@o opponents pay no attention to one anoterC, @eter te market-8al%e Bor rater @at tey call
market-price and price o! prod%ction respecti8elyC @as reg%lated by te commodities prod%ced %nder %n!a8o%rable
conditions B)icardoC /3n te ,rinciples o! ,olitical Economy, and 5axation, 5ird edition, 'ondon, 18<1, pp0 6610 I
Ed0 1, or by tose prod%ced %nder !a8o%rable conditions B$torcC /;o%rs d"economie politiD%e, o% exposition des
principes, D%determinent la prosperite des nations, tome &&, $t0-,etersbo%rg, 181+, pp0 >8->*0 I Ed0 1, resol8es itsel! in
te !inal analysis in tat bot are rigt and bot @rong, and tat bot o! tem a8e !ailed to consider te a8erage case0
;ompare ;orbet /?n &nD%iry into te ;a%ses and Modes o! te Wealt o! &ndi8id%als, 'ondon, 1821, pp0 2<-220 I
Ed0 1 on te cases in @ic te price is reg%lated by commodities prod%ced %nder te most !a8o%rable conditions0 I K&t
is not meant to be asserted by im B)icardoC tat t@o partic%lar lots o! t@o di!!erent articles, as a at and a pair o!
soes, excange @it one anoter @en tose t@o partic%lar lots @ere prod%ced by eD%al D%antities o! labo%r0 Ay
"commodity" @e m%st ere %nderstand te "description o! commodity", not a partic%lar indi8id%al at, pair o! soes etc0
5e @ole labo%r @ic prod%ces all te ats in England is to be considered, to tis p%rpose, as di8ided among all te
ats0 5is seems to me not to a8e been expressed at !irst, and in te general statement o! tis doctrine0L
B3bser8ations on ;ertain 4erbal 7isp%tes in ,olitical Economy, etc0, 'ondon, 18<1, pp0 +3-+20C
<
5e !ollo@ing s%btility is seer nonsense: KWere te D%antity o! @ages, capital, and land, reD%ired to prod%ce an
article, are become di!!erent !rom @at tey @ere, tat @ic ?dam $mit calls te nat%ral price o! it is also di!!erent,
and tat price, @ic @as pre8io%sly its nat%ral price becomes, @it re!erence to tis alteration, its market-price#
beca%se, to%g neiter te s%pply, nor te D%antity @anted, may a8e been cangedL I bot o! tem cange ere, H%st
beca%se te market-8al%e, or, in te case o! ?dam $mit, te price o! prod%ction, canges in conseD%ence o! a cange
o! 8al%e I Ktat s%pply is not no@ exactly eno%g !or tose persons @o are able and @illing to pay @at is no@ te
cost o! prod%ction, b%t is eiter greater or less tan tat# so tat te proportion bet@een te s%pply and @at is @it
re!erence to te ne@ cost o! prod%ction te e!!ect%al demand, is di!!erent !rom @at it @as0 ?n alteration in te rate o!
s%pply @ill ten take place i! tere is no obstacle in te @ay o! it, and at last bring te commodity to its ne@ nat%ral
price0 &t may ten seem good to some persons to say tat as te commodity gets to its nat%ral price by an alteration in
its s%pply, te nat%ral price is as m%c o@ing to one proportion bet@een te demand and s%pply, as te market-price is
to anoter# and conseD%ently, tat te nat%ral price, H%st as m%c as te market-price, depends on te proportion tat
demand and s%pply bear to eac oter0L BK5e great principle o! demand and s%pply is called into action to determine
@at ?0 $mit calls nat%ral prices as @ell as market-prices0L I Malt%s0C /,rinciples o! ,olitical Economy, 'ondon,
18<=, p0 >+0 I Ed01 B3bser8ations on ;ertain 4erbal 7isp%tes, etc0, 'ondon, 18<1, pp0 6=-610C 5e good man does not
grasp te !act tat it is precisely te cange in te cost o! prod%ction, and t%s in te 8al%e @ic ca%sed a cange in
te demand, in te present case, and t%s in te proportion bet@een demand and s%pply, and tat tis cange in te
demand may bring abo%t a cange in te s%pply0 5is @o%ld pro8e H%st te re8erse o! @at o%r good tinker @ants to
pro8e0 &t @o%ld pro8e tat te cange in te cost o! prod%ction is by no means d%e to te proportion o! demand and
s%pply, b%t rater reg%lates tis proportion0L
3
K&! eac man o! a class co%ld ne8er a8e more tan a gi8en sare, or aliD%ot part, o! te gains and possessions o! te
@ole, e @o%ld readily combine to raise te gainL# Be does it as soon as te proportion o! demand to s%pply permits
it C Ktis is monopoly0 A%t @ere eac man tinks tat e may any@ay increase te absol%te amo%nt o! is o@n sare,
to%g by a process @ic lessens te @ole amo%nt, e @ill o!ten do it# tis is competition0L B?n &nD%iry into 5ose
,rinciples )especting te -at%re o! 7emand, etc,, 'ondon, 18<1, p0 1=+0C
1
&t is 8ery pec%liar tat )icardo /3n te ,rinciples o! ,olitical Economy, and 5axation, 5ird edition, 'ondon, 18<1,
pp0 36-210I Ed01 B@o nat%rally proceeds di!!erently !rom %s, since e did not %nderstand te le8elling o! 8al%es to
prices o! prod%ctionC did not once consider tis e8ent%ality, b%t only te !irst case, tat o! a @age rise and its in!l%ence
on te prices o! prod%ction o! commodities0 ?nd te ser8%m pec%s imitator%m /6orace, Epistles, Aook &, Epistle 1*0I
Ed01 did not e8en attempt to make tis extremely sel!-e8ident, act%ally ta%tological, practical application0
1
KWe so%ld also expect tat, o@e8er te rate o! te pro!its o! stock migt diminis in conseD%ence o! te
acc%m%lation o! capital on te land and te rise o! @ages, yet te aggregate amo%nt o! pro!its @o%ld increase0 5%s,
s%pposing tat, @it repeated acc%m%lations o! V1==,===, te rate o! pro!it so%ld !all !rom <= to 1*, to 28, to 1>T, a
constantly diminising rate, @e so%ld expect tat te @ole amo%nt o! pro!its recei8ed by tose s%ccessi8e o@ners o!
capital @o%ld be al@ays progressi8e# tat it @o%ld be greater @en te capital @as V<==,===, tan @en V1==,===#
still greater @en V3==,===# and so on, increasing, to%g at a diminising rate, @it e8ery increase o! capital0 5is
progression, o@e8er, is only tr%e !or a certain time# t%s 1*T on V<==,=== is more tan <=T on V1==,===# again
18T on V3==,=== is more tan 1*T on V<==,===# b%t a!ter capital as acc%m%lated to a large amo%nt, and pro!its a8e
!allen, te !%rter acc%m%lation diminises te aggregate o! pro!its0 5%s, s%ppose te acc%m%lation so%ld be
V1,===,===, and te pro!its >T, te @ole amo%nt o! pro!its @ill be V>=,===# no@ i! an addition o! V1==,=== capital
be made to te million, and pro!its so%ld !all to 6T, V66,=== or a dimin%tion o! V2,=== @ill be recei8ed by te
o@ners o! te stock, alto%g te @ole amo%nt o! stock @ill be increased !rom V1,===,=== to V1,1==,===0L I
)icardo, ,olitical Economy, ;ap0 4& BWorks, ed0 by Mac;%lloc, 18+<, pp0 68-6*C0 I 5e !act is, tat te ass%mption
as ere been made tat te capital increases !rom 1,===,=== to 1,1==,===, tat is, by 1=T, @ile te rate o! pro!it
!alls !rom > to 6, ence by 12 <N> T0 6inc illae lacrimaeS /"5%s tese tears" - ,%bli%s, 5erence, ?ndria, ?ct &, $cene 10
I Ed01
1
?dam $mit @as rigt in tis respect, contrary to )icardo, @o said: K5ey contend tat te eD%ality o! pro!its @ill
be bro%gt abo%t by te general rise o! pro!its# and & am o! te opinion tat te pro!its o! te !a8o%red trade @ill
speedily s%bmit to te general le8el0L BWorks:, ed0 by Mac;%lloc, p0 >30C
1
5e !oregoing is placed in brackets, beca%se, to%g a reas o! te notes o! te original man%script, it goes in some
points beyond te scope o! te material !o%nd in te original0 I F0E0
1
5o be able to classi!y mercant"s capital as prod%cti8e capital, )amsay con!o%nds it @it te transportation ind%stry
and calls commerce Kte transport o! commodities !rom one place to anoter0L )+n 0ssay on the Distribution of
"ealth, p0 1*0C 5e same con!%sion by 4erri BMedita#ioni sulla 0conomia &olitica, p 2 /&n: Scrittori Classici Dtaliani
di 0conomia &olitica. ,arte Moderna, t0 J4, p03<0 I 0d.1C and by $ay B4rait7 d57conomie politi3ue, &, 12, 1+C0 &n is
0lements of &olitical 0conomy B?ndo8er and -e@ .ork, 183+C $0,0 -e@man says: K&n te existing economical
arrangements o! society, te 8ery act, @ic is per!ormed by te mercant, o! standing bet@een te prod%cer and te
cons%mer, ad8ancing to te !ormer capital and recei8ing prod%cts in ret%rn, and ten anding o8er tese prod%cts to
te latter, recei8ing back capital in ret%rn, is a transaction @ic bot !acilitates te economical processes o! te
comm%nity, and adds 8al%e to te prod%cts in relation to @ic it is per!ormedL Bp0 1>2C0 ,rod%cer and cons%mer t%s
sa8e time and money tro%g te inter8ention o! te mercant0 5is ser8ice reD%ires an ad8ance o! capital and labo%r,
and m%st be re@arded, Ksince it adds 8al%e to prod%cts, !or te same prod%cts in te ands o! cons%mers are @ort
more tan in te ands o! prod%cers0L ?nd so commerce appears to im, as it does to M0 $ay, as Kstrictly an act o!
prod%ctionL Bp0 1>+C0 5is -e@man"s 8ie@ is !%ndamentally @rong0 5e use1value o! a commodity is greater in te
ands o! te cons%mer tan in tose o! te prod%cer, beca%se it is !irst realised by te cons%mer0 For te %se-8al%e o! a
commodity does not ser8e its end, does not begin to !%nction %ntil te commodity enters te spere o! cons%mption0
$o long as it is in te ands o! te prod%cer, it exists only in potential !orm0 A%t one does not pay t@ice !or a
commodity I !irst !or its excange-8al%e, and ten !or its %se-8al%e0 Ay paying !or its excange-8al%e, & appropriate
its %se-8al%e0 ?nd its excange-8al%e is not in te least a%gmented by trans!erring te commodity !rom te prod%cer
or middleman to te cons%mer0
1
Pon Aellers /Essays abo%t te ,oor, Man%!act%res, 5rade, ,lantations, and &mmorality, 'ondon, 16**, p0 1=0 I Ed010
<
6o@ @ell tis !orecast o! te !ate o! te commercial proletariat, @ritten in 186+, as stood te test o! time can be
corroborated by %ndreds o! :erman clerks, @o are trained in all commercial operations and acD%ainted @it tree or
!o%r lang%ages, and o!!er teir ser8ices in 8ain in 'ondon ;ity at <+ sillings per @eek, @ic is !ar belo@ te @ages
o! a good macinist0 ? blank o! t@o pages in te man%script indicates tat tis point @as to a8e been treated at
greater lengt0 For te rest, @e re!er te reader to Aook && BKap0 4&0C BK5e ;osts o! ;irc%lationLC /Englis edition:
4ol0 &&, ;0 4&0 I Ed01, @ere 8ario%s matters belonging %nder tis ead a8e already been disc%ssed0 I F0E0
1
K,ro!it, on te general principle, is al@ays te same, @ate8er be price# keeping its place like an inc%mbent body on
te s@elling or sinking tide0 ?s, tere!ore, prices rise, a tradesman raises price# as prices !all, a tradesman lo@ers
price0L B;orbet, ?n &nD%iry into te ;a%ses, etc0, o! te Wealt o! &ndi8id%als, 'ondon, 1821, p0 <=0C 6ere, as in te
text generally# it is only a matter o! ordinary commerce, not o! spec%lation0 5e analysis o! spec%lation, as @ell as
e8eryting else pertaining to te di8ision o! mercantile capital, !alls o%tside te !ield o! o%r inD%iry0 K5e pro!it o!
