Capital Vol. III Part VII
Revenues and their Sources
For the purposes of the following analysis we may leave out of consideration the distinction between price of production and value, since this distinction disappears altogether when, as here, the value of the total annual product of labour is considered, i.e., the product of the total social capital.
Profit (profit of enterprise plus interest) and rent are nothing but peculiar forms assumed by particular parts of the surplus-value of commodities. The magnitude of surplus-value is the limit of the total size of the parts into which it may be divided. Average profit plus rent are, therefore, equal to the surplus-value. It is possible for part of the surplus-labour, and thus surplus-value, contained in the commodities, not to take part directly in the equalisation of an average profit, so that part of the commodity-value is not expressed at all in its price. But first, this is balanced either by the fact that the rate of profit increases, when the commodities sold below their value form an element of the constant capital, or by profit and rent being represented by a larger product, when commodities sold below their value enter into the portion of value consumed as revenue in the form of articles for individual consumption. Secondly, this is eliminated in the average movement. At any rate, even if a portion of surplus-value not expressed in the price of the commodity is lost for the price formation, the sum of average profit plus rent in its normal form can never be larger than the total surplus-value, although it may be smaller. Its normal form presupposes wages corresponding to the value of labour-power. Even monopoly rent, in so far as it is not a deduction from wages, i.e., does not constitute a special category, must always indirectly be a part of the surplus-value. If it is not part of the price excess above the price of production of the commodity itself, of which it is a constituent part (as in differential rent), or an excess portion of the surplus-value of the commodity itself, of which it is a constituent part, above that portion of its own surplus-value measured by the average profit (as in absolute rent), it is at least part of the surplus-value of other commodities, i.e., of commodities which are exchanged for this commodity having a monopoly price. The sum of average profit plus ground-rent can never be greater than the magnitude of which they are components and which exists before this division. It is therefore immaterial for our discussion whether the entire surplus-value of the commodities, i.e., all the surplus-labour contained in the commodities, is realised in their price or not. The surplus-labour is not entirely realised if only for the reason that due to a continual change in the amount of labour socially necessary to produce a certain commodity, resulting from the constant change in the productiveness of labour, some commodities are always produced under abnormal conditions and must, therefore, be sold below their individual value. At any rate, profit plus rent equal the total realised surplus-value (surplus-labour), and for purposes of this discussion the realised surplus-value may be equated to all surplus-value; for profit and rent are realised surplus-value, or, generally speaking, the surplus-value which passes into the prices of commodities, thus in practice all the surplus-value forming a constituent part of this price.
On the other hand, wages, which form the third specific form of revenue, are always equal to the variable component part of capital, i.e., the component part which is laid out in purchasing living labour-power, paying labourers rather than in means of labour. (The labour which is paid in the expenditure of revenue is itself paid in wages, profit, or rent, and therefore does not form any value portion of commodities by which it is paid. Hence it is not considered in the analysis of commodity-value and of the component parts into which it is divided.) It is the materialisation of that portion of the total working-day of the labourer in which the value of variable capital and thus the price of labour is reproduced; that portion of commodity-value in which the labourer reproduces the value of his own labour-power, or the price of his labour. The total working-day of the labourer is divided into two parts. One portion in which he performs the amount of labour necessary to reproduce the value of his own means of subsistence; the paid portion of his total labour, the portion necessary for his own maintenance and reproduction. The entire remaining portion of the working-day, the entire excess quantity of labour performed above the value of the labour realised in his wages, is surplus-labour, unpaid labour, represented in the surplus-value of his total commodity-production (and thus in an excess quantity of commodities), surplus-value which in turn is divided into differently named parts, into profit (profit of enterprise plus interest) and rent.
The entire value portion of commodities, then, in which the total labour of the labourers added during one day, or one year, is realised, the total value of the annual product, created by this labour, is divided into the value of wages, into profit and into rent. For this total labour is divided into necessary labour, by which the labourer creates that value portion of the product with which he is himself paid, that is, his wages, and into unpaid surplus-labour, by which he creates that value portion of the product which represents surplus-value and which is later divided into profit and rent. Aside from this labour, the labourer performs no labour, and aside from the total value of the product, which assumes the forms of wages, profit and rent, he creates no value. The value of the annual product, in which the new labour added by the labourer during the year is incorporated, is equal to the wage, or the value of the variable capital plus the surplus-value, which in turn is divided into profit and rent.
The entire value portion of the annual product, then, which the labourer creates in the course of the year, is expressed in the annual value sum of the three revenues, the value of wages, profit, and rent. Evidently, therefore, the value of the constant portion of capital is not reproduced in the annually created value of product, for the wages are only equal to the value of the variable portion of capital advanced in production, and rent and profit are only equal to the surplus-value, the excess of value produced above the total value of advanced capital, which equals the value of the constant capital plus the value of the variable capital.
