Net income, as opposed to gross income (which is equal to the total product or the value of the total product), is the form in which the Physiocrats originally conceived surplus-value. They consider rent to be its sole form, since they think of industrial profit as merely a kind of wage; later economists who blur the concept of profit by calling it wages for the superintendence of labour, ought to agree with them. Net revenue is therefore in fact the excess of the product (or the excess of its value) over that part of it which replaces the capital outlay, comprising both constant and variable capital. It thus consists simply of profit and rent, the latter, in turn, is only a separate portion of the profit, a portion accruing to a class other than the capitalist class. The direct purpose of capitalist production is not the production of commodities, but of surplus-value or profit (in its developed form), the aim is not the product, but the surplus-product. Labour itself, from this standpoint, is only productive in so far as it creates profit or surplus-product for capital. If the worker does not create profit, his labour is unproductive. The mass of productive labour employed is only of interest to capital in so far as through it or in proportion to it the mass of surplus-labour grows. Only to this extent is what we called necessary labour-time, necessary. In so far as it does not have this result, it is superfluous and to be supressed. It is the constant aim of capitalist production to produce a maximum of surplus-value or surplus-product with the minimum capital outlay; and to the extent that this result is not achieved by overworking the workers, it is a tendency of capital to seek to produce a given product with the least possible expenditure economy of power and expense. It is therefore the economic tendency of capital which teaches humanity to husband its strength and to achieve its productive aim with the least possible expenditure of means. In this conception, the workers themselves appear as that which they are in capitalist production mere means of production, not an end in themselves and not the aim of production. Net income is not determined by the value of the total product, but by the excess of the value of the total product over the value of the capital outlay, or by the size of the surplus-product in relation to the total product. Provided this surplus grows the aim of capitalist production has been achieved even if the value decreases ||733| or, if along with the value, the total quantity of the product also decreases. Ricardo expressed these tendencies consistently and ruthlessly. Hence much howling against him on the part of the philanthropic philistines. In considering net income, Ricardo again commits the error of resolving the total product into revenue, wages, profits and rent, and disregarding the constant capital which has to be replaced. But we will leave this out of account here. Chapter XXXII Mr. Malthus s Opinions on Rent . [And in Chapter XXVI Ricardo says :] This is wrong because the portion devoted to replacing the capital (wages excluded) employed in production has been forgotten. Ricardo himself makes the following comment on this passage in a note on page 416: To gain a better understanding of Ricardo s views, the following passages must also be considered. There is this advantage always resulting from a relatively low price of corn, that the division of the actual production is more likely to increase the fund for the maintenance of labour, inasmuch as more will be allotted, under the name of profit, to the productive class, a[a] less under the name rent, to the unproductive class (l.c., p. 317). Productive class here refers only to the industrial capitalists. ||734| Supposing that through the import of foreign corn the price of corn falls so that rent is decreased by 1 million. Ricardo says that as a result the money incomes of the capitalists will increase, and then continues: But it may be said, that the capitalist s income will not he increased; that the million deducted from the landlord s rent, will he paid in additional wages to labourers! Be it so; the situation of the society will be improved, and they can [b] bear the same money burthens with greater facility than before; it will only prove what is still more desirable, that the situation of another class, and by far the most important class in society, is the one which is chiefly benefited by the new distribution. All that they receive more than 9 millions, forms part of the net income of the country, and it cannot be expended without adding to its revenue, its happiness, or its power. Distribute then the net income as you please. Give a little more to one class, and a little less to another, yet you do not thereby diminish it; a greater amount of commodities will be still produced with the same labour, although the amount of the gross money value of such commodities will be diminished; but the net money income of the country, that fund from which taxes are paid and enjoyments procured, would be much more adequate, than before, to maintain the actual population, to afford it enjoyments and luxuries, and to support any given amount of taxation (l.c., pp. 515 16). Chapter I (Section V) On Value . This point is quite right. At the same time it provides the answer to those who believe that the workers displaced by machines find employment in machine manufacture itself. This view, incidentally, belongs to an epoch in which the engineering workshop was still based entirely on the division of labour, and machines were not as yet employed on the production of machines. Suppose the annual wage of one man to be 50, then that of 100 is 5,000. If these 100 men are replaced by a machine which costs, similarly, 5,000, then this machine must be the product of the labour of less than 100 men. For besides paid labour it contains unpaid labour which forms the profit of the machine manufacturer. If it were the product of 100 men, then it would contain only paid labour. If the rate of profit were 10 per cent then approximately 4,545 of the 5,000 would represent the capital advanced and approximately 455 the profit. At [a wage of] 50, 4,545 would only represent 90 9/10 men. ||735| But the capital of 4,545 by no means represents only variable capital (capital laid out directly in wages). It represents also raw materials and the wear and tear of the fixed capital employed by the machine manufacturer. The machine costing 5,000, which replaces 100 men whose wages come to 5,000, thus represents the product of far fewer than 90 men. Moreover, the machine can only be employed profitably, if it at least that portion of it which enters annually with interest into the product, i.e., into its value%rang; is the (annual) product of far fewer men than it replaces. Every rise in wages increases the variable capital that has to be laid out, although the value of the product since this is equal to the variable capital plus the surplus-labour remains the same, for the number of workers which the variable capital sets in motion remains the same. Chapter XX Value and Riches, their Distinctive[c] Properties. Natural agents add nothing to the value of commodities, on the contrary, [they reduce it]. But by doing so they add to the surplus-value, which alone interests the capitalists. The machine costs [labour]. Natural agents as such cost nothing. They cannot, therefore, add any value to the product; rather they diminish its value in so far as they replace capital or labour, immediate or accumulated labour. In as much as natural philosophy teaches how to replace human labour by natural agents, without the aid of machinery or only with the same machinery as before (perhaps even more cheaply, as with the steam boiler, many chemical processes etc.), it costs the capitalist, and society as well, nothing and cheapens commodities absolutely. Ricardo continues the above-quoted passage thus: Society would in the first place be richer by the diminished price of flour. It would either consume more flour or spend the money formerly destined for flour upon some other commodity, either existing, or called into life, because a new fund for consumption had become available. Of this part of the revenue, formerly spent on flour and now, consequent upon the diminished price of flour, set free for some other application, it may be said that it was destined by virtue of the whole economy of the society for a certain