trade is a 8al%e added to capital @ic is independent o! price, te secondL Bspec%lationC Kis !o%nded on te 8ariation
in te 8al%e o! capital or in price itsel!L B10 c0, p0 1<8C0
<
5is is a 8ery nai8e, b%t also a 8ery correct remark: K$%rely te !act tat one and te same commodity may be ad
!rom di!!erent sellers at considerably di!!erent prices is !reD%ently d%e to mistakes o! calc%lation0L BFeller and
3dermann, 7as :anEe der ka%!mnnniscen ?ritmetik, >t ed0, 18+*, $02+10C 5is so@s o@ p%rely teoretical, tat
is, abstract, becomes te determination o! prices0
1
9%r Kritik der politiscen 3ekonomie, $0 <>0
<
K5e great di!!erences among coins as concerns teir grain and coinage by many princes and to@ns tat @ere
pri8ileged to coin money, necessitated te creation o! b%siness establisments to enable mercants to %se local money
@ere8er compensation !or te di!!erent coins @as reD%ired0 5o be able to make cas payments, mercants @o
tra8elled to a !oreign market pro8ided temsel8es @it %ncoined p%re sil8er, or gold0 &n te same @ay tey excanged
money recei8ed in local markets !or %ncoined sil8er or gold @en ret%rning ome0 5e b%siness o! excanging money,
te excange o! %ncoined precio%s metals !or local coins, and 8ice 8ersa, t%s became a @idespread and paying
b%siness0L B6ellmann, $tndte@esen des Mittelalters0 Aonn, 18<6-<*, &, $0 23>-380C KAanks o! excange do not o@e
teir name to te !act tat tey iss%e bills o! excange000 b%t to te !act tat tey %sed to excange coins0 'ong be!ore
te establisment o! te ?msterdam Aank o! Excange in 16=*, tere existed in te 7%tc mercant to@ns money-
cangers and excange o%ses, e8en excange banks 000 5e b%siness o! tese money-cangers consisted in
excanging te n%mero%s 8arieties o! coin bro%gt into te co%ntry by !oreign traders !or te c%rrency o! te realm0
:rad%ally teir circle o! acti8ity extended 000 5ey became te bankers and casiers o! teir times0 A%t te go8ernment
o! ?msterdam 8ie@ed as dangero%s te combination o! casier and excange b%sinesses, and to meet tis danger it
@as resol8ed to establis a large cartered instit%tion able to per!orm bot te casier and excange operations0 5is
instit%tion @as te !amo%s ?msterdam Aank o! Excange o! 16=*0 &n like manner, te excange banks o! 4enice,
:enoa, $tockolm, 6amb%rg, o@e teir origin to te contin%al necessity o! canging money0 3! all tese, te
6amb%rg Excange is te only one today still doing b%siness, beca%se te need !or s%c an instit%tion is still !elt in
tat mercants" to@n, @ic as no Mint o! its o@n, etc0L B$0 4issering, 6andboek 8an ,raktisce
$taat%iso%dk%nde, ?msterdam, 186=-61, &, <2>-280C
3
K5e instit%tion o! casier as probably no@ere preser8ed its original independent caracter so p%re as in te 7%tc
mercant to@nsL Bc!0 on te origin o! te casier b%siness in ?msterdam0 E0 '%sac, 6olland"s )ykdom, ,art &&&C0 K&ts
!%nctions coincide in part @it tose o! te old ?msterdam Aank o! Excange0 5e casier recei8es !rom te
mercants, @o employ is ser8ices, a certain amo%nt o! money, !or @ic e opens a "credit" !or tem in is books0
'ater, tey send im teir claims, @ic e collects !or tem and credits to teir acco%nt0 ?t te same time, e makes
payments on teir dra!ts Bkassiers brie!esC and carges te amo%nts to teir acco%nt0 6e makes a small carge !or
tese receipts and payments, @ic yields im a rem%neration !or is labo%rs only corresponding to te siEe o! te
t%rno8er accomplised bet@een te t@o parties0 &! payments are to be balanced bet@een t@o mercants, @o bot deal
@it te same casier, s%c payments are settled 8ery simply by m%t%al entries in te books, !or te casiers balance
teir m%t%al claims !rom day to day0 5e casier"s act%al b%siness t%s consists basically o! tis mediation in
payments0 5ere!ore, it excl%des ind%strial enterprises, spec%lation, and opening o! %nlimited credits# !or it m%st be
te r%le in tis b%siness tat te casier makes no payment o8er and abo8e te credit o! any one keeping an acco%nt
@it im0L B4issering, loc0 cit0, p0 2320C )e te banking associations o! 4enice: K5e reD%irements and locality o!
4enice, @ere carrying b%llion @as less con8enient tan in oter places, ind%ced te large mercants o! tat city to
!o%nd banking associations %nder d%e sa!eg%ards, s%per8ision and management0 Members o! s%c associations
deposited certain s%ms, on @ic tey dre@ dra!ts !or teir creditors, @ere%pon te paid s%m @as ded%cted !rom te
debtor"s acco%nt on te page o! te book reser8ed !or tat p%rpose and added to te s%m credited in te same book to
te creditor0 5is is te earliest beginning o! te so-called giro banks0 5ese associations are indeed old0 A%t i!
attrib%ted to te 1<t cent%ry, tey are being con!o%nded @it te $tate 'oan &nstit%te establised in 11>10L
B6ellmann, 'oc0 cit0, pp0 2+3-+20C
1
5e sage Mr0 )oscer /7ie :r%ndlagen der -ationaldkonomie, 30 ?%!lage, 18+8, p 6=, +0 1=30 I Ed01 as !ig%red o%t
tat, since certain people designate trade as mediation bet@een prod%cers and cons%mers, KoneL migt H%st as @ell
designate prod%ction itsel! as mediation o! cons%mption Bbet@een @omQC, and tis implies, o! co%rse, tat mercant"s
capital is as m%c a part o! prod%cti8e capital as agric%lt%ral and ind%strial capital0 &n oter @ords, beca%se & can say,
tat man can mediate is cons%mption only by means o! prod%ction Band e as to do tis e8en @ito%t getting is
ed%cation at 'eipEigC, or tat labo%r is reD%ired !or te appropriation o! te prod%cts o! -at%re B@ic migt be called
mediationC, it !ollo@s, o! co%rse, tat social mediation arising !rom a speci!ic social !orm o! prod%ction I beca%se
mediation I as te same absol%te caracter o! necessity, and te same rank0 5e @ord mediation settles e8eryting0
Ay te @ay, te mercants are not mediators bet@een prod%cers and cons%mers Bcons%mers as distinct !rom
prod%cers, cons%mers, tat is, @o do not prod%ce, are le!t aside !or te momentC, b%t mediators in te excange o!
te prod%cts o! tese prod%cers among temsel8es0 5ey are b%t middlemen in an excange, @ic in to%sands o!
cases proceeds @ito%t tem0
<
6err W0 Kiesselbac Bin is 7er :ang des Weltandels im Mittelalter, 186=C is indeed still en@rapped in te ideas o!
a @orld, in @ic mercant"s capital is te general !orm o! capital0 6e as not te least idea o! te modern meaning o!
capital, any more tan Mommsen @en e speaks in is istory o! )ome o! KcapitalL and te r%le o! capital0 &n
modern Englis istory, te commercial estate proper and te mercant to@ns are also politically reactionary and in
leag%e @it te landed and moneyed interest against ind%strial capital0 ;ompare, !or instance, te political role o!
'i8erpool @it tat o! Mancester and Airmingam0 5e complete r%le o! ind%strial capital @as not ackno@ledged by
Englis mercant"s capital and moneyed interest %ntil a!ter te abolition o! te corn tax, etc0
3
K5e inabitants o! trading cities, by importing te impro8ed man%!act%res and expensi8e l%x%ries o! ricer
co%ntries a!!orded some !ood to te 8anity o! te great proprietors, @o eagerly p%rcased tem @it great D%antities
o! te r%de prod%ce o! teir o@n lands0 5e commerce o! a great part o! E%rope in tose times, accordingly consisted
cie!ly, in te excange o! teir o@n r%de prod%ce !or te man%!act%red prod%ce o! more ci8ilised nations0000 Wen
tis taste became so general as to occasion a considerable demand, te mercants, in order to sa8e te expense o!
carriage, nat%rally endea8o%red to establis some man%!act%res o! te same kind in teir o@n co%ntry0L B?dam $mit
/Wealt o! -ations1, Aook &&&, ;0 &&&, 'ondon, 1>>6, pp0 28*, 2*=0C
2
K-o@ tere is among mercants m%c complaint abo%t te nobles, or robbers, beca%se tey m%st trade %nder great
danger and r%n te risk o! being kidnapped, beaten, blackmailed, and robbed0 &! tey @o%ld s%!!er tese tings !or te
sake o! H%stice, te mercants @o%ld be saintly people0000 A%t since s%c great @rong and %ncristian tie8ery and
robbery are committed all o8er te @orld by mercants, and e8en among temsel8es, is it any @onder tat :od so%ld
proc%re tat s%c great @ealt, gained by @rong, so%ld again be lost or stolen, and tey temsel8es be it o8er te
ead or made prisonerQ 000 ?nd te princes so%ld p%nis s%c %nH%st bargains @it d%e rigo%r and take care tat teir
s%bHects sall not be so o%trageo%sly ab%sed by mercants0 Aeca%se tey !ail to do so, :od employs knigts and
robbers, and p%nises te mercants tro%g tem !or te @rongs tey committed, and %ses tem as is de8ils, H%st as
e plag%es Egypt and all te @orld @it de8ils, or destroys tro%g enemies0 6e t%s pits one against te oter,
@ito%t tereby insin%ating tat knigts are any te less robbers tan mercants, alto%g te mercants daily rob te
@ole @orld, @ile a knigt may rob one or t@o once or t@ice a year0L K:o by te @ord o! &saia: 5y princes a8e
become te companions o! robbers0 For tey ang te tie8es, @o a8e stolen a g%lden or a al! g%lden, b%t tey
associate @it tose, @o rob all te @orld and steal @it greater ass%rance tan all oters, so tat te pro8erb remains
tr%e: Aig tie8es ang little tie8es# and as te )oman senator ;ato said: Mean tie8es lie in prisons and stocks, b%t
p%blic tie8es are cloted in gold and silks0 A%t @at @ill :od say !inallyQ 6e @ill do as e said to EEekiel# e @ill
amalgamate princes and mercants, one tie! @it anoter, like lead and iron, as @en a city b%rns do@n, lea8ing
neiter princes nor mercants0L BMartin '%ter, 4on Ka%!sandl%ng %nd W%cer, 1+<2, $0 <*6-*>0C
+
6o@ predominant !isery, man%!act%re and agric%lt%re, aside !rom oter circ%mstances, @ere as te basis !or
6olland"s de8elopment, as already been explained by 18t-cent%ry @riters, s%c as Massie /p0 6=10 &n
contradistinction to te !ormer 8ie@, @ic %nderrated te 8ol%me and importance o! commerce in ?sia, in ?ntiD%ity,
and in te Middle ?ges, it as no@ come to be te c%stom to extremely o8errate it0 5e best antidote against tis
conception is to st%dy te imports and exports o! England in te early 18t cent%ry and to compare tem @it modern
imports and exports0 ?nd yet tey @ere incomparably greater tan tose o! any !ormer trading nation0 B$ee ?nderson,
?n 6istorical and ;ronological 7ed%ction o! te 3rigin o! ;ommerce0 /4ol0 &&, 'ondon, 1>62, p0 <61 et seD0 I Ed01C
6
&! any nation"s istory, ten te istory o! te Englis in &ndia is a string o! !%tile and really abs%rd Bin practice
in!amo%sC economic experiments0 &n Aengal tey created a caricat%re o! large-scale Englis landed estates# in so%t-
eastern &ndia a caricat%re o! small parcelled property# in te nort-@est tey did all tey co%ld to trans!orm te &ndian
economic comm%nity @it common o@nersip o! te soil into a caricat%re o! itsel!0
>
$ince )%ssia as been making !rantic exertions to de8elop its o@n capitalist prod%ction, @ic is excl%si8ely
dependent %pon its domestic and te neigbo%ring ?siatic market, tis is also beginning to cange0 I F0E0
8
5e same is tr%e o! te ribbon and basting makers and te silk @ea8ers o! te )ine0 E8en a rail@ay as been b%ilt
near Kre!eld !or te interco%rse o! tese r%ral and-@ea8ers @it te to@n Kman%!act%rer0L A%t tis @as later p%t o%t
o! b%siness, togeter @it te and-@ea8ers, by te mecanical @ea8ing ind%stry0 I F0E0
*
5is system as been de8eloped since 186+ on a still larger scale0 For details see te First )eport o! te $elect
;ommittee o! te 6o%se o! 'ords on te $@eating $ystem, 'ondon, 18880 I F0E0
1
?t tis point certain passages may be D%oted, in @ic te economists so concei8e te matter0 I K.o% Bte Aank o!