It is completely irrelevant to the problem to be solved here that a portion of the surplus-value converted into the form of profit and rent is not consumed as revenue, but is accumulated. That portion which is saved up as an accumulation fund serves to create new, additional capital, but not to replace the old capital, be it the component part of old capital laid out for labour-power or for means of labour. We may therefore assume here, for the sake of simplicity, that the revenue passes wholly into individual consumption. The difficulty is two-fold. On the one hand the value of the annual product, in which the revenues, wages, profit and rent, are consumed, contains a portion of value equal to the portion of value of constant capital used up in it. It contains this portion of value in addition to that portion which resolves itself into wages and that which resolves itself into profit and rent. Its value is therefore = wages + profit + rent + C (its constant portion of value). How can an annually produced value, which only = wages + profit + rent, buy a product the value of which = (wages + profit + rent) + C? How can the annually produced value buy a product which has a higher value than its own?
On the other hand, if we leave aside that portion of constant capital which did not pass over into the product, and which therefore continues to exist, although with reduced value, as before the annual production of commodities; in other words, temporarily leaving out of consideration the employed, but not consumed, fixed capital, then the constant portion of advanced capital is seen to have been wholly transferred to the new product in the form of raw and auxiliary materials, whereas a part of the means of labour has been wholly consumed and another part only partially, and thus only a part of its value has been consumed in production. This entire portion of constant capital consumed in production must be replaced in kind. Assuming all other circumstances, particularly the productive power of labour, to remain unchanged, this portion requires the same amount of labour for its replacement as before, i.e., it must be replaced by an equivalent value. If not, then reproduction itself cannot take place on the former scale. But who is obliged to perform this labour, and who does perform it?
As to the first difficulty: Who is obliged to pay for the constant portion of value contained in the product, and with what? — It is assumed that the value of constant capital consumed in production reappears as a part of the value of the product. This does not contradict the assumptions of the second difficulty. For it has already been demonstrated in Book I (Kap. V) [English edition: Ch. VII.—Ed.] ("The Labour Process and the Process of Producing Surplus-Value") how the old value remains simultaneously preserved in the product through the mere addition of new labour, although this does not reproduce the old value and does no more than add to it, creates merely additional value; but that this results from labour, not in so far as it is value-creating, i.e., labour in general, but in its function as definite productive labour. Therefore, no additional labour was necessary to preserve the value of the constant portion in the product in which the revenue, i.e., the entire value created during the year, is expended. But to be sure, new additional labour is required to replace the value and use-value of constant capital consumed during the preceding year, without the replacement of which no reproduction at all is possible.
All newly added labour is represented in the value newly created during the year, and this in turn is divided into the three revenues: wages, profit and rent. — Thus, on the one hand, no excess social labour remains for the replacement of the consumed constant capital, which must be replaced partially in kind and according to its value, and partially merely according to its value (for pure wear and tear on fixed capital). On the other hand, the value annually created by labour, divided into wages, profit and rent, and to be expended in this form, appears not to suffice to pay for, or buy, the constant portion of capital, which must be contained, outside their own value, in the annual product.
It is seen that the problem presented here has already been solved in the consideration of reproduction of the total social capital — Book II, Part III. We return to it here, in the first place, because surplus-value had not been developed there in its revenue forms: profit (profit of enterprise plus interest) and rent, and could not, therefore, be treated in these forms; and then, also because precisely in the form of wages, profit and rent there is contained an incredible blunder in analysis, which pervades all political economy since Adam Smith.
We divided all capital there into two big classes: Class I, producing means of production, and Class II, producing articles of individual consumption. The fact that certain products may serve equally well both for personal consumption and as means of production (a horse, grain, etc.) does not invalidate the absolute correctness of this division in any way. It is actually no hypothesis, but merely an expression of fact. Take the annual product of a country. One portion of the product, whatever its ability to serve as means of production, passes over into individual consumption. It is the product for which wages, profit and rent are expended. This product is the product of a definite department of the social capital. It is possible that this same capital may also produce products belonging to Class I. In so far as it does so, it is not the portion of this capital consumed in the products of Class II, products belonging actually to individual consumption, which supplies the productively consumed products belonging to Class I. This entire product II, which passes into individual consumption, and for which therefore the revenue is spent, is the existent form of the capital consumed in it plus the produced surplus. It is thus the product of a capital invested solely in the production of articles of consumption. And in the same way Department I of the annual product, which serves as means of reproduction — raw materials and instruments of labour — whatever capacity this product may otherwise possess naturaliter to serve as means of consumption, is the product of a capital invested solely in the production of means of production. By far the greater part of products forming constant capital exists also materially in a form in which it cannot pass into individual consumption. In so far as this could be done, e.g., in so far as a farmer could eat his seed-corn, butcher his draught animals, etc., the economic barrier works the same for him as if this portion did not exist in consumable form.
As already indicated, we leave out of consideration in both classes the fixed portion of constant capital, which continues to exist in kind and, so far as its value is concerned, independently of the annual product of both classes.