thing, and that it is now freed from that destiny . It is the same as if new capital had been accumulated. And in this way, the application of machinery and natural agents frees capital and enables previously latent needs to be satisfied. On the other hand, it is wrong to speak of the funds destined for the maintenance of the ten men thrown out of employment by the new discovery. For the first fund which is saved or created through the discovery is that part of the revenue which society previously paid for flour and which it now saves as a result of the diminished price of flour. The second fund which is saved, however, is that which the miller previously paid for the ten men now displaced. This fund indeed, as Ricardo notes, is in no degree impaired by the discovery and the displacement of the ten men. But the fund has no natural connection with the ten men. They may become paupers, starve etc. One thing only is certain, that ten men of the new generation who should take the place of these ten men in order to turn the mill, must now be absorbed in other employment; and so the relative population has increased (independently of the average increase of population) in that the mill is now driven [by a natural agent] and the ten men who would otherwise have had to turn it are employed in producing some other commodity. The invention of machinery and the employment of natural agents thus set free capital and men (workers) and create together with freed capital freed hands (free hands, as Steuart calls them), whether ||736| [for] newly created spheres of production or [for] the old ones which are expanded and operated on a larger scale. The miller with his freed capital will build new mills or will lend out his capital if he cannot use it himself as a capitalist. On no account, however, is there a fund destined for the ten men displaced. We shall return to this absurd assumption: namely that, if the introduction of machines (or natural agents) does not (as is partly the case in agriculture, when horses take the place of men or stock-raising takes the place of corn growing) reduce the quantity of means of subsistence which can be laid out in wages, the fund which has thus been set free must necessarily be laid out as variable capital (as if there was no possibility of exporting means of subsistence, or spending them on unproductive workers, or [as if] wages in certain spheres could not rise etc.) and must even be paid out to the displaced labourers. Machinery always creates a relative surplus population, a reserve army of workers, which greatly increases the power of capital. In the note on page 335, Ricardo also makes the following observation directed against Say: Natural agents, indeed, add nothing to value, so long as there are no circumstances in which they give occasion for the creation of rent. But machines invariably add their own value to the already existing value and firstly, in so far as their existence facilitates the further transformation of circulating into fixed capital, and makes it possible to carry on this transformation on an ever growing scale, they increase not only wealth but also the value which is added by past labour to the product of the annual labour; secondly, since machines make possible the absolute growth of population and with it the growth of the mass of the annual labour, they increase the value of the annual product in this second way. |736|| ||736| Chapter XXXI On Machinery . This section, which Ricardo added to his third edition, bears witness to his honesty which so essentially distinguishes him from the vulgar economists. This inconvenience is great enough for the worker, if, as in modern production, it is perpetual.%rang; In the first place, Ricardo starts from the false assumption that machinery is always introduced into spheres of production in which the capitalist mode of production already exists. But the mechanised loom originally replaced the hand-loom weaver, the spinning jenny the hand spinner, the mowing, threshing and sowing machines often the small peasant who himself cultivated his plot of land, etc. In this case, not only is the labourer displaced, but his instrument of production too ceases to be capital (in the Ricardian sense). This entire or complete devaluation of the old capital also takes place when machinery revolutionises manufacture previously based on the simple division of labour. It is ridiculous to say in this case that the old capital continues to make the same demand for labour as before. The capital which was employed by the hand-loom weaver, hand spinner etc. has ceased to exist. But suppose, for the sake of simplicity, that the machinery is introduced there is, of course, no question here of the employment of machinery in new branches of industry%rang; only into spheres where capitalist production (manufacture) is already [dominant] or it may be introduced into the workshop already based on machinery, thus increasing the mechanisation of the labour processes or bringing into use improved machinery, which makes it possible either to dismiss a section of the workers previously employed or to produce a greater product while employing the same number of workers as before. The latter is of course the most favourable case. In order to reduce confusion, we must distinguish here between 1. the funds of the capitalist who employs machinery and dismisses workers; 2. the funds of society, that is, of the consumers of the commodities produced by this capitalist. ad 1. So far as the capitalist who introduces the machinery is concerned, it is wrong and absurd to say that he can lay out the same amount of capital in wages as before. (Even if he borrows, it is still equally wrong, not for him, but for society.) One part of his capital he will convert into machinery and other forms of fixed capital, another part into auxiliary materials which he did not need before, and a larger part into raw materials, if we assume that he produces more commodities with fewer workers, thus requiring more raw material. The proportion of variable capital that is to say, of capital laid out in wages to constant capital has decreased in his branch of business. And this reduction in the proportion will be permanent (indeed, the decrease in variable capital relatively to constant will even continue at a faster rate as a result of the productive power of labour developing along with accumulation), even if his business on the new scale of production expands to such an extent that he can re-employ the total number of dismissed workers, and employ even more workers than before. The demand for labour in his business will grow with the accumulation of his capital, but to a much smaller degree than his capital accumulates, and his capital will in absolute terms never again require the same amount of labour as before. The immediate result, however, will be that a section of the workers is thrown on to the street.%rang; But it may be said that indirectly the demand for workers will remain the same, for more workers will be required for the construction of machines. But Ricardo himself has already shown that machinery never costs as much labour as the labour which it displaces. It is possible for the hours of labour in the machine workshops to be lengthened for some time ||738| and that, in the first instance, not a man more may be employed in them. Raw material cotton for example can come from America and China and it makes no difference whatsoever to the Englishmen who have been thrown out of work, whether the demand for Negroes or coolies grows. But even assuming that the raw materials are supplied within the country, more women and children will be employed in agriculture, more horses etc., and perhaps more of one product and less of another will be produced. But there will be no demand for the dismissed workers, for in agriculture, too, the same process which creates a constant relative surplus population is taking place. Prima facie it is not likely that the introduction of machinery will set free any of the capital of the manufacturer when he makes his first investment. It merely provides a new type of investment for his capital, its immediate result, according to the assumption, is the dismissal of workers and the conversion of part of the variable capital into constant capital. ad 2. So far as the general public is concerned, in the first place, revenue is set free as a result of the lowering in price of the commodity produced by means of the machine; capital directly only in so far as the manufactured article enters into constant capital as an element of production. If it entered into the average consumption of the worker, it would, according to Ricardo, bring in its wake a reduction in real wages also in the other branches of industry.