EnglandC are 8ery large dealers in te commodity o! capitalQL is te D%estion posed to a director o! tis bank @en e
@as interrogated !or te )eport on Aank ?cts on te @itness stand0 B60 o! ;0 18+>, p0 2=20C
<
K5at a man @o borro@s money @it a 8ie@ o! making a pro!it by it, so%ld gi8e some portion o! is pro!it to te
lender, is a sel!-e8ident principle o! nat%ral H%stice0L B:ilbart, 5e 6istory and ,rinciples o! Aanking, 'ondon, 1832,
p02630C
3
K? o%se,L Kmoney,L etc0, are not to be loaned as KcapitalL i! ,ro%don is to a8e is @ay, b%t are to be sold as
Kcommodities 000 cost-priceL Bp0 22C0 '%ter stood some@at abo8e ,ro%don0 6e kne@ tat pro!it-making does not
depend on te manner o! lending or b%ying: K5ey t%rn b%ying also into %s%ry0 A%t tis is really too m%c to bite o!!
at once0 We m%st !irst con!ine o%rsel8es to one ting, %s%ry in lending, and a!ter @e a8e stopped tat Ba!ter
H%dgement-dayC, @e sall not !ail to preac against %s%ry in b%ying0L BMartin '%ter, ?n die ,!arerrn @ider den
W%cer E% predigen, Wittenberg, 1+2=0C
2
K5e eD%itableness o! taking interest depends not %pon a man"s making or not making pro!it, b%t %pon itsL Bte
borro@edC Kbeing capable o! prod%cing pro!it i! rigtly employedL0 B?n Essay on te :o8erning ;a%ses o! te -at%ral
)ate o! &nterest, @erein te sentiments o! $ir W0 ,etty and Mr0 'ocke, on tat ead, are considered, 'ondon, 1>+=, p0
2*0 5e a%tor o! tis anonymo%s @ork is P0 Massie0C
+
K)ic people, instead o! employing teir money temsel8es 000 let it o%t to oter people !or tem to make pro!it o!,
reser8ing !or te o@ners a proportion o! te pro!its so madeL Bl0 c0, pp0 <3-<2C0
6
K5e term "8al%e," @en applied to c%rrency, as tree se8eral meanings 000 <C c%rrency, act%ally in and000 compared
@it te same amo%nt o! c%rrency to be recei8ed %pon a !%t%re day0 &n tis case te 8al%e o! c%rrency is meas%red by
te rate o! interest, and te rate o! interest being determined by te ratio bet@een te amo%nt o! liable capital and te
demand !or it0L B;olonel )0 5orrens, 3n te 3peration o! te Aank ;arter ?ct o! 1822, etc0, <nd ed0, 182>, pp0 +, 60C
>
K5e ambig%ity o! te term "8al%e o! money" or o! te c%rrency, @en employed indiscriminately as it is, to signi!y
bot 8al%e in excange !or commodities and 8al%e in %se o! capital, is a constant so%rce o! con!%sion0L B5ooke,
&nD%iry into te ;%rrency ,rinciple, p0 >>0C 5e main con!%sion Bimplied in te matter itsel!C tat 8al%e as s%c
BinterestC becomes te %se-8al%e o! capital, as escaped 5ooke0
1
K5e nat%ral rate o! interest is go8erned by te pro!its o! trade to partic%lars0L BMassie, l0 c0, p0 +10C
<
?t tis point te man%script contains te !ollo@ing remark: K5e co%rse o! tis capter so@s tat it is pre!erable,
be!ore analysing te la@s o! te distrib%tion o! pro!its, to ascertain !irst te @ay in @ic te di8ision o! D%antity
becomes one o! D%ality0 5o make a transition !rom te pre8io%s capter, @e need b%t ass%me tat interest is a certain
inde!inite portion o! pro!it0L
3
K&n te !irst period, immediately a!ter press%re, money is ab%ndant @ito%t spec%lation# in te second period, money
is ab%ndant and spec%lations abo%nd# in te tird period, spec%lation begins to decline and money is in demand, in te
!o%rt period, money is scarce and a press%re arri8es0L B:ilbart, ? ,ractical 5reatise on Aanking, +t ed0, 4ol0 &,
'ondon, 182*, p0 12*0C
2
5ooke explains tis Kby te acc%m%lation o! s%rpl%s-capital necessarily accompanying te scarcity o! pro!itable
employment !or it in pre8io%s years, by te release o! oards, and by te re8i8al o! con!idence in commercial
prospects0L B6istory o! ,rices !rom 183* till 182>, 'ondon, 1828, p0 +20
+
K?n old c%stomer o! a banker @as re!%sed a loan %pon a V<==,=== bond# @en abo%t to lea8e to make kno@n is
s%spension o! payment, e @as told tere @as no necessity !or te step, %nder te circ%mstances te banker @o%ld b%y
te bond at V+=,===0L B/60 )oy1 5e 5eory o! te Excanges0 5e Aank ;arter ?ct o! 1822, etc0, 'ondon, 186*, p0
+=0C
6
$ince te rate o! interest is on te @ole determined by te a8erage rate o! pro!it, inordinate s@indling is o!ten bo%nd
%p @it a lo@ rate o! interest0 For instance, te rail@ay s@indle in te s%mmer o! 18220 5e rate o! interest o! te
Aank o! England @as not raised to 3T %ntil 16t 3ctober, 18220
>
P :0 3pdyke, !or instance, in is 5reatise on ,olitical Economy B-e@ .ork, 18+1C makes a 8ery %ns%ccess!%l attempt
to explain te %ni8ersality o! a +T rate o! interest by eternal la@s0 Mr0 Karl ?rnd is still more nai8e in 7ie
nat%rgemnsse 4olks@irtsca!t gegeneber dem Monopoltengeist %nd dem Komm%nism%s, etc0, 6ana%, 182+0 &t is
stated tere: K&n te nat%ral co%rse o! goods prod%ction tere is H%st one penomenon, @ic, in te !%lly settled
co%ntries, seems in some meas%re to reg%late te rate o! interest# tis is te proportion, in @ic te timber in
E%ropean !orests is a%gmented tro%g teir ann%al gro@t0 5is ne@ gro@t occ%rs D%ite independently o! teir
excange-8al%e, at te rate o! 3 or 2 to 1==0L B6o@ D%eer tat trees so%ld see to teir ne@ gro@t independently o!
teir excange-8al%eSC K?ccording to tis a drop in te rate o! interest belo@ its present le8el in te ricest co%ntries
cannot be expectedL Bp0 1<2C0 B6e means, beca%se te ne@ gro@t o! te trees is independent o! teir excange-8al%e,
o@e8er m%c teir excange-8al%e may depend on teir ne@ gro@t0C 5is deser8es to be called Kte primordial
!orest rate o! interest0L &ts disco8erer makes a !%rter la%dable contrib%tion in tis @ork to Ko%r scienceL as te
Kpilosoper o! te dog tax0L /Marx ironically calls K0 ?rnd te Kpilosoper o! te dog taxL beca%se in a special
paragrap in is book Bp 88, +02<=-<2C e ad8ocated tat tax0 I Ed01
8
5e Aank o! England raises and lo@ers te rate o! its disco%nt, al@ays, o! co%rse, @it d%e consideration o! te rate
pre8ailing in te open market, in accordance @it imports and exports o! gold0 KAy @ic gambling in disco%nts, by
anticipation o! te alterations in te bank-rate, as no@ become al! te trade o! te great eads o! te money centreL
I i0e0, o! te 'ondon money-market0 B/60 )oy1 5e 5eory o! te Excanges, etc0 , p0 1130C
*
K"5e price o! commodities !l%ct%ates" contin%ally# tey are all made !or di!!erent %ses# te money ser8es !or all
p%rposes0 5e commodities, e8en tose o! te same kind, di!!er according to D%ality# cas money is al@ays o! te
same 8al%e, or at least is ass%med to be so0 5%s it is tat te price o! money, @ic @e designate by te term interest,
as a greater stability and %ni!ormity tan tat o! any oter ting0L BP0 $te%art, ,rinciples o! ,olitical Economy, Frenc
translation, 1>8*, &4, p0 <>0C
1=
K5is r%le o! di8iding pro!its is not, o@e8er, to be applied partic%larly to e8ery lender and borro@er, b%t to lenders
and borro@ers in general 000 remarkably great and small gains are te re@ard o! skill and te @ant o! %nderstanding,
@ic lenders a8e noting at all to do @it# !or as tey @ill not s%!!er by te one, tey o%gt not to bene!it by te
oter0 Wat as been said o! partic%lar men in te same b%siness is applicable to partic%lar sorts o! b%siness# i! te
mercants and tradesmen employed in any one branc o! trade get more by @at tey borro@ tan te common pro!its
made by oter mercants and tradesmen o! te same co%ntry, te extraordinary gain is teirs, to%g it reD%ired only
common skill and %nderstanding to get it# and not te lenders", @o s%pplied tem @it money 000 !or te lenders
@o%ld not a8e lent teir money to carry on any branc o! trade %p on lo@er terms tan @o%ld admit o! paying so
m%c as te common rate o! interest# and tere!ore tey o%gt not to recei8e more tan tat, @ate8er ad8antages may
be made by teir money0L BMassie, 10 c0, pp0 +=, +10C
11
Aank-rate +T
Market rate o! disco%nt, 6= days" dra!ts 3 +N8T
7itto, 8 monts" 3ZT
7itto, 6 monts" 3 +N16T
'oans to bill-brokers, day to day 1 to <T
7itto, !or one @eek 3T
'ast rate !or !ortnigt, loans to stockbrokers 2` to +T
7eposit allo@ance BbanksC 3ZT
7itto Bdisco%nt o%sesC 3 to 3[ T
6o@ large tis di!!erence may be !or one and te same day is so@n in te preceding !ig%res o! te rate o!
interest o! te 'ondon money-market on 7ecember *, 188*, taken !rom te ;ity article o! te 7aily -e@s o!
7ecember 1=0
5e minim%m is 1T, te maxim%m +T0 /F0E01
1
K5e pro!its o! enterprise depend %pon te net pro!its o! capital, not te latter %pon te !ormer0L B)amsay, Essay on
te 7istrib%tion o! Wealt, p0 <120 For )amsay net pro!its al@ays mean interest0C
<
K$%perintendence is ereL Bin te case o! te !arm o@nerC Kcompletely dispensed @it0L BP0 E0 ;airnes, 5e $la8e
,o@er, 'ondon, 186<, p0 280C
3
K&! te nat%re o! te @ork reD%ires tat te @orkmenL B8iE0, te sla8esC Kso%ld be dispersed o8er an extended area,
te n%mber o! o8erseers, and, tere!ore, te cost o! te labo%r @ic reD%ires tis s%per8ision, @ill be proportionately
increased0L B;airnes, 10 c0, p0 220C
2
?0 (re, ,ilosopy o! Man%!act%res, Frenc translation, 1836, &, p0 6>, @ere tis ,indar o! te man%!act%rers at te
same time testi!ies tat most man%!act%rers a8e not te sligtest %nderstanding o! te mecanism @ic tey set in
motion0
+
&n a case kno@n to me, !ollo@ing te crisis o! 1868, a bankr%pt man%!act%rer became te paid @age-labo%rer o! is
o@n !ormer labo%rers0 5e !actory @as operated a!ter te bankr%ptcy o! its o@ner by a labo%rers" co-operati8e, and its
!ormer o@ner @as employed as manager0 I F0 E0
6
5e acco%nts D%oted ere go no !%rter tan 1862, since te abo8e @as @ritten in 186+0 I F0 E0
>
KMasters are labo%rers as @ell as teir Ho%rneymen0 &n tis caracter teir interest is precisely te same as tat o!
teir men0 A%t tey are also eiter capitalists, or te agents o! te capitalists, and in tis respect teir interest is
decidedly opposed to te interests o! te @orkmen0L Bp0 <>C0 K5e @ide spread o! ed%cation among te Ho%rneymen
mecanics o! tis co%ntry diminises daily te 8al%e o! te labo%r and skill o! almost all masters and employers by
increasing te n%mber o! persons @o possess teir pec%liar kno@ledgeL Bp0 3=, 6odgskin, 'abo%r 7e!ended ?gainst
te ;laims o! ;apital, etc0, 'ondon, 18<+C0
8
K5e general relaxation o! con8entional barriers, te increased !acilities o! ed%cation tend to bring do@n te @ages
o! skilled labo%r instead o! raising tose o! te %nskilled0L BP0 $t0 Mill, ,rinciples o! ,olitical Economy, <nd ed0,
'ondon, 182*, &, p0 2>*0C
i
)icard ,rice, ?n ?ppeal to te ,%blic on te $%bHect o! te -ational 7ebt, <nd ed0, 'ondon, 1>>2, p0 1*0 6e cracks
te nai8e Hoke: K&t is borro@ing money at simple interest, in order to impro8e it at compo%nd interest0L B)0 6amilton,
?n &nD%iry into te )ise and ,rogress o! te -ational 7ebt o! :reat Aritain, <nd ed0, Edinb%rg, 1812, p0 1330C
?ccording to tis, borro@ing @o%ld be te sa!est means also !or pri8ate people to gater @ealt0 A%t i! & borro@ V1==
at +T ann%al interest, & a8e to pay V+ at te end o! te year, and e8en i! te loan lasts !or 1== million years, & a8e
mean@ile only V1== to loan e8ery year and V+ to pay e8ery year0 & can ne8er manage by tis process to loan V1=+
@en borro@ing V1==0 ?nd o@ am & going to pay +TQ Ay ne@ loans, or, i! it is te state, by ne@ taxes0 -o@, i! te
ind%strial capitalist borro@s money, and is pro!it amo%nts to, say, 1+T, e may pay +T interest, spend +T !or is
pri8ate expenses Balto%g is appetite gro@s @it is incomeC, and capitalise +T0 &n tis case, 1+T is te
precondition !or paying contin%ally +T interest0 &! tis process contin%es, te rate o! pro!it, !or te reasons indicated
in !ormer capters, @ill !all !rom 1+T to, say, 1=T0 A%t ,rice entirely !orgets tat te interest o! +T pres%pposes a
rate o! pro!it o! 1+T, and ass%mes it to contin%e @it te acc%m%lation o! capital0 6e as noting @atsoe8er to do
@it te act%al process o! acc%m%lation, b%t rater only @it lending money and getting it back @it compo%nd
interest0 6o@ tat is accomplised is immaterial to im, since it is te innate property o! interest-bearing capital0
ii
$ee Mill and ;arey, and )oscer"s mistaken commentary on tis score0 /Marx re!ers to te !ollo@ing @orks: P0 $t0
Mill, ,rinciples o! ,olitical Economy, $econd edition, 4ol0 &, 'ondon, 182*, pp0 *1-*<# 60 ;0 ;arey, ,rinciples o!