In Class II, for the products of which wages, profit and rent are expended, in short, the revenues consumed, the product itself consists of three components so far as its value is concerned. One component is equal to the value of the constant portion of capital consumed in production; a second component is equal to the value of the variable advanced capital laid out in wages; finally, a third component is equal to the produced surplus-value, thus = profit + rent. The first component of the product of Class II, the value of the constant portion of capital, can be consumed neither by the capitalists of Class II, nor by the labourers of this class, nor by the landowners. It forms no part of their revenues, but must be replaced in kind and must be sold for this to occur. On the other hand, the other two components of this product are equal to the value of the revenues created in this class, = wages + profit + rent. In Class I the product consists of the same constituents, as regards form. But that part which here forms revenue, wages + profit + rent, in short, the variable portion of capital + surplus-value, is not consumed here in the natural form of products of this Class I, but in products of Class II. The value of the revenues of Class I must, therefore, be consumed in that portion of products of Class II which forms the constant capital of II to be replaced. The portion of the product of Class II which must replace its constant capital is consumed in its natural form by the labourers, capitalists and landlords of Class I. They spend their revenue for this product of II. On the other hand, the product of I, to the extent that it represents a revenue of Class I, is productively consumed in its natural form by Class II, whose constant capital it replaces in kind. Finally, the used-up constant portion of capital of Class I is replaced out of the very products of this class, which consist precisely of means of labour, raw and auxiliary materials, etc., partly through exchange by capitalists of I among themselves, partly so that some of these capitalists can directly use their own product once more as means of production.
Let us take the previous scheme (Book II, Chapter XX, II) for simple reproduction:
I. 4,000c + 1,000v + 1,000s = 6,000
II. 2,000c + 500v + 500s = 3,000
According to this, the producers and landlords of II consume 500v + 500s = 1,000 as revenue; 2,000c remains to be replaced. This is consumed by the labourers, capitalists and those who draw rent from I, whose income = 1,000v + 1,000s = 2,000. The consumed product of II is consumed as revenue by I, and the portion of the revenue of I representing an unconsumable product is consumed as constant capital by II. It remains then to account for the 4,000c of I. This is replaced out of the product of I itself, which = 6,000, or rather = 6,000 - 2,000; for these 2,000 have already been converted into constant capital for II. It should be noted, of course, that these numbers have been chosen arbitrarily, and so the relation between the value of the revenues of I and the value of the constant capital of II appears arbitrary. It is evident, however, that so far as the process of reproduction is normal and takes place under otherwise equal circumstances, i.e., leaving aside the accumulation, the sum of the values of wages, profit and rent in Class I must equal the value of the constant portion of capital of Class II. Otherwise either Class II will not be able to replace its constant capital, or Class I will not be able to convert its revenue from unconsumable into consumable form.
Thus, the value of the annual commodity-product, just like the value of the commodity-product produced by some particular investment of capital, and like the value of any individual commodity, resolves itself into two component parts: A, which replaces the value of the advanced constant capital, and B, which is represented in the form of revenue — wages, profit and rent. The latter component part of value, B, is counterposed to the former A, in so far as A, under otherwise equal circumstances: 1) never assumes the form of revenue and 2) always flows back in the form of capital, and indeed constant capital. The other component, B, however, carries within itself, in turn, an antithesis. Profit and rent have this in common with wages: all three are forms of revenue. Nevertheless they differ essentially in that profit and rent represent surplus-value, i.e., unpaid labour, whereas wages represent paid labour. The portion of the value of the product which represents wages expended thus replaces wages, and, under the conditions assumed by us, where reproduction takes place on the same scale and under the same conditions, is again reconverted into wages, flows back first as variable capital, as a component of the capital that must be advanced anew for reproduction. This portion has a two-fold function. It exists first in the form of capital and is exchanged as such for labour-power. In the hands of the labourer, it is transformed into revenue which he draws out of the sale of his labour-power, is converted as revenue into means of subsistence and consumed. This double process is revealed through the mediation of money circulation. The variable capital is advanced in money, paid out as wages. This is its first function as capital. It is exchanged for labour-power and transformed into the manifestation of this labour-power, into labour. This is the process as regards the capitalist. Secondly, however: with this money the labourers buy a part of the commodities produced by them, which is measured by this money, and is consumed by them as revenue. If we imagine the circulation of money to be eliminated, then a part of the labourer’s product is in the hands of the capitalist in the form of available capital. He advances this part as capital, gives it to the labourer for new labour-power, while the labourer consumes it as revenue directly or indirectly through exchange for other commodities. That portion of the value of the product, then, which is destined in the course of reproduction to be converted into wages, into revenue for the labourers, first flows back into the hands of the capitalist in the form of capital, or more accurately variable capital. It is an essential requirement that it should flow back in this form in order for labour as wage-labour, the means of production as capital, and the process of production itself as a capitalist process, to be continually reproduced anew.