%rang; A part of the revenue thus set free, will be consumed in the same article, either because the reduction in price makes it accessible to new classes of consumers (in this case, incidentally, it is not displaced revenue that is expended on the article), or because the old consumers consume more of the cheaper article, for instance four pairs of cotton stockings instead of one pair. Another part of the revenue thus set free may serve to expand the industry into which the machinery has been introduced, or it may be used in the formation of a new industry producing a different commodity, or it may serve to expand a sphere of production which already existed before. For whatever purpose the revenue thus set free and reconverted into capital is used, it will in the first place hardly be sufficient to absorb that part of the increased population which each year streams into each branch of production, and which is now debarred from entering the old industry. It is, however, also possible for a portion of the freed revenue to be exchanged against foreign products or to be consumed by unproductive workers. But by no means does a necessary connection exist between the revenue that has been set free and the workers that have been set free of revenue. The absurd fundamental notion, however, which underlies Ricardo s view, is the following: The capital of the manufacturer who introduces machinery is not set free. It is merely utilised in a different manner, namely, in such a manner that it is not, as before, transformed into wages for the workers who are discharged. A part of the variable capital is converted into constant capital. Even if some of it were set free, it would be absorbed by spheres in which the discharged labourers could not work and where, at the most, those who replace them could find refuge. By expanding old spheres of production or opening up new ones the revenue set free in so far as it is not offset by greater consumption of the cheaper article or is not exchanged against foreign means of subsistence only gives the necessary opening (if it does so!) for that part of the annual population increase that is for the time being debarred from the old trade into which the machinery has been introduced. But the absurdity which lies concealed at the root of Ricardo s notions, is this: The means of subsistence which were previously consumed by the workers now discharged, remain after all in existence and are still on the market. The workers, on the other hand, are also available on the market. Thus there are, on the one hand, means of subsistence (and therefore means of payment) for workers, i.e., potential variable capital, and on the other, unemployed workers. Hence the fund is there to set them in motion. Consequently they will find employment. Is it possible that even such an economist as Ricardo can babble such hair-raising nonsense? According to this, no human being who is capable of work and willing, could ever starve in bourgeois society, when there are means of subsistence on the market, at the disposal of the society, to pay him for any work whatever. These means of subsistence, in the first place, do not by any means confront those workers as capital. Assume that 100,000 workers have suddenly been thrown out on the streets by machinery. Then in the first place there is no doubt whatsoever ||739| that the agricultural products on the market, which on the average suffice for the whole year and which were previously consumed by these workers, are still on the market as before. If there were no demand for them and if, at the same time, they were not exportable what would happen? As the supply relative to the demand would have grown, they would fall in price, and as a result of this fall in price, their consumption would rise, even if the 100,000 workers were starving to death. The price need not even fall. Perhaps less of these means of subsistence is imported or more of them exported. Ricardo imagines quixotically that the entire bourgeois social mechanism is arranged so nicely that if, for instance, ten men are discharged from their work, the means of subsistence of these workers now set free must definitely be consumed in one way or another by the identical ten men and that otherwise they could not be sold; as if a mass of semi-employed or completely unemployed were not for ever crawling around at the bottom of this society and as if the capital existing in the form of means of subsistence were a fixed amount. If the market-price of corn fell due to the decreasing demand, then the capital available in the shape of corn would be diminished (in terms of money) and would exchange for a smaller portion of the society s money revenue, in so far as it is not exportable. And this applies even more to manufactures. During the many years in which the hand-loom weavers were slowly dying of hunger, the production and export of English cotton cloth increased enormously. At the same time (1838 1841) the prices of provisions rose. And the weavers had only rags in which to clothe themselves and not enough food to keep body and soul together. The constant artificial production of a surplus population, which disappears only in times of feverish prosperity, is one of the necessary conditions of production of modern industry. There is nothing to prevent a part of the money capital lying idle and without employment and the prices of the means of subsistence falling because of relative surplus production while at the same time workers who have been displaced by machinery, are starving. It is true that in the long run the labour that has been released together with the portion of revenue or capital that has been released, will find an opening in a new sphere of production or in the expansion of the old one, but this is of more benefit to those who succeed the displaced men than to the displaced men themselves. New ramifications of more or less unproductive branches of labour are continually being formed and in these revenue is directly expended. Then there is the formation of fixed capital (railways etc.) and the labour connected with superintendence which this opens up; the manufacture of luxuries etc., foreign trade, which increasingly diversifies the articles on which revenue is spent. From his absurd standpoint, Ricardo therefore assumes that the introduction of machinery harms the workers only when it diminishes the gross product (and therefore gross revenue), a case which may occur, it is true, in large-scale agriculture, with the introduction of horses which consume corn in place of the workers, with the transition from corn-growing to sheep-raising etc.; but it is quite preposterous [to extend this case] to industry proper, whose ability to sell its gross product is by no means restricted by the internal market. (Incidentally, while one section of the workers starves, another section may be better fed and clothed, as may also the unproductive workers and the middle strata between worker and capitalist.) It is wrong, in itself, to say that the increase (or the quantity) of articles entering into revenue as such, forms a fund for the workers or forms capital for them. A portion of these articles is consumed by unproductive workers or non-workers, another portion may be transformed by means of foreign trade, from its coarse form, the form in which it serves as wages, into a form in which it enters into the revenue of the wealthy, or in which it serves as an element of production of constant capital. Finally, a portion will be consumed by the discharged workers themselves in the workhouse, or in prison, or as alms, or as stolen goods, or as payment for the prostitution of their daughters. In the following pages I shall briefly compare the passages in which Ricardo develops this nonsense. As he says himself, he received the impetus for it from Barton s work, which must therefore be examined, after citing those passages. ||740| It is self-evident, that in order to employ a certain number of workers each year, a certain quantity of food and other necessary means of subsistence must be produced annually. In large-scale agriculture, stock-raising etc, it is