$ocial $cience, 4ol0 &&&, ,iladelpia, 18+*, pp0 >10>3# W0 )oscer, 7ie :r%ndlagen der -ationaldkonomie, 3 ?%!lage,
$t%ttgart %nd ?%gsb%rg, 18+8, p 2+0 I Ed01
iii
K&t is clear, tat no labo%r, no prod%cti8e po@er, no ingen%ity, and no art, can ans@er te o8er@elming demand o!
compo%nd interest0 A%t all sa8ing is made !rom te re8en%e o! te capitalist, so tat act%ally tese demands are
constantly made and as constantly te prod%cti8e po@er o! labo%r re!%ses to satis!y tem0 ? sort o! balance is,
tere!ore, constantly str%ck0L B'abo%r 7e!ended ?gainst te ;laims o! ;apital, p0 <30 Ay 6odgskin0C
1
&n oter @ords, !ormerly tey !irst !ixed te di8idend, and ten ded%cted te income tax as te di8idend @as paid to
te indi8id%al stockolder# a!ter 1822, o@e8er, te Aank !irst paid te income tax on its total pro!it, and ten paid te
di8idend K!ree o! income tax0L 5e same nominal percentages are, tere!ore, iger in te latter case by te amo%nt o!
te tax0 I F0 E0
<
More on 38erstone"s con!%sion o! terms in matters concerning capital at te close o! ;apter JJJ&&0 I /F0E01
i8
K5e a8erage o! notes in circ%lation d%ring te year @as, in 181<, 1=6,+38,=== !rancs# in 1818, 1=1,<=+,=== !rancs#
@ereas te mo8ement o! te c%rrency, or te ann%al aggregate o! disb%rsements and %pon all acco%nts, @as, in 181<,
<,83>,>1<,=== !rancs# in 1818, *,66+,=3=,=== !rancs0 5e acti8ity o! te c%rrency in France, tere!ore, d%ring te year
1818, as compared @it its acti8ity in 181<, @as in te proportion o! tree to one0 5e great reg%lator o! te 8elocity
o! circ%lation is credit0000 5is explains, @y a se8ere press%re %pon te money-market is generally coincident @it a
!%ll circ%lation0L B5e ;%rrency 5eory )e8ie@ed, etc0, p0 6+C I KAet@een $eptember 1833 and $eptember 1823
nearly 3== banks @ere added to te 8ario%s iss%ers o! notes tro%go%t te (nited Kingdom# te res%lt @as a
red%ction in te circ%lation to te extent o! t@o million and a al!# it @as V36,=3+,<22 at te close o! $eptember 1833,
and V33,+18,++2 at te close o! $eptember 18230L B'0 c0, p0 +3C I K5e prodigio%s acti8ity o! $cottis circ%lation
enables it, @it V1==, to e!!ect te same D%antity o! monetary transactions, @ic in England it reD%ires V2<= to
accomplis0L B'0 c0, p0 ++0 5is last re!ers only to te tecnical side o! te operation0C
8
Ae!ore te establisment o! te banks 000 te amo%nt o! capital @itdra@n !or te p%rposes o! c%rrency @as greater, at
all times, tan te act%al circ%lation o! commodities reD%ired0L BEconomist, 182+, p0 <380C
8i
$ee, !or instance, in te 5imes te list o! b%siness bankr%ptcies in a crisis year s%c as 18+> and compare te pri8ate
property o! tose bankr%pt @it te amo%nt o! teir debts0 K5e tr%t is tat te po@er o! p%rcase by persons a8ing
capital and credit is m%c beyond anyting tat tose @o are %nacD%ainted practically @it spec%lati8e markets a8e
any idea o!0L B5ooke, &nD%iry into te ;%rrency ,rinciple, p0 >*0C K? person a8ing te rep%tation o! capital eno%g !or
is reg%lar b%siness, and enHoying good credit in is trade, i! e takes a sang%ine 8ie@ o! te prospect o! a rise o! price
o! te article in @ic e deals, and is !a8o%red by circ%mstances in te o%tset and progress o! is spec%lation, may
e!!ect p%rcases to an extent per!ectly enormo%s compared @it is capitalL B&bid0, p0 136C0 KMercants,
man%!act%rers, etc0, carry on operations m%c beyond tose @ic te %se o! teir o@n capital alone @o%ld enable
tem to do0000 ;apital is rater te !o%ndation %pon @ic a good credit is b%ilt tan te limit o! te transactions o! any
commercial establisment0L BEconomist, 182>, p0 3330C
8ii
50 ;almers /3n ,olitical Economy, etc0, :lasgo@, 183<0 I Ed010
8iii
We ere gi8e te related passage !rom 5ooke in te original, @ic @as cited in :erman on p0 3*= /present edition:
;0 JJ4:1 K5e b%siness o! bankers, setting aside te iss%e o! promissory notes payable on demand, may be di8ided
into t@o brances, corresponding @it te distinction pointed o%t by 7r0 B?damC $mit o! te transactions bet@een
dealers and dealers, and bet@een dealers and cons%mers0 3ne branc o! te bankers" b%siness is to collect capital !rom
tose @o a8e not immediate employment !or it, and to distrib%te or trans!er it to tese @o a8e0 5e oter branc
is to recei8e deposits o! te incomes o! teir c%stomers, and to pay o%t te amo%nt, as it is @anted !or expendit%re by
te latter in te obHects o! teir cons%mption 000 te !ormer being a circ%lation o! capital, te latter o! c%rrency0LB5ooke,
&nD%iry into te ;%rrency ,rinciple, 'ondon, p0 360C 5e !irst is Kte concentration o! capital on te one and and te
distrib%tion o! it on te oterL# te latter is Kadministering te circ%lation !or local p%rposes o! te district0L B&bid0, p0
3>0C ? !ar more correct conception is o%tlined in te !ollo@ing passage by Kinnear: KMoney 000 is employed to per!orm
t@o operations essentially distinct0000 ?s a medi%m o! excange bet@een dealers and dealers, it is te instr%ment by
@ic trans!ers o! capital are e!!ected# tat is, te excange o! a certain amo%nt o! capital in money !or an eD%al
amo%nt o! capital in commodities0 A%t money employed in te payment o! @ages and in p%rcase and sale bet@een
dealers and cons%mers is not capital, b%t income# tat portion o! te incomes o! te comm%nity, @ic is de8oted to
daily expendit%re0 &t circ%lates in constant daily %se, and is tat alone @ic can, @it strict propriety, be termed
c%rrency0 ?d8ances o! capital depend entirely on te @ill o! te Aank and oter possessors o! capital, !or borro@ers
are al@ays to be !o%nd# b%t te amo%nt o! te c%rrency depends on te @ants o! te comm%nity, among @om te
money circ%lates, !or te p%rposes o! daily expendit%re0L BP0 :0 Kinnear, 5e ;risis and te ;%rrency, 'ondon, 182>
/pp0 3-210C
ix
K&t is a great error, indeed, to imagine tat te demand !or pec%niary accommodation K Btat is, !or te loan o!
capitalC Kis identical @it a demand !or additional means o! circ%lation, or e8en tat te t@o are !reD%ently associated0
Eac demand originates in circ%mstances pec%liarly a!!ecting itsel!, and 8ery distinct !rom eac oter0 &t is @en
e8eryting looks prospero%s, @en @ages are ig, prices on te rise, and !actories b%sy, tat an additional s%pply o!
c%rrency is %s%ally reD%ired to per!orm te additional !%nctions inseparable !rom te necessity o! making larger and
more n%mero%s payments# @ereas it is cie!ly in a more ad8anced stage o! te commercial cycle, @en di!!ic%lties
begin to present temsel8es, @en markets are o8erstocked, and ret%rns delayed, tat interest rises, and a press%re
comes %pon te Aank !or ad8ances o! capital0 &t is tr%e tat tere is no medi%m tro%g @ic te Aank is acc%stomed
to ad8ance capital except tat o! its promissory notes# and tat to re!%se te notes, tere!ore, is to re!%se te
accommodation0 A%t te accommodation once granted, e8eryting adH%sts itsel! in con!ormity @it te necessities o!
te market# te loan remains, and te c%rrency, i! not @anted, !inds its @ay ack to te iss%er0 ?ccordingly, a 8ery
sligt examination o! te ,arliamentary )et%rns may con8ince any one, tat te sec%rities in te ands o! te Aank o!
England !l%ct%ate more !reD%ently in an opposite direction to its circ%lation tan in concert @it it, and tat te
example, tere!ore, o! tat great establisment !%rnises no exception to te doctrine so strongly pressed by te
co%ntry bankers, to te e!!ect tat no ank can enlarge its circ%lation, i! tat circ%lation e already adeD%ate to te
p%rposes to @ic a bank-note c%rrency is commonly applied# b%t tat e8ery addition to its ad8ances, a!ter tat limit is
passed, m%st e made !rom its capital, and s%pplied by te sale o! some o! its sec%rities in reser8e, or by abstinence
!rom !%rter in8estment in s%c sec%rities0 5e table compiled !rom te ,arliamentary )et%rns !or te inter8al
bet@een 1833 and 182=, to @ic & a8e re!erred in a preceding page, !%rnises contin%ed examples o! tis tr%t# b%t
t@o o! tese are so remarkable tat it @ill be D%ite %nnecessary !or me to go beyond tem0 3n te 3rd o! Pan%ary,
183>, @en te reso%rces o! te Aank @ere strained to te %ttermost to s%stain credit and meet te di!!ic%lties o! te
money-market, @e !ind its ad8ances on loan and disco%nt carried to te enormo%s s%m o! V1>,=<<,===, an amo%nt
scarcely kno@n since te @ar, and almost eD%al to te entire aggregate iss%es @ic, in te mean@ile, remain
%nmo8ed at so lo@ a point as V1>,=>6,===S 3n te oter and, @e a8e on te 2t o! P%ne, 1833, a circ%lation o!