In order to avoid unnecessary difficulty, one should distinguish gross output and net output from gross income and net income.
The gross output, or gross product, is the total reproduced product. With the exception of the employed but not consumed portion of fixed capital, the value of the gross output, or gross product, equals the value of capital advanced and consumed in production, that is, constant and variable capital plus surplus-value, which resolves itself into profit and rent. Or, if we consider the product of the total social capital instead of that of an individual capital, the gross output equals the material elements forming the constant and variable capital, plus the material elements of the surplus-product in which profit and rent are represented.
The gross income is that portion of value and that portion of the gross product measured by it which remains after deducting that portion of value and that portion of the product of total production measured by it which replaces the constant capital advanced and consumed in production. The gross income, then, is equal to wages (or the portion of the product destined to again become the income of the labourer) + profit + rent. The net income, on the other hand, is the surplus-value, and thus the surplus-product, which remains after deducting wages, and which, in fact, thus represents the surplus-value realised by capital and to be divided with the landlord, and the surplus-product measured by it.
Thus, we saw that the value of each individual commodity and the value of the total commodity-product of each individual capital is divided into two parts: one replaces only constant capital, and the other, although a fraction of it flows back as variable capital — thus also flows back in the form of capital — nevertheless is destined to be wholly transformed into gross income, and to assume the form of wages, profit and rent, the sum of which makes up the gross income. Furthermore, we saw that the same is true of the value of the annual total product of a society. A difference between the product of the individual capitalist and that of society exists only in so far as: from the standpoint of the individual capitalist the net income differs from the gross income, for the latter includes the wages, whereas the former excludes them. Viewing the income of the whole society, national income consists of wages plus profit plus rent, thus, of the gross income. But even this is an abstraction to the extent that the entire society, on the basis of capitalist production, bases itself on the capitalist standpoint and thereby considers only the income resolved into profit and rent as net income.
On the other hand, the fantasy of men like Say, to the effect that the entire yield, the entire gross output, resolves itself into the net income of the nation or cannot be distinguished from it, that this distinction therefore disappears from the national viewpoint, is but the inevitable and ultimate expression of the absurd dogma pervading political economy since Adam Smith, that in the final analysis the value of commodities resolves itself completely into income, into wages, profit and rent.
To comprehend, in the case of each individual capitalist, that a portion of his product must be transformed again into capital (even aside from the expansion of reproduction, or accumulation), indeed not only into variable capital, which is destined to again become in its turn income for the labourers, thus a form of revenue, but also into constant capital, which can never be transformed into revenue — such discernment is naturally extraordinarily easy. The simplest observation of the process of production shows this clearly. The difficulty first begins as soon as the process of production is viewed as a whole. The value of the entire portion of the product which is consumed as revenue in the form of wages, profit and rent (it is entirely immaterial whether the consumption is individual or productive), indeed, completely resolves itself under analysis into the sum of values consisting of wages plus profit plus rent, that is, into the total value of the three revenues, although the value of this portion of the product, just like that which does not enter into revenue, contains a value portion = C, equal to the value of the constant capital contained in these portions, and thus prima facie cannot be limited by the value of the revenue. This circumstance which, on the one hand, is a practically irrefutable fact, on the other hand, an equally undeniable theoretical contradiction presents a difficulty which is most easily circumvented by the assertion that commodity-value contains another portion of value, merely appearing to differ, from the standpoint of the individual capitalist, from the portion existing in the form of revenue. The phrase: that which appears as revenue for one constitutes capital for another, relieves one of the necessity for any further reflection. But how, then, the old capital can be replaced when the value of the entire product is consumable in the form of revenue; and how the value of the product of each individual capital can be equal to the value sum of the three revenues plus C, constant capital, whereas the sum of the values of the products of all capitals is equal to the value sum of the three revenues plus 0 — this appears, of course, as an insoluble riddle and must be solved by declaring that the analysis is completely incapable of unravelling the simple elements of price, and must be content to go around in a vicious circle making a spurious advance ad infinitum. Thus, that which appears as constant capital may be resolved into wages, profit and rent, but the commodity-values in which wages, profit and rent appear, are determined in their turn by wages, profit and rent, and so forth ad infinitum. 
The fundamentally erroneous dogma to the effect that the value of commodities in the last analysis may be resolved into wages + profit + rent also expresses itself in the proposition that the consumer must ultimately pay for the total value of the total product; or also that the money circulation between producers and consumers must ultimately be equal to the money circulation between the producers themselves (Tooke); all these propositions are as false as the axiom upon which they are based.
