material, the gold, represents a considerably higher value than the leather of the shoemaking business, the total rent of £500 is distributed over a far larger business capital. Assume that the jeweller's capital amounts to £20,000, £500 for wages and £19,500 for material, then the rent of £500 will only show a 2½ per cent interest on the business capital.
Both examples are carried out entirely on the lines of Rodbertus's theory.
As in almost every "manufacture" the proportion between the number of the (directly and indirectly) employed labourers and the amount of business capital employed is different, it follows that, in almost every manufacture, business capital must bear interest at the most various possible rates. Now even Rodbertus does not venture to maintain that this is really the case in everyday life. On the contrary, in a remarkable passage in his theory of land-rent, he assumes that, in virtue of the competition of capitals over the whole field of manufacture, an equal rate of profit will become established. I will give the passage in his own words. After remarking that the rent derived from manufacture is considered wholly as profit on capital, since here it is exclusively wealth in the form of capital that is employed, he goes on to say:—
"This, further, will give a rate of profit which will tend to the equalisation of profits, and according to this rate, therefore, must be calculated that profit which, as one part of the rent falling to the raw product, accrues to the capital required for agriculture. For if, in consequence of the universal presence of value in exchange, there now exists a homonymous standard for indicating the ratio between return and resources, this standard, in the case of the portion of rent accruing to the capital employed in manufacture, also serves to indicate the ratio between profit and capital. In other words, it will be right to say that the profit in any trade amounts to ten per cent of the capital employed. This rate will then furnish a standard for the equalisation of profits. In whatever trade this rate indicates a higher profit, competition will cause increased investment of capital, and thereby cause a universal tendency towards the equalising of profits. Similarly no one will invest capital where he does not expect profit corresponding to this rate."
It will repay us to look more closely into this passage.
Rodbertus speaks of competition as that factor which will establish a uniform rate of profit over the field of manufacture. In what manner it will do so is only slightly indicated by him. He assumes that every rate of profit which is higher than the average level is reduced to the average by an increase of the supply of capital; and we may supplement this by saying that every lower rate of profit is raised to the average level by the flowing off of capital.
Let us continue a little farther the consideration of the process from the point at which Rodbertus breaks off. In what manner can an increased supply of capital level down the abnormally high rate of profit? Clearly in this way; that with the increased capital the production of the particular article is increased, and through the increase of supply the exchange value of the product is lowered till such time as after deducting the wages of labour, it only leaves the usual rate of profit as rent. In our above example of the shoemaking business we might evidently have pictured to ourselves the levelling down of the abnormal rate of profit of 50 per cent to the average rate of 5 per cent in the following manner. Attracted by the high rate of profit of 50 per cent, a great many persons will go into the shoemaking business. At the same time those who have been engaged in producing will extend their business. Thus the supply of shoes is increased, and their price and exchange value reduced. This process will continue till such time as the exchange value of the year's product of ten labourers in the shoemaking trade is reduced from £1000 to £550. Then the undertaker, after deducting £500 for necessary wages, has only £50 o