V18,8*<,===, @it a ret%rn o! pri8ate sec%rities in and, nearly, i! not te 8ery lo@est on record !or te last al!-
cent%ry, amo%nting to no more tan V*><,===SL BF%llarton, 10 c0, pp0 *>, *80C 5at a demand !or pec%niary
accommodation need not be identical by any means @it a demand !or gold B@at Wilson, 5ooke and oters call
capitalC is seen !rom te !ollo@ing testimony o! Mr0 Weg%elin, :o8ernor o! te Aank o! England: K5e disco%nting o!
bills to tat extentL Bone million daily !or tree s%ccessi8e daysC K@o%ld not red%ce te reser8eL Bo! bank-notesC,
K%nless te p%blic demanded a greater amo%nt o! acti8e circ%lation0 5e notes iss%ed on te disco%nt o! bills @o%ld be
ret%rned tro%g te medi%m o! te bankers and tro%g deposits0 (nless tese transactions @ere !or te p%rpose o!
exporting b%llion, and %nless tere @ere an amo%nt o! internal panic @ic ind%ced people to lock %p teir notes, and
not to pay tem into te ands o! te bankers 000 te reser8e @o%ld not be a!!ected by te magnit%de o! te
transactions0L I K5e Aank may disco%nt a million and a al! a day, and tat is done constantly, @ito%t its reser8e
being in te sligtest degree a!!ected, te notes coming back again as deposits, and no oter alteration taking place
tan te mere trans!er !rom one acco%nt to anoter0L B)eport on Aank ?cts, 18+>, E8idence -os0 <21, +==0C 5e notes
tere!ore ser8e ere merely as means o! trans!erring credits0
x
5e passage tat !ollo@s in te original is %nintelligible in tis context and as been re@ritten by te editor to te end
o! te brackets0 &n anoter context tis point as already been to%ced %pon in ;apter JJ4&0 I F0 E
xi
K5e labo%rer possesses capital-8al%e, @ic is arri8ed at by considering te money-8al%e or is ann%al @age as
income !rom interest0000 ;apitalising 000 te a8erage daily @age at 2T, @e obtain te a8erage 8al%e o! a male
agric%lt%ral labo%rer to be: :erman ?%stria, 2,+== taler# ,r%ssia, 2,+==# England, 3,>+=# France, <,===# inner )%ssia,
>+= taler0L B4on )eden,4ergleicende K%lt%r-$tatistik, Aerlin, 1828, p0 2320C
xii
/&mmediately a!ter te Febr%ary )e8ol%tion, @en commodities and sec%rities @ere extremely depreciated and
%tterly %nsaleable, a $@iss mercant in 'i8erpool, Mr0 A0 9@ilcenbart I @o told tis to my !ater I cased all is
belongings, tra8elled @it cas in and to ,aris and so%gt o%t )otscild, o!!ering to participate in a Hoint enterprise
@it im0 )otscild looked at im !ixedly, r%sed to@ards im, grabbed im by is so%lders and asked: K?8eE-8o%s
de l"argent s%r 8o%sQL I K3%i, M0 le baron0L I K?lors 8o%s qtes mon ommeSL BK6a8e yo% money in yo%r possessionQL
I K.es, Aaron0L I K5en yo% are my manSLC I ?nd tey did a tri8ing b%siness togeter0 I F0E01
xiii
/5is do%bling and trebling o! capital as de8eloped considerably !%rter in recent years, !or instance, tro%g
!inancial tr%sts, @ic already occ%py a eading o! teir o@n in te report o! te 'ondon $tock Excange0 ? company
is organised !or te p%rcase o! a certain class o! interest-bearing o! !oreign go8ernment sec%rities, Englis m%nicipal
or ?merican p%blic bonds, rail@ay stocks, etc0 5e capital, !or example, V< million, is raised by stock s%bscriptions0
5e Aoard o! 7irectors b%ys %p te 8al%es in D%estion or spec%lates more or less acti8ely terein, and a!ter ded%cting
te expenses distrib%tes among te stockolders te ann%al interest as di8idends0 F%rtermore, some stock companies
a8e adopted te c%stom o! di8iding te common stock into t@o classes, pre!erred and de!erred0 5e pre!erred recei8e
a !ixed rate o! interest, say, +T, pro8ided tat te total pro!it permits it# i! tere is anyting le!t a!ter tat, te de!erred
recei8e it0 &n tis manner, te KsolidL in8estment o! capital in pre!erred sares is more or less separated !rom act%al
spec%lation I @it de!erred sares0 $ince a !e@ large enterprises a8e been %n@illing to adopt tis ne@ c%stom, te
expedient as been resorted to o! organising ne@ companies @ic in8est a million or se8eral million po%nds sterling
in sares o! te !ormer companies and ten iss%e ne@ sares amo%nting to te nominal 8al%e o! te p%rcased sares,
b%t al! o! tem are iss%ed as pre!erred and te oter al! as de!erred0 &n s%c cases te original sares are do%bled,
since tey ser8e as a basis !or a ne@ iss%e o! sares0 I F0E01
xi8
/5o @at extent tis as intensi!ied since ten is so@n by te !ollo@ing o!!icial tab%lation o! te bank reser8es o!
te !i!teen largest 'ondon banks in -o8ember 18*<, taken !rom te 7aily -e@s o! 7ecember 1+, 18*<:
-ame o! Aank'iabilities;as )eser8es,ercentages;ityV*,31>,6<*V>26,++180=1;apital and
;o%nties11,3*<,>221,3=>,2831102>&mperial3,*8>,2==22>,1+>110<<'loyds<3,8==,*3><,*66,8=61<026'
on0 ?nd Westminster<2,6>1,++*3,818,88+1+0+='on0 ?nd $0 Western+,+>=,<6881<,3+3120+8'ondon
Point $tock1<,1<>,**31,<88,*>>1=06<'ondon and Midland8,812,2**1,1<>,<8=1<0>*'ondon and
;o%nty3>,111,=3+3,6==,3>2*0>=-ational11,163,8<*1,2<6,<<+1<0>>-ational
,ro8incial021,*=>,3822,612,>8=210=1,arrs and te ?lliance1<,>*2,28*1,+3<,>=>110*8,rescott g
;o2,=21,=+8+38,+1>130=>(nion o! 'ondon0,1+,+=<,618<,3==,=8212082Williams, 7eacon g
Mancester g ;o01=,2+<,3811,31>,6<81<06=Total;1/1,655,81/;13,845,8&311.933! tis total reser8e o!
almost <8 million, at least <+ million are deposited in te Aank o! England, and at most 3 million are in cas in te
sa!es o! te 1+ banks temsel8es0 A%t te cas reser8e o! te banking department o! te Aank o! England amo%nted to
less tan 16 million d%ring tat same mont o! -o8ember 18*<S I F0 E01
x8
5e s%spension o! te Aank ?ct o! 1822 permits te Aank to iss%e any D%antity o! bank-notes regardless o! te gold
reser8e backing in its possession# t%s, to create an arbitrary D%antity o! !ictitio%s paper money-capital, and to %se it
!or te p%rpose o! making loans to banks, excange brokers, and tro%g tem to commerce0 I F0 E01
x8i
5e p%blic !%nd is noting b%t imaginary capital, @ic represents tat portion o! te ann%al re8en%e, @ic is set
aside to pay te debt0 ?n eD%i8alent amo%nt o! capital as been spent# it is tis @ic ser8es as a denominator !or te
loan, b%t it is not tis @ic is represented by te p%blic !%nd# !or te capital no longer exists0 -e@ @ealt m%st be
created by te @ork o! ind%stry# a portion o! tis @ealt is ann%ally set aside in ad8ance !or tose @o a8e loaned
tat @ealt @ic as been spent# tis portion is taken by means o! taxes !rom tose @o prod%ce it, and is gi8en to
te creditors o! te state, and, according to te c%stomary proportion bet@een capital and interest in te co%ntry, an
imaginary capital is ass%med eD%i8alent to tat @ic co%ld gi8e rise to te ann%al income @ic tese creditors are to
recei8e0 B$ismondi, -o%8ea%x principes /$econde Fdition, ,aris, 18<>1, &&, p0 <3=0C
x8ii
? portion o! te acc%m%lated loanable money-capital is indeed merely an expression o! ind%strial capital0 For
instance, @en England, in 18+>, ad in8ested 18= million in ?merican rail@ays and oter enterprises, tis in8estment
@as transacted almost completely by te export o! Englis commodities !or @ic te ?mericans did not a8e to
make payment in ret%rn0 5e Englis exporter dre@ bills o! excange !or tese commodities on ?merica, @ic te
Englis stock s%bscribers bo%gt %p and @ic @ere sent to ?merica !or p%rcasing te stock s%bscriptions0
x8iii
/?s & a8e already stated else@ere /Englis edition: 4ol0 &0 I Ed01, a cange as taken place ere since te last
maHor general crisis0 5e ac%te !orm o! te periodic process @it its !ormer ten-year cycle, appears to a8e gi8en @ay
to a more cronic, long dra@n o%t, alternation bet@een a relati8ely sort and sligt b%siness impro8ement and a
relati8ely long, indecisi8e depression-taking place in te 8ario%s ind%strial co%ntries at di!!erent times0 A%t peraps it
is only a matter o! a prolongation o! te d%ration o! te cycle0 &n te early years o! @orld commerce, 182+-2>, it can
be so@n tat tese cycles lasted abo%t !i8e years# !rom 182> to 186> te cycle is clearly ten years# is it possible tat
@e are no@ in te preparatory stage o! a ne@ @orld cras o! %nparalleled 8eemenceQ Many tings seem to point in
tis direction0 $ince te last general crisis o! 186> many pro!o%nd canges a8e taken place0 5e colossal expansion
o! te means o! transportation and comm%nication I ocean liners, rail@ays, electrical telegrapy, te $%eE ;anal I as
made a real @orld-market a !act0 5e !ormer monopoly o! England in ind%stry as been callenged by a n%mber o!
competing ind%strial co%ntries# in!initely greater and 8aried !ields a8e been opened in all parts o! te @orld !or te
in8estment o! s%rpl%s E%ropean capital, so tat it is !ar more @idely distrib%ted and local o8er-spec%lation may be
more easily o8ercome0 Ay means o! all tis, most o! te old breeding-gro%nds o! crises and opport%nities !or teir
de8elopment a8e been eliminated or strongly red%ced0 ?t te same time, competition in te domestic market recedes
be!ore te cartels and tr%sts, @ile in te !oreign market it is restricted by protecti8e tari!!s, @it @ic all maHor
ind%strial co%ntries, England excepted, s%rro%nd temsel8es0 A%t tese protecti8e tari!!s are noting b%t preparations
!or te %ltimate general ind%strial @ar, @ic sall decide @o as s%premacy on te @orld-market0 5%s e8ery !actor,
@ic @orks against a repetition o! te old crises, carries @itin itsel! te germ o! a !ar more po@er!%l !%t%re crisis0 I
F0 E01
xix
A0 ?0 18+>0 5estimony o! 5@ells, banker: K2+160 ?s a banker, do yo% deal in capital or in moneyQ I We deal in
money0L I K2+1>0 6o@ are te deposits paid into yo%r bankQ I &n money0L I K2+180 6o@ are tey paid o%tQ I &n
money0L I K2+1*0 5en can tey be called anyting else b%t moneyQ I -o0L
38erstone Bsee ;apter JJ4&C con!%ses contin%ally KcapitalL and Kmoney0L K4al%e o! moneyL also means
interest to im, b%t in so !ar as it is determined by te mass o! money, K8al%e o! capitalL is s%pposed to be interest, in
so !ar as it is determined by te demand !or prod%cti8e capital and te pro!it made by it0 6e says: K212=0 5e %se o!
te @ord fcapitalG is 8ery dangero%s0L I K21280 5e export o! b%llion !rom tis co%ntry is a dimin%tion o! te D%antity
o! money in tis co%ntry, and a dimin%tion o! te D%antity o! money in tis co%ntry m%st o! co%rse create a press%re
%pon te money-market generallyL /b%t not in te capital-market, according to tis10 I K211<0 ?s te money goes o%t
o! te co%ntry, te D%antity in te co%ntry is diminised0 5at dimin%tion o! te D%antity remaining in te co%ntry
prod%ces an increased 8al%e o! tat moneyL /tis originally means in is teory an increase in te 8al%e o! money as
s%c tro%g a contraction o! circ%lation, as compared to te 8al%es o! commodities# in oter @ords, an increase in te
8al%e o! money is te same as a !all in te 8al%e o! commodities0 A%t since in te meantime e8en e as been
con8inced beyond perad8ent%re tat te mass o! circ%lating money does not determine prices, it is no@ te dimin%tion
in money as a medi%m o! circ%lation @ic is s%pposed to raise its 8al%e as interest-bearing capital, and t%s te rate
o! interest10 K?nd tat increased 8al%e o! @at remains stops te exit o! money, and is kept %p %ntil it as bro%gt back
tat D%antity o! money @ic is necessary to restore te eD%ilibri%m0L I More o! 38erstoneGs contradictions later on0
xx
?t tis point te con!%sion starts: bot o! tese tings are s%pposed to be KmoneyL, namely, te deposit as a claim to
payment !rom te banker, and te deposited money in te ands o! te banker0 Aanker 5@ells, be!ore te Aanking
;ommittee o! 18+>, o!!ers te !ollo@ing example: K&! & begin b%siness @it V1=,===, & b%y @it V+,=== commodities
and p%t tem into @areo%se0 & deposit te oter V+,=== @it a banker, to dra@ %pon it and %se it as & reD%ire it0 &
consider it still V1=,=== capital to me, to%g V+,=== is in te sape o! deposits or moneyL B2+<8C0 I 5is no@ gi8es
rise to te !ollo@ing pec%liar debate0 I K2+310 .o% a8e parted @it yo%r V+,=== o! notes to somebody elseQ I .es0L I
K2+3<0 5en e as V+,=== o! depositsQ-.es0L I K2+330 ?nd yo% a8e V+,=== o! deposits le!tQ I Exactly0L I K2+320 6e
as V+,=== in money, and yo% a8e V+,=== in moneyQ I .es0L I K2+3+0 A%t it is noting b%t money at lastQ I -o0L
5is con!%sion is d%e partly to te circ%mstance tat ?, @o as deposited V+,===, can dra@ on it and dispose o! it as
to%g e still ad it0 5o tat extent it ser8es im as potential money0 6o@e8er, in all cases in @ic e dra@s on it e
destroys is deposit pro tanto0 &! e dra@s o%t real money, and is o@n money as already been lent to someone else,
e is not paid @it is o@n money, b%t @it tat o! some oter depositor0 &! e pays a debt to A @it a ceD%e on is
banker, and A deposits tis ceD%e @it is banker, and te banker o! ? also as a ceD%e on te banker o! A, so tat
te t@o bankers merely excange ceD%es, te money deposited by ? as per!ormed te !%nction o! money t@ice#
!irst, in te ands o! te one @o as recei8ed te money deposited by ?# secondly, in te ands o! ? imsel!0 &n te
second !%nction, it is a balancing o! claims Bte claim o! ? on is banker, and te claim o! te latter on te banker o!