The difficulties, which lead to this erroneous and prima facie absurd analysis, are briefly these:
1) The fundamental relationship of constant and variable capital, hence also the nature of surplus-value, and thereby the entire basis of the capitalist mode of production, are not understood. The value of each partial product of capital, each individual commodity, contains a portion of value = constant capital, a portion of value = variable capital (transformed into wages for labourers), and a portion of value = surplus-value (later split into profit and rent). Thus, how is it possible for the labourer with his wages, the capitalist with his profit, the landlord with his rent, to be able to buy commodities, each of which contains not only one of these constituent elements, but all three of them; and how is it possible for the sum of the values of wages, profit and rent, that is, the three sources of revenue together, to be able to buy the commodities which go to make up the total consumption of the recipients of these incomes — commodities containing an additional component of value, namely constant capital, outside these three components of value? How should they buy a value of four with a value of three? 
We presented our analysis in Book II, Part III.
2) The method is not grasped whereby labour, in adding a new value, preserves the old value in a new form without producing this old value anew.
3) The pattern of the process of reproduction is not understood — how it appears not from the standpoint of individual capital, but rather from that of the total capital; the difficulty is not understood how it is that the product in which wages and surplus-value, in short, the entire value produced by all the labour newly added during the year, is realised, replaces the constant part of its value and yet at the same time resolves itself into value limited solely by the revenues; and furthermore how it is that the constant capital consumed in production can be replaced in substance and value by new capital, although the total sum of newly added labour is realised only in wages and surplus-value, and is fully represented in the sum of the values of both. It is precisely here that the main difficulty lies, in the analysis of reproduction and the relations of its various component parts, both as concerns their material character and their value relationships.
4) To these difficulties is added still another, which increases even more as soon as the various component parts of surplus-value appear in the form of mutually independent revenues. This difficulty consists in the definite designations of revenue and capital interchanging, and altering their position, so that they seem to be merely relative determinations from the point of view of the individual capitalist and to disappear when the total process of production is viewed as a whole. For instance, the revenue of the labourers and capitalists of Class I, which produces constant capital, replaces in value and substance the constant capital of the capitalists of Class II, which produces articles of consumption. One may, therefore, squeeze out of the dilemma by remonstrating that what is revenue for one is capital for another and that these designations thus have nothing to do with the actual peculiarities of the value components of commodities. Furthermore: commodities which are ultimately destined to form the substantive elements of revenue expenditure, that is, articles of consumption, pass through various stages during the year, e.g., woollen yarn, cloth. In one stage they form a portion of constant capital, in the other they are consumed individually, and thus pass wholly into the revenue. One may therefore imagine along with Adam Smith that constant capital is but an apparent element of commodity-value, which disappears in the total pattern. Thus, a further exchange takes place of variable capital for revenue. The labourer buys with his wages that portion of commodities which form his revenue. In this way he simultaneously replaces for the capitalist the money-form of variable capital. Finally: one portion of products which form constant capital is replaced in kind or through exchange by the producers of constant capital themselves; a process with which the consumers have nothing to do. When this is overlooked the impression is created that the revenue of consumers replaces the entire product, i.e., including the constant portion of value.
5) Aside from the confusion which the transformation of values into prices of production brings about, another arises due to the transformation of surplus-value into different, special, mutually independent forms of revenue applying to the various elements of production, i.e., into profit and rent. It is forgotten that the fact that the values of commodities are the basis, and that the division of these commodity-values into distinct constituent parts, and the further development of these constituents of value into forms of revenue, their transmutation into relations of various owners of different factors of production to these individual components of value, their distribution among these owners according to definite categories and titles, itself alters nothing in value determination and its law. Just as little is the law of value changed by the circumstance that the equalisation of profit, i.e., the distribution of the total surplus-value among the various capitals, and the obstacles which landed property partially (in absolute rent) puts in the way of this equalisation, bring about a divergence between the regulating average prices and the individual values of commodities. This again affects merely the addition of surplus-value to the various commodity-prices, but does not abolish surplus-value itself, nor the total value of commodities as the source of these various component parts of price.
This is the quid pro quo which we shall consider in the next chapter, and which is inevitably linked with the illusion that value arises out of its own component parts. And namely, the various component values of the commodity acquire independent forms as revenues, and as such revenues they are related back to the particular material elements of production as their sources of origin instead of to the value of the commodity as their source. They are actually related back to those sources — however, not as components of value, but rather as revenues, as components of value falling to the share of these particular categories of agents in production: the labourer, the capitalist and the landlord. But then one might fancy that these constituents of value, rather than arising out of the division of commodity-value, conversely form it instead only through their combination, which leads to the pretty and vicious circle, whereby the value of commodities arises out of the sum of the values of wages, profit and rent, and the value of wages, profit and rent, in its turn, is determined by the value of commodities, etc. 