possible for the net income (profit and rent) to be increased while the gross income is reduced, that is to say, while the quantity of necessaries intended for the maintenance of the workers is reduced. But that is not the question here. The quantity of articles entering into consumption or, to use Ricardo s expression, the quantity of articles of which the gross revenue consists, can be increased, without a consequent increase in that portion of this quantity which is transformed into variable capital. This may even decrease. In this case more is consumed as revenue by capitalists, landlords and their retainers, the unproductive classes, the state, the middle strata (merchants) etc. What lies behind the view taken by Ricardo (and Barton) is that he originally set out from the assumption that every accumulation of capital is equivalent to an increase in variable capital, that the demand for labour therefore increases directly, in the same proportion, as capital is accumulated. But this is wrong, since with the accumulation of capital a change takes place in its organic composition and the constant part of the capital grows at a faster rate than the variable. This does not, however, prevent revenue from constantly growing, in value and in quantity. But it does not result in a proportionately larger part of the total product being laid out in wages. Those classes and sub-classes who do not live directly from their labour become more numerous and live better than before, and the number of unproductive workers increases as well. Since, in the first place, it has nothing to do with the question, we will not concern ourselves with the revenue of the capitalist who transforms a part of his variable capital into machinery (and who therefore also puts more into raw material relatively to the amount of labour employed in all those spheres of production where raw material is an element of the process of creating value). His revenue and that part of his capital which has actually gone into the production process exist, at first, in the form of products or rather commodities which he produces himself, for example yarn if he is a spinner. After the introduction of machinery he transforms one part of these commodities or the money for which he sells them into machinery, auxiliary materials and raw materials whereas, previously, he paid it out as wages to the workers, thus transforming it indirectly into means of subsistence for the workers. With some exceptions in agriculture, he will produce more of these commodities than before, although his discharged workers have ceased to consume, and therefore to buy his own articles, though they did so before. More of these commodities will now be present on the market, although for the workers thrown on the street, they have ceased to exist [as objects of consumption] or have ceased to exist in their previous quantity. Thus, so far as his own product is concerned, in the first place, even if it enters into the consumption of the workers, its increased production in no way contradicts the fact that a part of it has ceased to exist as capital for the workers. A larger part of it (of the total product) on the other hand must now replace that portion of the constant capital which resolves into machinery, auxiliary materials and raw materials, that is to say, it must be exchanged against more of these ingredients of reproduction than formerly. If the increase in commodities through machinery and the decrease in a previously existing demand (namely in the demand of the workers that have been discharged) for the commodities produced by this machinery were contradictory, then in most cases, no machinery could in fact be introduced. The mass of commodities produced and the portion of these commodities which is reconverted into wages, therefore, have no definite relationship or necessary connection, when we consider the capital of which a part is transformed into machinery instead of into wage labour. So far as society in general is concerned, the replacement of its revenue or rather the extension of the limits of its revenue takes place first of all on account of the articles whose price has been lowered by the introduction of machinery. This revenue may continue to be spent as revenue, and if a considerable part of it is transformed into capital, the increased population apart from the artificially created surplus population is already there to absorb that part of the revenue which is transformed into variable capital. Prima facie, therefore, what this comes to is only: the production of all other articles, particularly in the spheres which produce articles entering into the consumption of the workers despite the discharging of the hundred men etc. continues on the same scale as before; quite certainly at the moment when the workers are discharged. In so far, therefore, as the dismissed workers represented a demand for these articles, the demand has decreased, although the supply has remained the same. If the reduced demand is not made good, the price will fall (or instead of a fall in price a larger stock may remain on the market for the following year). If the article is not produced for export, too, and if the decrease in demand were to persist, then reproduction would decrease, but it does not follow that the capital employed in this sphere ||741| must necessarily decrease. Perhaps more meat or commercial crops or luxury foods are produced [and] less wheat or more oats for horses etc. or fewer fustian jackets and more bourgeois frock-coats. But none of these consequences need necessarily materialise, if, for instance, as a result of the cheapening of cotton goods, the employed workers are able to spend more on food etc. The same quantity of commodities and even more of them including those consumed by the workers can be produced, although less capital, a smaller portion of the total product, is transformed into variable capital, that is laid out in wages. Neither is it the case that part of the capital of the producers of these articles has been set free. At worst the demand for their commodities would have decreased, and the reproduction of their capital impeded by the reduced price of their commodities. Hence their own revenue would immediately decrease, as it would with any fall in the prices of commodities. But it cannot be said that any particular part of their commodities had previously confronted the discharged workers as capital and was now set free along with the workers. What confronted the workers as capital, was a part of the commodity now being produced with machinery; this part came to them in the form of money and was exchanged by them for other commodities (means of subsistence), which did not face them as capital, but confronted their money as commodities. This is therefore an entirely different relationship. The farmer and any other producer whose commodity they bought with their wages, did not confront them as capitalist and did not employ them as workers. They have only ceased to be buyers for him, which may possibly if not counterbalanced by other circumstances bring about a temporary depreciation in his capital, but does not set free any capital for the discharged workers. The capital that employed them is still in being , but no longer in a form in which it resolves into wages, or only indirectly and to a smaller extent. Otherwise anyone who through some bad luck ceased to have money, would inevitably set free sufficient capital for his own employment. By gross revenue Ricardo means that part of the product which replaces wages and surplus-value (profits and rent); by net revenue he means the surplus-product, [which] equals the surplus-value. He forgets here, as throughout his work, that a portion of the gross product must replace the value of the machinery and raw material, in short, the value of the constant capital. * * * Ricardo s subsequent treatment is of interest, partly because of some of the observations he makes in passing, partly because, mutatis mutandis, it is of practical importance for large-scale agriculture, particularly sheep-rearing, and shows the limitations of capitalist production. Not only is its determining purpose not production for the producers (workmen), but its exclusive aim is net revenue (profit and rent), even if this is achieved at the cost of the volume of production at the cost of the volume of commodities produced. First it is noteworthy that Ricardo here admits that causes