AC @ito%t %sing money0 6ere te deposit acts t@ice as money, namely, as real money and ten as a claim on money0
Mere claims to money can take te place o! money only by a balancing o! claims0
xxi
?8erage n%mber o! days d%ring @ic a bank-note remained in circ%lation:
.earV+ -oteV1= -oteV<=-1==V<==-+==V1,===1>*<Q
<36<=*31<<181812813>1<118131826>*>1321<818+6>=+8<>*>B;ompilation by Marsall, ;asier o! te
Aank o! England, in )eport on Aank ?ct, 18+>0 ?ppendix &&, pp0 3==-=10C
xxii
?t te general meeting o! stockolders o! te (nion Aank o! 'ondon on Pan%ary 1>, 18*2, ,resident )itcie relates
tat te Aank o! England raised te disco%nt in 18*3 !rom <ZT in P%ly to 3 and 2T in ?%g%st, and since it lost @itin
!o%r @eeks !%lly V2Z million in gold despite tis, it raised te bank-rate to +T, @ere%pon gold !lo@ed back to it and
te bank rate @as red%ced to 2T in $eptember and ten to 3T in 3ctober0 A%t tis bank-rate @as not recognised in te
market0 KWen te bank-rate @as +T, te disco%nt rate @as 3ZT, and te rate !or money <ZT# @en te bank-rate
!ell to 2T, te disco%nt rate @as < 3N8T and te money rate 1`T# @en te bank-rate @as 3T, te disco%nt rate !ell to
1ZT and te money rate to someting belo@ tat0L B7aily -e@s, Pan%ary 18, 18*20C I F0E0
xxiii
5e e!!ect tis ad on te money-market is indicated by te !ollo@ing testimony o! -e@marc: K1+=*0 ?t te close
o! 18+3, tere @as a considerable appreension in te p%blic mind, and in $eptember o! tat year te Aank o! England
raised its disco%nt on tree occasions000 &n te early part o! 3ctober tere @as a considerable degree o! appreension
and alarm in te p%blic mind0 5at appreension and alarm @as relie8ed to a 8ery great extent be!ore te end o!
-o8ember, and @as almost @olly remo8ed, in conseD%ence o! te arri8al o! nearly V+,===,=== o! treas%re !rom
?%stralia000 5e same ting appened in te a%t%mn o! 18+2, by te arri8al in te monts o! 3ctober and -o8ember o!
nearly V6,===,=== o! treas%re0 5e same ting appened again in te a%t%mn o! 18++, @ic @e kno@ @as a period o!
excitement and alarm, by te arri8als, in te tree monts o! $eptember, 3ctober and -o8ember, o! nearly V8,===,===
o! treas%re# and ten at te close o! last year, 18+6, @e !ind exactly te same occ%rrence0 &n tr%t, & migt appeal to te
obser8ation almost o! any member o! te ;ommittee, @eter te nat%ral and complete sol8ent to @ic @e a8e got
into te abit o! looking !or any !inancial press%re, is not te arri8al o! a gold sipL /A0 ?0 18+>10
xxi8
?ccording to -e@marc, a drain o! gold to !oreign co%ntries can arise !rom tree ca%ses: 1C !rom p%rely
commercial conditions, tat is, i! imports a8e exceeded exports, as @as te case in 1836 to 1822, and again in 182> I
principally a ea8y import o! grain# <C in order to sec%re te means !or in8esting Englis capital in !oreign co%ntries,
as in 18+> !or rail@ays in &ndia, and 3C !or de!inite expendit%res abroad, as in 18+3 and 18+2 !or @ar p%rposes in te
3rient0
xx8
1*180 -e@marc0 KWen yo% combine &ndia and ;ina, @en yo% bring into acco%nt te transactions bet@een
&ndia and ?%stralia, and te still more important transactions bet@een ;ina and te (nited $tates, te trade being a
triang%lar one, and te adH%stment taking place tro%g %s 000 ten it is tr%e tat te balance o! trade @as not merely
against tis co%ntry, b%t against France, and against te (nited $tates0L I BA0 ?0 18+>0C
xx8i
$ee, !or instance, te ridic%lo%s reply o! Weg%elin /A0?0 18+>1 @ere e states tat a drain o! !i8e million in gold is
so m%c capital less, and t%s attempts to explain certain penomena @ic do not take place @en tere is an
in!initely greater increase in prices or depreciation, expansion or contraction o! real ind%strial capital0 3n te oter
and, it is H%st as ridic%lo%s to attempt to explain tese penomena directly as symptoms o! an expansion or
contraction o! te mass o! real capital Bconsidered !rom te 8ie@point o! its material elementsC0
xx8ii
-e@marc BA0 ?0 18+>C: K13620 5e reser8e o! b%llion in te Aank o! England is, in tr%t, te central reser8e or
oard o! treas%re %pon @ic te @ole trade o! te co%ntry is made to t%rn# all te oter banks in te co%ntry look to
te Aank o! England as te central oard or reser8oir !rom @ic tey are to dra@ teir reser8e o! coin# and it is %pon
tat oard or reser8oir tat te action o! te !oreign excanges al@ays !alls0L
xx8iii
K,ractically, ten, bot Mr0 5ooke and Mr0 'oyd @o%ld meet an additional demand !or gold 000 by an early 000
contraction o! credit by raising te rate o! interest, and restricting ad8ances o! capital0000 A%t te principles o! Mr0 'oyd
lead to certain /legal1 restrictions and reg%lations @ic prod%ce te most serio%s incon8enience0L BEconomist
/7ecember 111, 182>, p0 12180C
xxix
K.o% D%ite agree tat tere is no mode by @ic yo% can modi!y te demand !or b%llion except by raising te rate
o! interestQL I ;apman /associate member o! te great bill-brokers" !irm o! 38erend, :%rney g ;o01: K& so%ld say
so0000 Wen o%r b%llion !alls to a certain point, @e ad better so%nd te tocsin at once and say @e are drooping, and
e8ery man sending money abroad m%st do it at is o@n peril0L BA0 ?0 18+>, E8idence -o0 +=+>0C
xxx
K&t is by !reD%ent !l%ct%ations @itin te mont, and by pa@ning one article to relie8e anoter, @ere a small s%m is
obtained, tat te premi%m !or money becomes so excessi8e0 5ere are abo%t <2= licensed pa@nbrokers in te
metropolis, and nearly 1,2+= in te co%ntry0 5e capital employed is s%pposed some@at to exceed a million po%nds
sterling# and tis capital is t%rned ro%nd trice in te co%rse o! te year, and yields eac time abo%t 33Z per cent on an
a8erage# according to @ic calc%lation, te in!erior orders o! society in England pay abo%t one million a year !or te
%se o! a temporary loan, excl%si8e o! @at tey lose by goods being !or!eited0L BP0 70 5%ckett, ? 6istory o! te ,ast
and ,resent $tate o! te 'abo%ring ,op%lation, 'ondon, 1826, 1, p0 1120C
xxxi
E8en in te titles o! teir @orks tey state as teir principal p%rpose Kte general good o! te landed men, te great
increase o! te 8al%e o! land, te exemption o! te nobility, gentry, etc0, !rom taxes, enlarging teir yearly estates, etc0L
3nly te %s%rers @o%ld stand to lose, tose @orst enemies o! te nation @o ad done more inH%ry to te nobility and
yeomanry tan an army o! in8asion !rom France co%ld a8e done0
xxxii
K5e ric goldsmitL Bte prec%rsor o! te bankerC, K!or example, made ;arles && o! England pay t@enty and
tirty per cent !or accommodation0 ? b%siness so pro!itable, ind%ced te goldsmit "more and more to become lender
to te King, to anticipate all te re8en%e, to take e8ery grant o! ,arliament into pa@n as soon as it @as gi8en# also to
o%t8ie eac oter in b%ying and taking to pa@n bills, orders, and tallies, so tat, in e!!ect, all te re8en%e passed
tro%g teir ands"0L BPon Francis, 6istory o! te Aank o! England, 'ondon, 1828, &, p0310C K5e erection o! a bank
ad been s%ggested se8eral times be!ore tat0 &t @as at last a necessityL Bl0 c0, p0 38C0 K5e bank @as a necessity !or te
go8ernment itsel!, s%cked dry by %s%rers, in order to obtain money at a reasonable rate, on te sec%rity o!
parliamentary grantsL Bl0 c0, pp0 +*, 6=C0
xxxiii
Marx @o%ld s%rely a8e modi!ied tis passage considerably, ad e re@orked is man%script0 &t @as inspired by
te role o! te ex-!ollo@ers o! $aint-$imon %nder France"s $econd Empire @ere H%st at te time tat Marx @rote te
abo8e, te @orld redeeming credit !antasies o! tis scool tro%g te irony o! istory @ere being realised in te !orm
o! a tremendo%s s@indle on a scale ne8er seen be!ore0 'ater Marx spoke only @it admiration o! te geni%s and
encyclopaedic mind o! $aint $imon0 Wen in is earlier @orks te latter ignores te antitesis bet@een te
bo%rgeoisie and te proletariat @ic @as H%st ten coming into existence in France @en e incl%des among te
tra8aille%rs tat part o! te bo%rgeoisie @ic @as acti8e in prod%ction, tis corresponds to Fo%rier"s conception o!
attempting to reconcile capital and labo%r and is explained by te economic and political sit%ation o! France in tose
days0 5e !act tat 3@en @as more !ar sigted in tis respect is d%e to is di!!erent en8ironment, !or e li8ed in a
period o! ind%strial re8ol%tion and o! ac%tely sarpening class antagonisms0 I F0 E0
xxxi8
Karl Marx, Misjre de la ,ilosopie, Ar%xelles et ,aris, 182>0 I Karl Marx, 9%r Kritik der politiscen
3ekonomie, $0 620
xxx8
-oting co%ld e more comical tan 6egel"s de8elopment o! pri8ate landed property0 ?ccording to tis, man as an
indi8id%al m%st endo@ is @ill @it reality as te so%l o! external nat%re, and m%st tere!ore take possession o! tis
nat%re and make it is pri8ate property0 &! tis @ere te destiny o! te Kindi8id%alL, o! man as an indi8id%al, it @o%ld
!ollo@ tat e8ery %man being m%st be a lando@ner, in order to become a real indi8id%al0 Free pri8ate o@nersip o!
land, a 8ery recent prod%ct, is according to 6egel, not a de!inite social relation, b%t a relation o! man as an indi8id%al
to Knat%re,L an absol%te rigt o! man to appropriate all tings B6egel ,ilosopie des )ects, Aerlin 182= p >*C 5is
m%c at least is e8ident te indi8id%al cannot maintain imsel! as a lando@ner by is mere K@illL against te @ill o!