Considering reproduction in its normal state, only a part of newly added labour is employed for production, and thus for replacement of constant capital; precisely that part which replaces the constant capital used up in the production of articles of consumption, of material elements of revenue. This is balanced by the fact that this constant portion of Class II costs no additional labour. But, now, this constant capital (looking upon the total process of reproduction, in which then the above-mentioned equalisation of Classes I and II is included), not representing a product of newly added labour, although this product could not be created without it — this constant capital, in the process of reproduction, considered from the standpoint of substance, is exposed to certain accidents and dangers which could decimate it. (Furthermore, however, considered from the point of view of value as well, it may be depreciated through a change in the productiveness of labour; but this refers only to the individual capitalist.) Accordingly, a portion of the profit, therefore of surplus-value and thereby also surplus-product, in which (as concerns value) only newly added labour is represented, serves as an insurance fund. And it matters not whether this insurance fund is managed by insurance companies as a separate business or not. This is the sole portion of revenue which is neither consumed as such nor serves necessarily as a fund for accumulation. Whether it actually serves as such, or covers merely a loss in reproduction, depends upon chance. This is also the only portion of surplus-value and surplus-product, and thus of surplus-labour, which would continue to exist, outside of that portion serving for accumulation, and hence expansion of the process of reproduction, even after the abolition of the capitalist mode of production. This, of course, presupposes that the portion regularly consumed by direct producers does not remain limited to its present minimum. Apart from surplus-labour for those who on account of age are not yet, or no longer, able to take part in production, all labour to support those who do not work would cease. If we think back to the beginnings of society, we find no produced means of production, hence no constant capital, the value of which could pass into the product, and which, in reproduction on the same scale, would have to be replaced in kind out of the product and to a degree measured by its value. But Nature there directly provides the means of subsistence, which need not first be produced. Nature thereby also gives to the savage who has but few wants to satisfy the time, not to use the as yet non-existent means of production in new production, but to transform, alongside the labour required to appropriate naturally existing means of production, other products of Nature into means of production: bows, stone knives, boats, etc. This process among savages, considered merely from the substantive side, corresponds to the reconversion of surplus-labour into new capital. In the process of accumulation, the conversion of such products of excess labour into capital obtains continually; and the circumstance that all new capital arises out of profit, rent, or other forms of revenue, i.e., out of surplus-labour, leads to the mistaken idea that all value of commodities arises from some revenue. This reconversion of profit into capital shows rather upon closer analysis that, conversely, the additional labour — which is always represented in the form of revenue — does not serve for the maintenance, or reproduction respectively, of the old capital value, but for the creation of new excess capital so far as it is not consumed as revenue.
The whole difficulty arises from the fact that all newly added labour, in so far as the value created by it is not resolved into wages, appears as profit — interpreted here as a form of surplus-value in general — i.e., as a value which costs the capitalist nothing and which, of course, therefore does not have to replace for him anything advanced, any capital whatever. This value thus exists in the form of available additional wealth, in short, from the viewpoint of the individual capitalist, in the form of his revenue. But this newly created value can just as well be consumed productively as individually, equally well as capital or revenue. As a consequence of its natural form, some of it must be productively consumed. It is, therefore, evident that the annually added labour creates capital as well as revenue; as becomes evident in the process of accumulation. However, the portion of labour-power employed in the creation of new capital (thus analogous to that portion of the working-day employed by a savage, not for acquiring subsistence, but to fashion tools with which to acquire his subsistence) becomes invisible in that the entire product of surplus-labour first appears in the form of profit; a designation which indeed has nothing to do with this surplus-product itself, but refers merely to the individual relation of the capitalist to the surplus-value pocketed by him. In fact, the surplus-value created by the labourer is divided into revenue and capital; i.e., into articles of consumption and additional means of production. But former constant capital taken over from the previous year (leaving aside the portion impaired and thus pro tanto destroyed, thus so far as it does not have to be reproduced — and such disturbances in the process of reproduction fall under insurance) is not reproduced as concerns value by the newly added labour.
We see, furthermore, that a portion of the newly added labour is continually absorbed in the reproduction and replacement of consumed constant capital, although this newly added labour resolves itself solely into revenue, into wages, profit and rent. But it is thereby overlooked 1) that one value portion of the product of this labour is no product of this new additional labour, but rather pre-existing and consumed constant capital; that the portion of the product in which this part of value appears is thus also not transformed into revenue, but replaces the means of production of this constant capital in kind; 2) that the portion of value in which this newly added labour actually appears is not consumed as revenue in kind, but replaces the constant capital in another sphere, where it is transformed into a natural form, in which it may be consumed as revenue, but which in its turn is again not entirely a product of newly added labour.
In so far as reproduction obtains on the same scale, every consumed element of constant capital must be replaced in kind by a new specimen of the same kind, if not in quantity and form, then at least in effectiveness. If the productiveness of labour remains the same, then this replacement in kind implies replacing the same value which the constant capital had in its old form. But should the productiveness of labour increase, so that the same material elements may be reproduced with less labour, then a smaller portion of the value of the product can completely replace the constant part in kind. The excess may then be employed to form new additional capital or a larger portion of the product may be given the form of articles of consumption, or the surplus-labour may be reduced. On the other hand, should the productiveness of labour decrease, then a larger portion of the product must be used for the replacement of the former capital, and the surplus-product decreases.
