Third and last post on Marx's Capital. You put a book on a table. Why it can't be gravitation that keeps it there.

Marxism. Capital Books 2 - 3

This is the third part of my examination of Karl Marx's book Capital, comprising Book 2 and Book 3. In Book 1 I treated all chapters, although some were dismissed in just one or a few sentences. Now I omit those I don't find interesting. I do not intend to write about Book 4.

CAPITAL BOOK 2. THE PROCESS OF CIRCULATION OF CAPITAL

Chapter 6. The Costs of Circulation

A salesman works as hard as any other but he creates neither value nor product. He is useful, not because he makes an unproductive function productive, but because less manpower is bound up in this unproductive function. If the productive worker also had to work as salesman, he would not be as effective as a dedicated salesman.

So although more value is produced through the work of the salesman, his work does not produce value.

As a wage worker, part of his working time is unpaid. Maybe he works ten hours and is paid corresponding to the value of eight hours labor. Just like his eight hours necessary labor, his two hours surplus labor does not produce any value. Although no extra product or value is appropriated, the costs of circulation are reduced by one fifth. To the capitalist who pays his wages this is a positive gain.

Now Marx has forgotten what he means by necessary labor and surplus labor. Necessary labor is the labor needed to produce the value corresponding to the wages, surplus labor is the labor necessary to produce the value corresponding to the surplus value. If the salesman produces no value, he is exploiting the worker just like the capitalist.

It does not matter if the capitalist or the producing worker performs the part of salesman, the only difference is that the capitalist has a higher turnover. When the turnover turns so high he has to hire someone to take care of sales, things don't change besides a part of the variable capital goes to this work that produces neither product nor value.

The variable capital used to be something the capitalist used to get a variable amount of new value, he spent the variable capital and he got a value that was the variable capital plus the surplus value. Now he spends variable capital and gets no value back. So really, it is the salesman exploiting the worker. Just like the capitalist, he is getting his money and producing no value.

Chapter 8. Fixed Capital and Circulating Capital

Fixed capital is capital in the form of facilities that are only consumed through wear, facilities like buildings and tools. The rest of the capital is called circulating. It is manpower, raw material, fuel and similar things.

CAPITAL BOOK 3. THE PROCESS OF CAPITALIST PRODUCTION AS A WHOLE

Chapter 1. Cost Price and Profit

The value of the commodity is the sum of the constant value, the variable value and the surplus value. The constant value comes from circulating capital, raw materials, fuel, etc. It also includes the costs of wear of machinery, buildings and things like that.
The capitalist is interested in the cost price; in the sum of constant and variable capital. He does not care about the distribution; he does not care if there is more constant capital than variable or vice versa.
This affects how he looks at the surplus value, he compares it to the cost price, not to the variable capital.

Chapter 2. The Rate of Profit

While the Rate of Surplus Value is Surplus Value / Variable Capital, the rate of profit is Surplus Value / ( Constant Capital + Variable Capital ) or Surplus Value / Cost Price.
If the capitalist sells to a price different from the value, it does not change anything. If he has to sell to a price lower than the value, it only means that the buyer gets part of the surplus value.

Here Marx makes total nonsense out of his surplus value. You have no way to know it. No matter what the price is, you can say that the rate of surplus value is 100%. If the sum of cost price and surplus value does not equal the price you say that the buyer got part of the surplus value.
You can say that the rate of surplus value is 200%. If the sum of cost price and surplus value does not equal the price you say that the buyer got part of the surplus value.
If the customer pays more than the value, part of the capitalist's profit comes from the customer, not from the surplus value. You have no way to say how much. You can say that there is no surplus value, that all the profit comes from the customer. Marx has no way to say it is wrong.
It does not help to say that Marx is talking about mean values, not about specific cases. It is meaningless to talk about mean values when you can't know what figures to put into the computations.

Chapter 9. Formation of a General Rate of Profit (Average Rate of Profit) and Transformation of the Values of Commodities into Prices of Production

Depending on the ratio between constant and variable capital, the same cost price (sum of constant and variable capital) can give very different surplus value. Let us compare two spheres of production, one with 20% constant capital and 80% variable, the other with 80% constant and 20% variable. Let us assume that the rate of surplus value is the same for both and that it is 100%.
If the capital is £100, we get following values:
1) £20 constant + £80 variable + £80 surplus = £180 value
2) £80 constant + £20 variable + £20 surplus = £120 value

Thus, even if the cost price is the same, the created value can be very different depending on the composition of the cost price. If the commodities were sold at their values, this would mean that the profit would be much bigger for capitalist 1 than for capitalist 2. Capitalist 1 would get a profit of £80 while capitalist 2 would get a profit £20.