anoter indi8id%al, @o like@ise @ants to become a real indi8id%al by 8irt%e o! te same strip o! land0 &t de!initely
reD%ires some ting oter tan good@ill0 F%rtermore, it is absol%tely impossible to determine @ere te Kindi8id%alL
dra@s te line !or realising is @ill I@eter tis @ill reD%ires !or its realisation a @ole co%ntry, or @eter it
reD%ires a @ole gro%p o! co%ntries by @ose appropriation Kte s%premacy o! my @ill o8er te ting can be
mani!ested0L 6ere 6egel comes to a complete impasse0 K5e appropriation is o! a 8ery partic%lar kind# & do not take
possession o! more tan & to%c @it my body# b%t it is clear, on te oter and, tat external tings are more
extensi8e tan & can grasp0 Ay t%s a8ing possession o! s%c a ting, some oter is tereby connected to it0 & carry
o%t te act o! appropriation by means o! my and, b%t its scope can be extendedL Bp0*=C0 A%t tis oter ting is again
linked @it still anoter and so te bo%ndary @itin @ic my @ill, as te so%l, can po%r into te soil, disappears0
KWen & possess someting, my mind at once passes o8er to te idea tat not only tis property in my immediate
possession, b%t @at is associated @it it is also mine0 6ere positi8e rigt m%st decide, !or noting more can be
ded%ced !rom te conceptL Bp0 *1C0 5is is an extraordinarily nai8e admission Ko! te conceptL, and pro8es tat tis
concept @ic makes te bl%nder at te 8ery o%tset o! regarding as absol%te a 8ery de!inite legal 8ie@ o! landed
property belonging to bo%rgeois society I %nderstands KnotingL o! te act%al nat%re o! tis landed property0 5is
contains at te same time te admission tat Kpositi8e rigtL can, and m%st, alter its determinations as te
reD%irements o! social, i0e0, economic, de8elopment cange0
xxx8i
4ery conser8ati8e agric%lt%ral cemists, s%c as Ponston, admit tat a really rational agric%lt%re is con!ronted
e8ery@ere @it ins%rmo%ntable barriers stemming !rom pri8ate property0 $o do @riters @o are ex pro!esso
ad8ocates o! te monopoly o! pri8ate property in te @orld, !or instance, ;arles ;omte in is t@o-8ol%me @ork,
@ic as as its special aim te de!ence o! pri8ate property0 K? nation,L e says, Kcannot attain to te degree o!
prosperity and po@er compatible @it its nat%re, %nless e8ery portion o! te soil no%rising it is assigned to tat
p%rpose @ic agrees best @it te general interest0 &n order to gi8e to its @ealt a strong de8elopment, one sole and
abo8e all igly enligtened @ill so%ld, i! possible, take it %pon itsel! to assign eac piece o! its domain its task and
make e8ery piece contrib%te to te prosperity o! all oters0 A%t te existence o! s%c a @ill 000 @o%ld be incompatible
@it te di8ision o! te land into pri8ate plots I and @it te a%tority g%aranteed eac o@ner to dispose o! is
property in an almost absol%te manner0 /K5raitF de la propriFtF,L 5ome &, ,aris, 1832, p0 <<80 I Ed01 Ponston, ;omte,
and oters, only a8e in mind te necessity o! tilling te land o! a certain co%ntry as a @ole, @en tey speak o! a
contradiction bet@een property and a rational system o! agronomy0 A%t te dependence o! te c%lti8ation o! partic%lar
agric%lt%ral prod%cts %pon te !l%ct%ations o! market-prices, and te contin%al canges in tis c%lti8ation @it tese
price !l%ct%ations I te @ole spirit o! capitalist prod%ction, @ic is directed to@ard te immediate gain o! money
are in contradiction to agric%lt%re, @ic as to minister to te entire range o! permanent necessities o! li!e reD%ired
by te cain o! s%ccessi8e generations0 ? striking ill%stration o! tis is !%rnised by te !orests, @ic are only rarely
managed in a @ay more or less corresponding to te interests o! society as a @ole, i0e0, @en tey are not pri8ate
property, b%t s%bHect to te control o! te state0
xxx8ii
Misjre de la ,ilosopie, p016+0 5ere & a8e made a distinction bet@een terre-matijre and terre-capital0 K5e
mere application o! !%rter o%tlays o! capital to land already trans!ormed into means o! prod%ction increases land as
capital @ito%t adding anyting to land as matter, tat is, to te extent o! te land0000 'and as capital is no more eternal
tan any oter capital000 'and as capital is !ixed capital# b%t !ixed capital gets %sed %p H%st as m%c as circ%lating
capital0L
xxx8iii
& say KcanL beca%se %nder certain circ%mstances tis interest is reg%lated by te la@ o! gro%nd-rent and, tere!ore,
can disappear, as in te case o! competition bet@een 8irgin lands o! great nat%ral !ertility0
xxxix
$ee Pames ?nderson /? ;alm &n8estigation o! te ;irc%mstances tat a8e led to te ,resent $carcity o! :rain in
Aritain, 'ondon, 18=1, pp03+-36, 380 I Ed01 and ;arey, 5e ,ast, te ,resent, and te F%t%re, ,iladelpia, 1828, pp0
1<*-310 I Ed0
xl
$ee te ?nti-;orn 'a@ ,riEe-Essays0 6o@e8er, te ;orn 'a@s al@ays kept prices at an arti!icially iger le8el0 For
te better placed tenants tis @as !a8o%rable0 5ey pro!ited !rom te passi8ity in @ic te protecti8e d%ties kept te
great mass o! tenants @o relied, @it or @ito%t good reason, on te exceptional a8erage price0
xli
Pon ;0 Morton, 5e Forces (sed in ?gric%lt%re0 'ect%re in te 'ondon $ociety o! ?rts, 186=, based %pon a%tentic
doc%ments collected !rom abo%t 1== tenants in 1< $cottis and 3+ Englis co%nties0
xlii
;oncerning extra pro!it, see te &nD%iry /into tose ,rinciples, )especting te -at%re o! 7emand and te -ecessity
o! ;ons%mption, lately ad8ocated by Mr0 Malt%s, 'ondon, 18<10 I Ed01 Bagainst Malt%sC0
xliii
/&t is precisely te rapidly gro@ing c%lti8ation o! s%c prairie or steppe regions @ic o! late t%rns te reno@ned
statement o! Malt%s, tat Kte pop%lation is a b%rden %pon te means o! s%bsistence,L into ridic%le, and prod%ced in
its stead te agrarian lament tat agric%lt%re, and @it it :ermany, @ill be r%ined, %nless te means o! s%bsistence
@ic are a b%rden %pon te pop%lation are !orcibly kept a@ay !rom tem0 5e c%lti8ation o! tese steppes, prairies,
pampas, ilanos, etc0, is ne8erteless only in its beginning# its re8ol%tionising e!!ect on E%ropean agric%lt%re @ill,
tere!ore, make itsel! !elt in te !%t%re e8en more so tan iterto0 I F0 E01
xli8
5e abo8e tables &4a to &4d ad to be recalc%lated d%e to an error in comp%tation @ic ran tro%g all o! tem0
Wile tis did not a!!ect te teoretical concl%sions dra@n !rom tese tables, it introd%ced, in part, D%ite monstro%s
n%merical 8al%es !or prod%ction per acre0 E8en tese are not obHectionable in principle0 For all relie! and
topograpical maps it is c%stomary to coose a m%c larger scale !or te 8ertical tan !or te oriEontal0 -e8erteless,
so%ld anyone !eel tat is agrarian !eelings a8e been inH%red tereby, e is at liberty to m%ltiply te n%mber o! acres
by any n%merical 8al%e tat @ill satis!y im0 3ne migt also coose 1=, 1<, 12, 16 b%sels B8 b%sels R 1 D%arterC per
acre in 5able 1 instead o! 1, <, 3, 2 D%arters, and te deri8ed n%merical 8al%es in te oter tables @o%ld remain @itin
te limits o! probability# it @ill be !o%nd tat te res%lt, i0e0, te ratio o! rent increase to capital increase, is exactly te
same0 5is as been done in te tables incl%ded by te editor in te next capter0 I F0 E0
xl8
Wake!ield, England and ?merica, 'ondon, 18330 ;ompare also 7as Kapital, A%c &, Kap0 JJ4 /Englis edition:
;0 JJJ&&&0 I Ed010
xl8i
$ee 7ombasle /?nnales agricoles de )o8ille, o% MFlanges dGagric%lt%re, dGFconomie r%rale et de lFgislation
agricole, ,aris, 18<2-3>0 I Ed01 and )0 Pones /?n Essay on te 7istrib%tion o! Wealt, and on te $o%rces o! 5axation,
,art &, )ent, 'ondon, 1831, p0 <<>0 I Ed010 J'4-1=18
xl8ii
)icardo deals @it tis 8ery s%per!icially0 $ee te passage directed against ?dam $mit concerning !orest rent in
-or@ay, at te 8ery beginning o! ;apter 11, in ,rinciples0
xl8iii
'aing /-ational 7istress# its ;a%ses and )emedies, 'ondon, 18220 I Ed01, -e@man /'ect%res on ,olitical
Economy, 'ondon, 18+>0 I Ed010
xlix
;ro@lington $trike0 Engels, 'age der arbeitenden Klasse in England, $0 3=>0
l
K5e pa8ing o! te streets o! 'ondon as enabled te o@ners o! some barren rocks on te coast o! $cotland to dra@ a
rent !rom @at ne8er a!!orded any be!ore0L ?dam $mit /?n &nD%iry into te -at%re and ;a%ses o! te Wealt o!
-ations,1 Aook 1, ;apter J&, <0
li
&t is one o! te merits o! )odbert%s @ose important @ork on rent /$ociale Arie!e an 8on Kircmann, 7ritter Arie!:
Widerleg%ng der )icardo"scen 'ere 8on der :r%ndrente %nd Aegrend%ng einer ne%en )ententeorie, Aerlin, 18+10 I
Ed01 @e sall disc%ss in Aook &4 /i0e0, 5eorien eber den Mer@ert0 K0 Marx0 Engels, Werke, Aand <6, <0 5eil, $0 >-
1=<, 13*-+10 I Ed01 to a8e de8eloped tis point0 6e commits te one error, o@e8er, o! ass%ming, in te !irst place,
tat as regards capital an increase in pro!it is al@ays expressed by an increase in capital, so tat te ratio remains te
same @en te mass o! pro!it increases0 A%t tis is erroneo%s, since te rate o! pro!it may increase, gi8en a canged
composition o! capital, e8en i! te exploitation o! labo%r remains te same, precisely beca%se te proportional 8al%e o!
te constant portion o! capital compared @it its 8ariable portion !alls0 $econdly, e commits te mistake o! dealing
@it te ratio o! money-rent to a D%antitati8ely de!inite piece o! land, e0g0, an acre, as to%g it ad been te general
premise o! classical economics in its analysis o! te rise or !all o! rent0 5is, again, is erroneo%s0 ;lassical economics
al@ays treats te rate o! rent, in so !ar as it considers rent in its nat%ral !orm, @it re!erence to te prod%ct, and in so
!ar as it considers rent as money-rent, @it re!erence to te ad8anced capital, beca%se tese are in !act te rational
expressions0
lii
;oncerning te act%al !all in te price o! land @en rent rises, see ,assy0 / 60 ,assy, 9ente du sol0 &n: 7ictionnaire de
lGFconomie politiD%e, 5ome &&01
liii
?dam $mit empasises o@, in is time Band tis applies also to te plantations in tropical and s%btropical
co%ntries in o%r o@n dayC, rent and pro!it @ere not yet di8orced !rom one anoter /$mit, ?n &nD%iry into te -at%re
and ;a%ses o! te Wealt o! -ations, ?berdeen, 'ondon, 1828, p0 220 I Ed01, !or te landlord @as sim%ltaneo%sly a
capitalist, H%st as ;ato, !or instance, @as on is estates0 A%t tis separation is precisely te prereD%isite !or te
capitalist mode o! prod%ction, to @ose conception te basis o! sla8ery moreo8er stands in direct contradiction0
li8
6err Mommsen, in is K)oman 6istory,L by no means %ses te term capitalist in te sense employed by modern
economics and modern society, b%t rater in te manner o! pop%lar conception, s%c as still contin%es to tri8e,
to%g not in England or ?merica, b%t ne8erteless on te E%ropean continent, as an ancient tradition re!lecting
bygone conditions0
l8
Follo@ing te conD%est o! a co%ntry, te immediate aim o! a conD%eror @as also to con8ert its people to is o@n %se0
;!0 'ing%et /5Forie des loi ci8iles, o% ,rincipes !ondamenta%x de la sociFtF, 5omes &-&&, 'ondres, 1>6>0 I Ed010 $ee
also Mdser /3snabrekisce :escicte, 10 5eil, Aerlin %nd $tettin, $0 1>80 I Ed010
l8i
;! A%8et /;o%rs dGFconomie politiD%e, Ar%xelles, 182<0 I Ed01 5ocD%e8ille /'Gancien rFgime et la rF8ol%tion, ,aris,
18+60 I Ed01, $ismondi /-o%8ea%x principes dGFconomie politiD%e0 I $econde Fdition, 5ome &, ,aris, 18<>0 I Ed01
l8ii
$ee te speec !rom te trone o! te King o! France in 5ooke0 /-e@-marc, ? 6istory o! ,rices, and o! te $tate
o! te ;irc%lation, d%ring te nine years 1828-+6, 4ol0 4&, 'ondon0 18+>, pp0 <*-3=0 I Ed01
l8iii
$ee Mo%nier /7e lGagric%lt%re en France, ,aris, 18260 I Ed01 and )%bicon /7% mFcanisme de la sociFtF en
France et en ?ngleterre, ,aris0 183>0 I Ed010
lix
7r0 60 Maron BExtensi8 oder &ntensi8QC /no !%rter in!ormation gi8en abo%t tis pamplet1 starts !rom te !alse
ass%mption o! te ad8ersaries e opposes0 6e ass%mes tat capital in8ested in te p%rcase o! land is Kin8estment
capital,L and ten engages in a contro8ersy abo%t te respecti8e de!initions o! in8estment capital and @orking capital,
tat is, !ixed and circ%lating capital0 6is @olly amate%ris conceptions o! capital in general, @ic may be exc%sed
incidentally in one @o is not an economist in 8ie@ o! te state o! :erman political economy, conceal !rom im tat
tis capital is neiter in8estment nor @orking capital, any more tan te capital @ic someone in8ests at te $tock
Excange in p%rcasing stocks or go8ernment sec%rities, and @ic, !or im, represents a personal in8estment o!