which further the wealth of the capitalists and landlords may render the population redundant so that redundant population or over-population is presented here as the result of the process of enrichment itself, and of the development of productive forces which conditions this process. So far as the fund is concerned, out of which the capitalists and landlords draw their revenue and on the other hand the fund from which the workers draw theirs, to begin with, it is the total product which forms this common fund. A large part of the products which enter into the consumption of the capitalists and landlords, does not enter into the consumption of the workers. On the other hand, almost all, in fact more or less all, products which enter into the consumption of the workers also enter into that of the landlords and capitalists, their retainers and hangers-on, including dogs and cats. One cannot suppose that there are two essentially distinct fixed funds in existence. The important point is, what relative portion each of these groups draws from the common fund. The aim of capitalist production is to obtain as large an amount of surplus-product or surplus-value as possible with a given amount of wealth. This aim is achieved by constant capital growing more rapidly in proportion to variable capital or by setting in motion the greatest possible ||742| constant capital with the least possible variable capital. In much more general terms than Ricardo conceives here, the same cause effects an increase in the fund out of which capitalists and landlords draw their revenue, by a decrease in the fund out of which the workers draw theirs. It does not follow from this that the fund from which the workers draw their revenue is diminished absolutely; only that it is diminished relatively, in proportion to their total output. And that is the only important factor in the determination of the portion which they appropriate out of the wealth they themselves created. A capitalist we will suppose employs a capital of the value of 20,000 and that he carries on the joint business of a farmer, and a manufacturer of necessaries. We will further suppose, that 7,000 of this capital is invested in fixed capital, viz. in buildings, implements, etc., etc., and that the remaining 13,000 is employed as circulating capital in the support of labour. Let us suppose, too, that profits are 10 per cent, and consequently that the capitalist s capital is every year put into its original state of efficiency, and yields a profit of 2,000. The nature of surplus-value is very palpably expressed here. The passage is on pp. 469 70.%rang; As far as these products are concerned, the gross produce for that year is 15,000, and the net produce 2,000. Suppose now, that the following year the capitalist employs half his men in constructing a machine, and the other half in producing food and necessaries as usual. During that year he would pay the sum of 13,000 in wages as usual, and would sell food and necessaries to the same amount to his workmen; but what would be the case the following year? {This would, however, also be the case if by means of the machine which costs 7,500, exactly the same quantity of products were produced as previously with a variable capital of 13,000. Suppose the wear and tear of the machine were equal to one-tenth in one year, that is to 750, then the value of the product previously 15,000 would now be 8,250. (Apart from the wear and tear of the original fixed capital of 7,000, whose replacement Ricardo does not mention at all.) Of these 8,250, 2,000 would be profit, as previously out of the 15,000. The lower price would be advantageous to the farmer in so far as he himself consumes food and necessaries as revenue. It would also be advantageous to him in so far as it enables him to reduce the wages of the workers he employs thus releasing a portion of his variable capital. It is this portion, which to a certain degree could employ new labour, but only because the real wage of the workers who have been retained had fallen. A small number of those who have been discharged could thus at the cost of those who had been retained be re-employed. The fact however that the product would be just as great as before, would not help the dismissed workers. If the wage remained the same, no part of the variable capital would be released. The fact that the product of 8,250 represents the same amount of necessaries and food as previously 15,000 does not cause its value to rise. The farmer would have to sell it for 8,250, partly in order to replace the wear and tear of his machinery and partly in order to replace his variable capital. In so far as this lowering of the price of food and necessaries did not bring about a fall in wages in general, or a fall in the ingredients entering into the reproduction of the constant capital, the revenue of society would have expanded only in so far as it is expended on food and necessaries. A section of the unproductive and productive workers etc. would live better. That is all. (They could also save, but that is always action in the future). The discharged workers would remain on the street, although the physical possibility of their maintenance existed just as much as before. Moreover, the same capital would be employed in the reproduction process as before. But a part of the product (whose value had fallen), which previously existed as capital has now become revenue.} The reduced quantity of labour which the capitalist can employ, must, indeed, with the assistance of the machine, and after deductions for its repairs, produce a value equal to 7,500, it must replace the circulating capital with a profit of 2,000 on the whole capital; but if this be done, ||743| if the net income be not diminished, of what importance is it to the capitalist, whether the gross income be of the value of 3,000, of 10,000, or of 15,000? This is perfectly correct. The gross income is of absolutely no importance to the capitalist. The only thing which is of interest to him is the net income.%rang; Hence Adam Smith s partiality for gross produce, a partiality to which Ricardo objects. See Chapter XXVI On Gross and Net Revenue , which Ricardo opens with the words: Labour therefore becomes redundant, because the demand for labour diminishes, and that demand diminishes in consequence of the development in the productive powers of labour.%rang; According to this, first one part of capital is transformed into revenue, transferred to revenue not in terms of value, but as regards the use-value, the material elements of which the capital consists in order later, to transfer a part of the revenue back into capital. For example, when 13,000 was laid out in variable capital a part of the product amounting to 7,500, entered into the consumption of the workers whom the farmer employed, and this part of the product formed part of his capital. Following upon the introduction of machinery, for example, according to our supposition, the same amount of product is produced as previously, but its value does not amount to 15,000, as previously, but only to 8,250; and a larger part of this cheaper product enters into the revenue of the farmer or the revenue of the buyers of food and necessaries. They now consume a part of the product as revenue which was previously consumed industrially, as capital, by the farmer, although his labourers (since dismissed) consumed it as revenue as well. As a result of this growth in revenue which has come about because a part of the product which was previously consumed as capital is now consumed as revenue new capital is formed and revenue is reconverted into capital.%rang; this in any case not in proportion to the increased capital, not to the whole extent of that increase. Perhaps he would buy more horses, or guano, or new implements%rang; and, therefore, a portion of the people thrown out of work in the first instance, would be subsequently employed; and if the increased production, in consequence of the employment of the machine, was so great as to afford, in the shape of net produce, as great a quantity of food and necessaries as existed before in the form of gross produce, there would be the same ability to employ the whole population, and, therefore, there would not necessarily but possibly and probably!