The reconversion of profit, or generally of any form of surplus-value, into capital shows — leaving aside the historically defined economic form and considering it merely as the simple formation of new means of production — that the situation still prevails whereby the labourer performs labour to produce means of production beyond the labour for acquiring his immediate means of subsistence. Transformation of profit into capital is no more than employing a portion of excess labour to form new, additional means of production. That this takes place in the shape of a transformation of profit into capital signifies merely that it is the capitalist rather than the labourer who disposes of excess labour. That this excess labour must first pass through a stage in which it appears as revenue (whereas, e.g., in the case of a savage it appears as excess labour directly destined for the production of means of production) means simply that this labour, or its product, is appropriated by the non-worker. However, what is actually transformed into capital is not profit as such. Transformation of surplus-value into capital signifies merely that the surplus-value and surplus-product are not consumed individually as revenue by the capitalist. But, what is actually so transformed is value, materialised labour, or the product in which this value is directly manifested, or for which it is exchanged after having been previously transformed into money. And when the profit is transformed back into capital, this definite form of surplus-value, or profit, does not form the source of the new capital. The surplus-value is thereby merely changed from one form into another. But it is not this change of form which turns it into capital. It is the commodity and its value which now function as capital. However, that the value of the commodity is not paid for — and only by this means does it become surplus-value — is quite irrelevant for the materialisation of labour, the value itself.
The misunderstanding is expressed in various forms. For instance, that the commodities which compose the constant capital also contain elements of wages, profit and rent. Or, on the other hand, that what is revenue for the one is capital for another, and that therefore these are but subjective relations. Thus the yarn of the spinner contains a portion of value representing profit for him, Should the weaver buy the yarn, he realises the profit of the spinner, but for himself this yarn is merely a part of his constant capital.
Aside from the previous remarks made concerning the relations between revenue and capital, the following is to be noted: That which, as regards value, passes along with the yarn as a constituent element into the capital of the weaver, is the value of the yarn. In what manner the parts of this value have been resolved for the spinner himself into capital and revenue, or, in other words, into paid and unpaid labour, is completely irrelevant for the value determination of the commodity itself (aside from modifications through the average profit). Back of this still lurks the idea that the profit, or surplus-value in general, is an excess above the value of the commodity, which can only be made by an extra charge, mutual cheating, or gain through selling. When the price of production is paid, or even the value of the commodity, the component values of the commodity which appear to the seller in the form of revenue are naturally also paid. Monopoly prices, of course, are not referred to here.
Secondly, it is quite correct to say that the component parts of commodities which make up the constant capital, like any other commodity-value, may be reduced to portions of value which resolve themselves for the producers and the owners of the means of production into wages, profit and rent. This is merely a capitalist form of expression for the fact that all commodity-value is but the measure of the socially necessary labour contained in a commodity. But it has already been shown in Book I that this nowise prevents the commodity-product of any capital from being split into separate parts, of which one represents exclusively the constant portion of capital, another the variable portion of capital, and a third solely surplus-value.
Storch expresses the opinion of many others when he says:
"The saleable products which make up the national revenue must be considered in political economy in two different ways: relative to individuals as values, and relative to the nation as goods; for the revenue of a nation is not appraised, like that of an individual, by its value, but by its utility or by the wants which it can satisfy." (Considérations sur le revenu national, p. 19.)
In the first place, it is a false abstraction to regard a nation whose mode of production is based upon value, and furthermore is capitalistically organised, as an aggregate body working merely for the satisfaction of the national wants.
Secondly, after the abolition of the capitalist mode of production, but still retaining social production, the determination of value continues to prevail in the sense that the regulation of labour-time and the distribution of social labour among the various production groups, ultimately the book-keeping encompassing all this, become more essential than ever.
51. Ricardo makes the following very apt comment on thoughtless Say: "Of net produce and gross produce, M. Say speaks as follows: ‘The whole value produced is the gross produce; this value, after deducting from it the cost of production, is the net produce.’ (Vol. II, p. 491.) There can, then, be no net produce, because the cost of production, according to M. Say, consists of rent, wages and profits. On page 508 he says: ‘The value of a product, the value of a productive service, the value of the cost of production, are all, then, similar values, whenever things are left to their natural course.’ Take a whole from a whole, and nothing remains." (Ricardo, Principles, Chapter XXII, p.512, Note.) — By the way we shall see later that Ricardo now refuted Smith’s false analysis of commodity-price, its reduction to the sum of the values of the revenues. He does not bother with it, and accepts its correctness so far in his analysis that he "abstracts" from the constant portion of the value of commodities. He also falls back into the same way of looking at things from time to time.