capital, is Kin8estedL in any branc o! prod%ction0
lx
5e !ollo@ing tree !ragments @ere !o%nd in di!!erent parts o! te man%script !or ,art 4&0 I F0 E0
lxi
Aeginning o! ;apter J'4&&& according to te man%script0 I F0 E0
lxii
Wages, pro!it, and rent are te tree original so%rces o! all re8en%e, as @ell as o! all excangeable 8al%e B?0 $mitC
/?n &nD%iry into te -at%re and ;a%ses o! te Wealt o! -ations, ?berdeen, 'ondon, 1828, $0 230 I Ed01 I &t is t%s
tat te ca%ses o! material prod%ction are at te same time te so%rces o! te original re8en%es @ic exist0 B$torc
/;o%rs dGFconomie politiD%e, $t0-,Ftersbo%rg, 181+0 I Ed01, &, p0 <+*0 I Ed0C
lxiii
)icardo makes te !ollo@ing 8ery apt comment on to%gtless $ay: K3! net prod%ce and gross prod%ce, M0 $ay
speaks as !ollo@s: f5e @ole 8al%e prod%ced is te gross prod%ce# tis 8al%e, a!ter ded%cting !rom it te cost o!
prod%ction, is te net prod%ce0G B4ol0 &&, p0 2*10C 5ere can, ten, be no net prod%ce, beca%se te cost o! prod%ction,
according to M0 $ay, consists o! rent, @ages and pro!its0 3n page +=8 e says: f5e 8al%e o! a prod%ct, te 8al%e o! a
prod%cti8e ser8ice, te 8al%e o! te cost o! prod%ction, are all, ten, similar 8al%es, @ene8er tings are le!t to teir
nat%ral co%rse0G 5ake a @ole !rom a @ole, and noting remains0L B)icardo, ,rinciples, ;apter JJ&&, p0+1<, -ote0C I
Ay te @ay @e sall see later tat )icardo no@ re!%ted $mitGs !alse analysis o! commodity-price, its red%ction to te
s%m o! te 8al%es o! te re8en%es0 6e does not boter @it it, and accepts its correctness so !ar in is analysis tat e
KabstractsL !rom te constant portion o! te 8al%e o! commodities0 6e also !alls back into te same @ay o! looking at
tings !rom time to time0
lxi8
K&n e8ery society te price o! e8ery commodity !inally resol8es itsel! into some one or oter, or all o! tose tree
parts /8iE0, @ages, pro!its, rent1 000 ? !o%rt part, it may peraps be to%gt, is necessary !or replacing te stock o! te
!armer or !or compensating te @ear and tear o! is labo%ring cattle, and oter instr%ments o! %sbandry0 A%t it m%st
be considered tat te price o! any instr%ment o! %sbandry, s%c as a labo%ring orse, is itsel! made %p o! te same
tree parts: te rent o! te land %pon @ic e is reared, te labo%r o! tending and rearing im, and te pro!its o! te
!armer, @o ad8ances bot te rent o! is land and te @ages o! is labo%r0 5o%g te price o! te corn, tere!ore,
may pay te price as @ell as te maintenance o! te orse, te @ole price still resol8es itsel! eiter immediately or
%ltimately into te same tree parts o! rent, labo%r /meaning @ages1 and pro!it0L B?dam $mit0C I We sall so@ later
on o@ ?dam $mit imsel! !eels te inconsistency and ins%!!iciency o! tis s%bter!%ge, !or it is noting b%t a
s%bter!%ge on is part to send %s !rom ,onti%s to ,ilate @ile no@ere does e indicate te real in8estment o! capital,
in @ic case te price o! te prod%ct resol8es itsel! %ltimately into tese tree parts, @ito%t any !%rter progress%s0
lx8
,ro%don exposes is inability to grasp tis in te ignorant !orm%lation: 'Go%8rier ne pe%t pas raceter son propre
prod%it Bte labo%rer cannot b%y back is o@n prod%ctC, beca%se te interest @ic is added to te prix-de-re8ient
Bcost-priceC is contained in te prod%ct0 A%t o@ does M0 E%gjne Forcade teac im to kno@ betterQ K&! ,ro%donGs
obHection @ere correct, it @o%ld strike not only te pro!its o! capital, b%t @o%ld eliminate te possibility e8en o!
ind%stry0 &! te labo%rer is compelled to pay 1== !or eac article !or @ic e as recei8ed only 8=, i! is @ages can
b%y back only te 8al%e @ic e as p%t into a prod%ct, it co%ld be said tat te labo%rer cannot b%y back anyting,
tat @ages cannot pay !or anyting0 &n !act, tere is al@ays someting more tan te @ages o! te labo%rer contained
in te cost-price, and al@ays more tan te pro!its o! enterprise in te selling price, !or instance, te price o! ra@
materials, o!ten paid to !oreign co%ntries0 000 ,ro%don as !orgotten abo%t te contin%al gro@t o! national capital# e
as !orgotten tat tis gro@t re!ers to all labo%rers, @eter in an enterprise or in andicra!ts0L B)e8%e des de%x
Mondes, 1828, 5ome <2, p0 **80C 6ere @e a8e te optimism o! bo%rgeois to%gtlessness in te !orm o! sagacity tat
most corresponds to it0 M0 Forcade !irst belie8es tat te labo%rer co%ld not li8e did e not recei8e a iger 8al%e tan
tat @ic e prod%ces, @ereas con8ersely te capitalist mode o! prod%ction co%ld not exist @ere e really to recei8e
all te 8al%e @ic e prod%ces0 $econdly, e correctly generalises te di!!ic%lty, @ic ,ro%don expressed only
!rom a narro@ 8ie@point0 5e price o! commodities contains not only an excess o8er @ages, b%t also o8er pro!it,
namely, te constant portion o! 8al%e0 ?ccording to ,ro%donGs reasoning, ten, te capitalist too co%ld not b%y back
te commodities @it is pro!it0 ?nd o@ does Forcade sol8e tis riddleQ Ay means o! a meaningless prase: te
gro@t o! capital0 5%s te contin%al gro@t o! capital is also s%pposed to be s%bstantiated, among oter tings, in
tat te analysis o! commodity-prices, @ic is impossible !or te political economist as regards a capital o! 1==,
becomes s%per!l%o%s in te case o! a capital o! 1=,===0 Wat @o%ld be said o! a cemist, @o, on being asked, 6o@ is
it tat te prod%ct o! te soil contains more carbon tan te soilQ @o%ld ans@er: &t comes !rom te contin%al increase
in agric%lt%ral prod%ction0 5e @ell-meaning desire to disco8er in te bo%rgeois @orld te best o! all possible @orlds
replaces in 8%lgar economy all need !or lo8e o! tr%t and inclination !or scienti!ic in8estigation0
lx8i
K5e circ%lating capital in8ested in materials, ra@ materials and !inised goods is itsel! composed o! goods, te
necessary price o! @ic is !ormed o! te same elements# so tat, 8ie@ing te total goods in one co%ntry, it @o%ld
mean d%plication to co%nt tis portion o! circ%lating capital among te elements o! te necessary price0L B$torc,
;o%rs dGFconomie politiD%e, &&, p0 12=0C I Ay tese elements o! circ%lating capital $torc means te 8al%e o! constant
capital B!ixed capital is merely circ%lating in a di!!erent !orm0 K&t is tr%e tat te @ages o! te labo%rer, like tat
portion o! pro!it o! enterprise @ic consists o! @ages, i! @e consider tem as a part o! te means o! s%bsistence, also
consist o! goods bo%gt at c%rrent prices and @ic like@ise comprise @ages, interest on capital, gro%nd-rent and
pro!it o! enterprise0000 5is obser8ation merely ser8es to pro8e tat it is impossible to resol8e te necessary price into
its simplest elements0G, Bibid, -ote0C I &n is ;onsidFrations s%r la nat%re d% re8en% national B,aris, 18<2C, $torc
indeed realises in is contro8ersy @it $ay to @at abs%rdity te erroneo%s analysis o! commodity-8al%e leads I @en
it resol8es 8al%e into mere re8en%es0 6e correctly points o%t te !olly o! s%c res%lts I not !rom te 8ie@point o! te
indi8id%al capitalist, b%t !rom tat o! a nation I b%t imsel! goes no step !%rter in is analysis o! te prix nFcessaire
!rom tat presented in is ;o%rs, tat it is impossible to resol8e it into its act%al elements, @ito%t resol8ing it into a
sp%rio%s ad8ance ad in!init%m0 K&t is e8ident tat te 8al%e o!G te ann%al prod%ct is di8ided partly into capitals and
partly into pro!its, and tat eac one o! tese portions o! 8al%e o! te ann%al prod%ct reg%larly goes to b%y te
prod%cts needed by te nation, as m%c to preser8e its capital as to rene@ its cons%mption !%nd Bpp0 132, 13+C0000 ;an
itL Ba sel!-employed peasant !amilyC Kli8e in its barns or stables, eat its seed and !orage, clote itsel! @it its dra%gt
cattle, dispense @it its agric%lt%ral implementsQ ?ccording to te tesis o! M0 $ay one m%st ans@er all tese
D%estions in te a!!irmati8e Bpp0 13+, 136C 0000 &! it is admitted tat te re8en%e o! a nation is eD%al to its gross prod%ct,
i0e0, i! no capital as to be ded%cted !rom it, ten it m%st also be admitted tat a nation can spend te entire 8al%e o! its
ann%al prod%ct %nprod%cti8ely @ito%t impairing its !%t%re income in te least B12>C0 5e prod%cts @ic constit%te
te capital o! a nation are not cons%mableL Bp01+=C0
lx8ii
&n breaking do@n te 8al%e added to te constant portion o! capital into @ages, pro!it and gro%nd-rent, it goes
@ito%t saying tat tese are portions o! 8al%e0 3ne may, indeed, concei8e o! tem as existing in te direct prod%ct in
@ic tis 8al%e appears, i0e0, in te direct prod%ct prod%ced by labo%rers and capitalists in some partic%lar spere o!
prod%ction I !or instance, yarn prod%ced in te spinning ind%stry0 A%t in !act tey do not materialise in tis prod%ct
any more or any less tan in any oter commodity, in any oter component o! te material @ealt a8ing te same
8al%e0 ?nd in practice @ages are indeed paid in money, tat is, in te p%re expression o! 8al%e, like@ise interest and
rent0 For te capitalist, te trans!ormation o! is prod%ct into te p%re expression o! 8al%e is indeed 8ery important# in
te distrib%tion itsel! tis trans!ormation is already ass%med0 Weter tese 8al%es are recon8erted into te same
prod%ct, te same commodity, o%t o! @ose prod%ction tey arose, @eter te labo%rer b%ys back a part o! te
prod%ct directly prod%ced by imsel! or b%ys te prod%ct o! some oter labo%r o! a di!!erent kind, as noting to do
@it te matter itsel!0 6err )odbert%s D%ite %nnecessarily !lies into a passion abo%t tis0
lx8iii
K&t @ill be s%!!icient to remark tat te same general r%le @ic reg%lates te 8al%e o! ra@ prod%ce and
man%!act%red commodities is applicable also to te metals# teir 8al%e depending not on te rate o! pro!its, nor on te
rate o! @ages, nor on te rent paid !or mines, b%t on te total D%antity o! labo%r necessary to obtain te metal and to
bring it to market0L B)icardo, ,rinciples, ;0 &&&, p0 >>0C
lxix
P0 $t%art Mill, $ome (nsettled M%estions in ,olitical Economy, 'ondon, 18220
lxx
$ee te @ork on ;ompetition and ;o-operation B183<QC0
lxxi
F0 'ist remarks correctly: K5e pre8alence o! a sel!-s%!!icient economy on large estates demonstrates solely te lack
o! ci8ilisation, means o! comm%nication, domestic trades and @ealty cities0 &t is to be enco%ntered, tere!ore,
tro%go%t )%ssia, ,oland, 6%ngary and Mecklenb%rg0 Formerly, it @as also pre8alent in England# @it te ad8ance
o! trades and commerce, o@e8er, tis @as replaced by te breaking %p into middle estates and te leasing o! land0L
B7ie ?cker8er!ass%ng, die 9@erg@irtsca!t %nd die ?%s@ander%ng, 182<, p01=0C