%rang; be any redundancy of people (l.c., pp. 469 72). In the last lines, Ricardo thus says what I observed above. In order that revenue is transformed in this way into capital, capital is first transformed into revenue. Or, as Ricardo puts it: First the net produce is increased at the expense of the gross produce in order then to reconvert a part of the net produce into gross produce. Produce is produce. Net or gross makes no difference (although this antithesis may also mean that the excess over and above the outlay increases, that therefore the net produce grows although the total product, i.e., the gross produce, diminishes). The produce only becomes net or gross, according to the determinate form which it assumes in the process of production. But the same may, and in most instances ||744| will, be the case, even if the gross produce remains the same or increases; but that part of it which was formerly used as variable capital, is now consumed as revenue. It is superfluous for us to go into Ricardo s absurd example of the clothier who reduces his production because of the introduction of machinery (pp. 472 74). It will always increase that value whenever it diminishes the value of labour. this sentence contradicts the whole of Ricardo s doctrine, according to which the lowering in the price of necessaries, and therefore of wages, raises profits, whereas machinery, which permits more to be extracted from the same land with less labour, must lower rent%rang;, this is indeed a fine result of machinery, that a considerable section of the female and male labouring class is turned into servants;%rang; The entire apologetic bourgeois presentation of machinery does not deny, 1. That machinery sometimes here, sometimes there, but continually makes a part of the population redundant, throws a section of the labouring population on the street. It creates a surplus population, thus leading to lower wages in certain spheres of production, here or there, not because the population grows more rapidly than the means of subsistence, but because the rapid growth in the means of subsistence, due to machinery, enables more machinery to be introduced and therefore reduces the immediate demand for labour. This comes about not because the social fund diminishes, but because of the growth of this fund, the part of it which is spent in wages falls relatively. 2. Even less do these apologetics deny the subjugation of the workers who operate the machines and the wretchedness of the manual workers or craftsmen who are displaced by machinery and perish. What they assert and partly rightly is [firstly] that due to machinery and the development of the productivity of labour in general the net revenue (profit and rent) grows to such an extent, that the bourgeois needs more menial servants than before; whereas previously he had to lay out more of his product in productive labour, he can now lay out more in unproductive labour, [so that] servants and other workers living on the unproductive class increase in number. This progressive transformation of a section of the workers into servants is a fine prospect. For the worker it is equally consoling that because of the growth in the net product, more spheres are opened up for unproductive workers, who live on his product and whose interest in his exploitation coincides more or less with that of the directly exploiting classes. Secondly, that because of the spur given to accumulation, on the new basis requiring less living labour in proportion to past labour, the workers who were dismissed and pauperised, or at least that part of the population increase ||745| which replaces them, are either absorbed in the expanding engineering-works themselves, or in branches of production which machinery has made necessary and brought into being, or in new fields of employment opened by the new capital, and satisfying new wants. This then is another wonderful prospect: the labouring class has to bear all the temporary inconveniences unemployment, displacement of labour and capital but wage-labour is nevertheless not to be abolished, on the contrary it will be reproduced on an ever growing scale, growing absolutely, even though decreasing relatively to the growing total capital which employs it. Thirdly: that consumption becomes more refined due to machinery. The reduced price of the immediate necessities of life allows the scope of luxury production to be extended. Thus the third fine prospect opens before the workers : in order to win their means of subsistence, the same amount of them as before, the same number of labourers will enable the higher classes to extend, refine, and diversify the circle of their enjoyments, and thus to widen the economic, social, and political gulf separating them from their betters. Fine prospects, these, for the labourer, and very desirable results of the development of the productive powers of his labour. Furthermore, Ricardo then shows that it [is in] the interest of the labouring classes, The same applies to the maintenance of large fleets and armies. Whether it (the revenue) was expended in the one way or in the other, there would be the same quantity of labour employed in production; for the food and clothing of the soldier and sailor would require the same amount of industry to produce it as the more luxurious commodities; but in the case of the war, there would be the additional demand for men as soldiers and sailors; and, consequently, a war which is supported out of the revenue, and not from the capital of a country, is favourable to the increase of population (l.c., p. 477). There are two tendencies which constantly cut across one another; [firstly,] to employ as little labour as possible, in order to produce the same or a greater quantity of commodities, in order to produce the same or a greater net produce, surplus-value, net revenue; secondly, to employ the largest possible number of workers (although as few as possible in proportion to the quantity of commodities produced by them) , because at a given level of productivity the mass of surplus-value and of surplus-product grows with the amount of labour employed. The one tendency throws the labourers on to the streets and makes a part of the population redundant, the other absorbs them again and extends wage-slavery absolutely, so that the lot of the worker is always fluctuating but he never escapes from it. The worker, therefore, justifiably regards the development of the productive power of his own labour as hostile to himself; the capitalist, on the other hand, always treats him as an element to be eliminated from production. These are the contradictions with which Ricardo struggles in this chapter. What he forgets to emphasise ||746| is the constantly growing number of the middle classes, those who stand between the workman on the one hand and the capitalist and landlord on the other. The middle classes maintain themselves to an ever increasing extent directly out of revenue, they are a burden weighing heavily on the working base and increase the social security and power of the upper ten thousand. According to the bourgeoisie the perpetuation of wage-slavery through the application of machinery is a vindication of the latter. First gross revenue declines and net revenue increases. Then a portion of the increased net revenue is transformed into capital again and hence into gross revenue. Thus the workman must constantly enlarge the power of capital, and then, after very serious disturbances, obtain permission to repeat the process on a larger scale. With every increase of capital and population, food will generally rise, on account of its being more difficult to produce (l.c., pp. 478 79). It then goes straight on: The machine is thus a means to prevent a rise of labour. The truth is, that it is not so much the displaced labour as, rather, the new supply of labour the part of the growing population which was to replace it for which, as a result of new accumulation, new fields of employment are opened. {How little the employment of machinery is dependent on the price of food is shown precisely by America, which employs relatively much more machinery than England, where there is always a redundant population. The use of machinery may, however, depend on the relative scarcity of labour as, for instance, in America, where a comparatively small population is spread over immense tracts of land. Thus we read in the Standard of September 19, 1862, in an article on the Exhibition: In the last sentence Ricardo expresses the correct law of growth of capital, although his reasoning is very one-sided. He adds a note to this, from which