52. "In every society the price of every commodity finally resolves itself into some one or other, or all of those three parts [viz., wages, profits, rent] ... A fourth part, it may perhaps be thought, is necessary for replacing the stock of the farmer or for compensating the wear and tear of his labouring cattle, and other instruments of husbandry. But it must be considered that the price of any instrument of husbandry, such as a labouring horse, is itself made up of the same three parts: the rent of the land upon which he is reared, the labour of tending and rearing him, and the profits of the farmer, who advances both the rent of his land and the wages of his labour. Though the price of the corn, therefore, may pay the price as well as the maintenance of the horse, the whole price still resolves itself either immediately or ultimately into the same three parts of rent, labour [meaning wages] and profit." (Adam Smith.) — We shall show later on how Adam Smith himself feels the inconsistency and insufficiency of this subterfuge, for it is nothing but a subterfuge on his part to send us from Pontius to Pilate while nowhere does he indicate the real investment of capital, in which case the price of the product resolves itself ultimately into these three parts, without any further progressus.
53. Proudhon exposes his inability to grasp this in the ignorant formulation: L’ouvrier ne peut pas racheter son propre produit (the labourer cannot buy back his own product), because the interest which is added to the prix-de-revient (cost-price) is contained in the product. But how does M. Eugène Forcade teach him to know better? "If Proudhon’s objection were correct, it would strike not only the profits of capital, but would eliminate the possibility even of industry. If the labourer is compelled to pay 100 for each article for which he has received only 80, if his wages can buy back only the value which he has put into a product, it could be said that the labourer cannot buy back anything, that wages cannot pay for anything. In fact, there is always something more than the wages of the labourer contained in the cost-price, and always more than the profits of enterprise in the selling price, for instance, the price of raw materials, often paid to foreign countries. ... Proudhon has forgotten about the continual growth of national capital; he has forgotten that this growth refers to all labourers, whether in an enterprise or in handicrafts." (Revue des deux Mondes, 1848, Tome 24, p. 998.) Here we have the optimism of bourgeois thoughtlessness in the form of sagacity that most corresponds to it. M. Forcade first believes that the labourer could not live did he not receive a higher value than that which he produces, whereas conversely the capitalist mode of production could not exist were he really to receive all the value which he produces. Secondly, he correctly generalises the difficulty, which Proudhon expressed only from a narrow viewpoint. The price of commodities contains not only an excess over wages, but also over profit, namely, the constant portion of value. According to Proudhon’s reasoning, then, the capitalist too could not buy back the commodities with his profit. And how does Forcade solve this riddle? By means of a meaningless phrase: the growth of capital. Thus the continual growth of capital is also supposed to be substantiated, among other things, in that the analysis of commodity-prices, which is impossible for the political economist as regards a capital of 100, becomes superfluous in the case of a capital of 10,000. What would be said of a chemist, who, on being asked, How is it that the product of the soil contains more carbon than the soil? would answer: It comes from the continual increase in agricultural production. The well-meaning desire to discover in the bourgeois world the best of all possible worlds replaces in vulgar economy all need for love of truth and inclination for scientific investigation.
54. "The circulating capital invested in materials, raw materials and finished goods is itself composed of goods, the necessary price of which is formed of the same elements; so that, viewing the total goods in one country, it would mean duplication to count this portion of circulating capital among the elements of the necessary price." (Storch, Cours d’économie politique, II, p. 140.) — By these elements of circulating capital Storch means the value of constant capital (fixed capital is merely circulating in a different form. "It is true that the wages of the labourer, like that portion of profit of enterprise which consists of wages, if we consider them as a part of the means of subsistence, also consist of goods bought at current prices and which likewise comprise wages, interest on capital, ground-rent and profit of enterprise.... This observation merely serves to prove that it is impossible to resolve the necessary price into its simplest elements.’, (ibid, Note.) — In his Considérations sur la nature du revenu national (Paris, 1824), Storch indeed realises in his controversy with Say to what absurdity the erroneous analysis of commodity-value leads — when it resolves value into mere revenues. He correctly points out the folly of such results — not from the viewpoint of the individual capitalist, but from that of a nation — but himself goes no step further in his analysis of the prix nécessaire from that presented in his Cours, that it is impossible to resolve it into its actual elements, without resolving it into a spurious advance ad infinitum. "It is evident that the value of’ the annual product is divided partly into capitals and partly into profits, and that each one of these portions of value of the annual product regularly goes to buy the products needed by the nation, as much to preserve its capital as to renew its consumption fund (pp. 134, 135).... Can it" (a self-employed peasant family) "live in its barns or stables, eat its seed and forage, clothe itself with its draught cattle, dispense with its agricultural implements? According to the thesis of M. Say one must answer all these questions in the affirmative (pp. 135, 136) .... If it is admitted that the revenue of a nation is equal to its gross product, i.e., if no capital has to be deducted from it, then it must also be admitted that a nation can spend the entire value of its annual product unproductively without impairing its future income in the least (147). The products which constitute the capital of a nation are not consumable" (p.150).