it is evident that he follows Barton here, whose work we will therefore examine briefly. But first one more comment. When Ricardo discussed revenue expended either on menial servants or luxuries, he wrote: Similarly the gross produce, in terms of value, may be the same, but it may be realised and this would strongly affect the workmen in different commodities according to whether it had to replace more variable or constant capital. Barton s work is called: John Barton. Observations on the Circumstances which Influence the Condition of the Labouring Classes of Society, London, 1817. Let us first gather together the small number of theoretical propositions to be found in Barton s work. Ricardo comments on this passage in a note on page 480 of his work: To Barton s above proposition we must add the following one: And: Indisputably, Barton has very great merit. Adam Smith believes that the demand for labour grows in direct proportion to capital accumulation. Malthus derives surplus population from capital not being accumulated (that is, reproduced on a growing scale) as rapidly as the population. Barton was the first to point out that the different organic component parts of capital do not grow evenly with accumulation and development of the productive forces, that on the contrary in the process of this growth, that part of capital which resolves into wages decreases in proportion to that part (he calls it fixed capital) which in relation to its size, alters the demand for labour only to a very small degree. He is therefore the first to put forward the important proposition that the number of labourers employed is not in proportion to the wealth of the state , that relatively more workers are employed in an industrially undeveloped country than in one which is industrially developed. In the third edition of his Principles, Chapter XXXI On Machinery , Ricardo having followed exactly in Smith s footsteps in his earlier editions now takes up Barton s correction on this point, and moreover, in the same one-sided formulation in which Barton gives it. The only point in which he makes an advance and this is important is that, unlike Barton, he not only says that the demand for labour does not grow proportionally with the development of machinery, but that the machines themselves render the population redundant [l.c., p. 469], i.e., create surplus population. But he wrongly limits this effect to the case in which the net produce is increased at the cost of the gross produce. This only occurs in agriculture, but he also transfers it into industry. Essentially however, the whole of the absurd theory of population was thus overthrown, in particular also the claptrap of the vulgar economists, that the workers must strive to keep their multiplication below the standard of the accumulation of capital. The opposite follows from Barton s and Ricardo s presentation, namely that to keep down the labouring population, thus diminishing the supply of labour, and, consequently, raising its price, would only accelerate the application of machinery, the conversion of circulating into fixed capital, and, hence, make the population artificially redundant ; redundancy exists, generally, not in regard to the quantity of the means of subsistence, but the means of employment, the actual demand for labour. ||749| Barton s error or deficiency lies in his conceiving the organic differentiation or composition of capital only in the form in which it appears in the circulation process as fixed and circulating capital a difference which the Physiocrats had already discovered, which Adam Smith had developed further and which became a prepossession among the economists who succeeded him; a prepossession in so far as they see only this difference which was handed down to them in the organic composition of capital. This difference, which arises out of the process of circulation, has a considerable effect on the reproduction of wealth in general, and therefore also on that part of it which forms the wages fund. But that is not decisive here. The difference between fixed capital such as machinery, buildings, breeding cattle etc. and circulating capital, does not directly lie in their relation to wages, but in their mode of circulation and reproduction. The direct relation of the different component parts of capital to living labour is not connected with the phenomena of the circulation process. It does not arise from the latter, but from the immediate process of production, and its [expression] is the relation of constant to variable capital, whose difference is based only on their relationship to living labour. Thus Barton says for example: The demand for labour does not depend on fixed capital, but only on circulating capital. But a part of circulating capital, raw material and auxiliary materials, is not exchanged against living labour, any more than is machinery. In all branches of industry in which raw material enters as an element into the process of the creation of value in so far as we consider only that portion of the fixed capital which enters into the commodity it forms the most important part of that portion of capital which is not laid out in wages. Another part of the circulating capital, namely of the commodity capital, consists of articles of consumption which enter into the revenue of the non-productive class (i.e., [not of] the working class). The growth of these two parts of circulating capital therefore does not influence the demand for labour any more than does that of fixed capital. Furthermore, the part of the circulating capital which resolves into raw materials and auxiliary materials increases in the same or even greater proportion as that part of capital which is fixed in machinery etc. On the basis of the distinction made by Barton, Ramsay goes further. He improves on Barton but retains his method of approach. Indeed he reduces the distinction to constant and variable capital, but continues to call constant capital fixed capital, although he includes raw materials etc., and [calls] variable capital circulating capital, although he excludes from it all circulating capital which is not directly laid out in wages. More on this later, when we come to Ramsay. It does, however, show the intrinsic necessity of the progress. Once the distinction between constant capital and variable capital has been grasped, a distinction which arises simply out of the immediate process of production, out of the relationship of the different component parts of capital to living labour, it also becomes evident that in itself it has nothing to do with the absolute amount of the consumption goods produced, although plenty with the way in which these are realised. The way, however, of realising the gross revenue in different commodities is not, as Ricardo has it, and Barton intimates it, the cause, but the effect of the immanent laws of capitalistic production, leading to a diminishing proportion, compared with the total amount of produce, of that part of it which forms the fund for the reproduction of the labouring class. If a large part of the capital consists of machinery, raw materials, auxiliary materials etc., then a smaller portion of the working class as a whole will be employed in the reproduction of the means of subsistence ||750| which enter into the consumption of the workers. This relative diminution in the reproduction of variable capital, however, is not the reason for the relative decrease in the demand for labour, but on the contrary, its effect. Similarly: A larger section of the workers employed in the production of articles of consumption which enter into revenue in general, will produce articles of consumption that are consumed by are exchanged against the revenue of capitalists, landlords and their retainers (state, church etc.), [and a smaller) section [will produce] articles destined for the revenue of the workers. But this again is effect, not cause. A change in the social relation of workers and capitalists, a revolution in the conditions governing capitalist production, would change this at once. The revenue would be realised in different commodities , to use an expression of Ricardo s. There is nothing in the, so-to-speak, physical conditions of production which forces the above to take place. The workmen, if they were dominant, if they were allowed to produce for themselves, would very soon, and without great exertion, bring the capital (to use a phrase of the vulgar economists) up to the standard of their needs. The very great difference is whether the available means of production confront the workers as capital and can therefore be employed by them only in so far as it is necessary for the increased production of surplus-value and surplus-produce for their employers, in other words whether the means of production employ the workers, or whether the workers, as subjects, employ the means of production in the accusative case in order to produce wealth for themselves. It is of course assumed here that capitalist production has already developed the productive forces of labour in general to a sufficiently high level for this revolution to take place. Take for example 1862 (the present autumn). The plight of the Lancashire unemployed labourers; on the other hand, the difficulty of finding employment for money on the London money market, this has almost made necessary the formation of fraudulent companies, since it [is] difficult to obtain two per cent for money. According to Ricardo s theory some new field of employment ought to have been opened up, for on the one hand there is capital in London, and on the other, unemployed workers in Manchester.%rang; Barton explains further, that the accumulation of capital increases the demand for labour only very slowly, unless the population has grown to such an extent previously, that the rate of wages is low. for the same reason, the rate of wages can remain below the average for long periods, because of all commodities, labour is the most difficult to withdraw from the market and thus to bring down to the level of the actual demand%rang; Barton puts forward various propositions here: First: It is not the rise of wages in itself which increases the labouring population, but a fall in wages may very easily and rapidly make it rise. Proof: First half of the eighteenth century, gradual rise in wages, slow movement in population; in the second half of the eighteenth century, on the other hand, sharp fall in real wages, rapid increase in the labouring population. Reason: It is not the insufficient rate of wages which prevents marriages, but the difficulty of finding employment. Secondly: The facility of finding employment stands, however, in inverse ratio to the rate of wages. For capital is transformed into circulating or fixed capital, that is to say, capital which employs labour or capital which does not employ it, in inverse proportion to the high or low level of wages. If wages are low, then the demand for labour is great because it is then profitable for the employer to use much labour, and he can employ more with the same circulating capital. If wages are high, then the manufacturer employs as few workers as possible and seeks to do everything with the aid of machines. Thirdly: The accumulation of capital by itself raises the demand for labour only slowly, because each increase in this demand, if [labour is] scarce, causes [the wages] of labour to rise rapidly and brings about a fall of profit which is ten times greater than the rise in wages. Accumulation can have a rapid effect on the demand for labour only if accumulation was preceded by a large increase in the labouring population, and wages are therefore very low so that even a rise of wages still leaves them low because the demand mainly absorbs unemployed workers rather than competing for those fully employed. This is all, cum grano salis, correct so far as fully developed capitalist production is concerned. But it does not explain this development itself. And even Barton s historical proof therefore contradicts that which it is supposed to prove. During the first half of the eighteenth century, wages rose gradually, the population grew slowly and [there was] no machinery; moreover, compared with the following half of the century, little other fixed capital [was employed]. During the second half of the eighteenth century, however, wages fell continuously, population grew amazingly and [so did] machinery. But it was precisely the machinery which on the one hand made the existing population superfluous, thus reducing wages, and on the other hand, as a result of the rapid development of the world market, absorbed the population again, made it redundant once more and then absorbed it again; while at the same time, it speeded up the accumulation of capital to an extraordinary extent, and increased the amount of variable capital, although variable capital fell relatively, both compared with the total value of the product and also compared with the number of workers it employed. In the first half of the eighteenth century, however, large-scale industry did not as vet exist, but only manufacture based on the division of labour. The principal component part of capital was still variable capital laid out in wages. The productivity of labour developed slowly, compared with the second half of the century. The demand for labour, and therefore also wages, rose almost proportionately to the accumulation of capital. England was as vet essentially an agricultural nation and a very extensive cottage industry spinning and weaving which was carried on by the agricultural population, continued to exist, and even to expand. A numerous proletariat could not as yet come into being, any more than there could exist industrial millionaires at the time. In the first half of the eighteenth century, variable capital was relatively dominant; in the second, fixed capital; but the latter requires a large mass of human material. Its introduction on a large scale must be preceded by an increase of population. The whole course of things, however, contradicts Barton s presentation, in as much as it is evident that a general change in the method of production took place. The laws which correspond to large-scale industry are not identical with those corresponding to manufacture ||752|. The latter constitutes merely a phase of development leading to the former. But in this context some of Barton s historical data comparing the development in England during the first half and the second half of the eighteenth century are of interest, partly because they show the movement of wages, and partly because they show the movement in corn prices. (l.c., pp. 25 26) From a table of the number of Bills for the inclosing of land passed in each session since the revolution, given in the Lord s Report on the Poor Laws (1816?), it appears that in sixty-six years from 1688 to 1754, that number was 123; in the sixty-nine[k] years from 1754 to 1813 it was 3,315. The progress of cultivation was then about twenty-five times more rapid during the last period than the former. But during the first sixty-six years more and more corn was grown continually for exportation; whereas, during the greater part of the last sixty-nine years, we not only consumed all that we had formerly sent abroad, but likewise imported an increasing, and at last a very large quantity, for our own consumption the increase of population in the former period, as compared with the latter, was still slower than the progress of cultivation might appear to indicate (l. c., pp. 11 12). Barton calculates from good sources that It is not a question of how great a quantity of means of subsistence is produced annually, but how large a portion of living labour enters into the annual production of fixed and circulating capital. This determines the size of the variable capital in relation to constant. Barton explains the remarkable increase in population which took place almost all over Europe during the last 50 to 60 years, from the increased productivity of the American mines, since this abundance of precious metals raised commodity prices more than wages, thus in fact, lowering the latter and causing the rate of profit to rise (l.c., pp. 29 35). |XIII-752|| [a] In the manuscript: and . Ed. [b] In the manuscript: they will be able instead of they can . Ed. [c] In the manuscript: different. Ed. [d] In the manuscript: on , instead of: in the support of . Ed. * He means wages . [e] In the manuscript: geometrical . Ed. [f] In the manuscript: A machine . Ed. [g] In the manuscript: given . Ed. [h] In the manuscript: manufacturers . Ed. [i] Marx gives this part of the quotation in his own words, summarising the idea expressed by Barton. Ed. [j] In the manuscript: been . Ed. [k] Although Barton says 69 years in fact the period from 1754 to 1813 comprises only 59 years. Ed.
Economic Manuscripts: Theories of Surplus-Value, Chapter 18