These differences in profit are equalized by competition to a single general rate of profit. The surplus values will be equalized at £50 to each; the values have been equalized to the production price of £150. Deviations of price from value balance out one another through the uniform distribution of surplus value. It is only the sale of the commodities at such prices that enables the rate of profit to be the same, regardless of their composition.
1) £20 constant + £80 variable + £50 surplus = £150 production price
2) £80 constant + £20 variable + £50 surplus = £150 production price

So even if the value remains the same, it is supply and demand that sets the price.

Should the surplus value be the same as the profit in one specific production sphere, it is just a coincidence. To the capitalist this is only of interest as far as his surplus value affects the total average profit, a process he is not interested in and does not understand. Through the conversion of value to production price, the basis for value-determination is upset.
Here, for the first time, this inner relationship is disclosed.

It is really marvelous. For the first time, it is disclosed that Marx's value is no good if you are interested in the price. And it is disclosed by Marx himself! No wonder he is proud.

The price is the sum of cost price and profit. These are quantities you can get from the bookkeeping. What you can't get, from the bookkeeping or from anywhere, is the surplus value. You know the profit and you know that the profit is the sum of the surplus value and something else, some equalizing term. The only thing you know about the surplus value is that the sum of all surplus values equals the sum of all profits. Now he leaves the value completely undefined.
In the example above, Marx assumes that the rate of surplus value is the same for both. That's all right, he can do that if he wants to. But why does he not set the rate of surplus value to 62.5% in the first case and 250% in the second case? There is nothing in Marx's theory saying that it is not possible and he would not have to mess with some equalizing. Then the value would be equal to the price and we would get:
1) £20 constant + £80 variable + £50 surplus = £150 value = £150 price
2) £80 constant + £20 variable + £50 surplus = £150 value = £150 price

A solution much more elegant. The values are no longer undefined and the commodities would be sold at their value.

Chapter 10. Equalization of the General Rate of Profit Through Competition. Market-Prices and Market-Values. Surplus-Profit

Spheres of production with average composition give the same surplus value as profit; for all spheres of production competition tends to equalize the rate of profit to an average profit. The prices you get by adding the average profit to the cost prices are the values transmuted into price of production. The sum of all profits equals the sum of surplus-value; the sum of all production prices equals the sum of all values. If, in some spheres, the profit is not equalized, they are not included.

As usual, disregard reality if it does not fit.

Capitals employing unequal amounts of living labor produce unequal amounts of surplus-value. This means that we have, at least to a certain extent, a general rate of surplus value. Such a general rate of surplus-value - viewed as a tendency, like all other economic laws - has been assumed as a simplification. In reality it is an actual premise of the capitalist mode of production.

Pure nonsense. It does not matter how much the rate of surplus value varies, unequal amounts of living labor would still produce unequal amounts of surplus value.
As I demonstrated previously, a general rate of surplus value is no premise for the capitalist mode of production. Different rates of surplus value are quite in accordance with Marx's theories; they make the theories much more elegant although not much more meaningful.

The really difficult question is how the equalization of profits is brought about.

It is not very difficult. Marx just told you: it's competition; in other words, it's supply and demand.

As we have seen, if the commodities are sold at their real values we would get very different rates of profit. This presupposes that the rate of surplus value is the same, at least to a certain extent.

As we have just seen, a common rate of surplus value is an entirely arbitrary assumption from Marx. There is no way to decide the rate of profit; because there is no way to know how the surplus value is split between different capitalists and because there is no way to know how the surplus value is split between seller and buyer.

The problem is that the commodities are not exchanged as commodities, but as products of capitals; they want an even split of the surplus value.
The best way to understand is this: Assume that the worker owns his means of production. Some will need expensive tools and expensive raw material; some have more moderate needs. They are equally adept so they create the same amount of new value. This would comprise their wages plus the surplus-value, the latter representing surplus-labor over and above their necessary wants, the product of which would however belong to them.
Depending on the costs for tools and raw material, the products would have different values and prices. The exchange of commodities at their values thus requires a much lower stage of development than their exchange at their prices of production, which requires capitalist development.

In a capitalist society, the surplus value does not go to the worker; the revenue is split, the wage to the worker and the surplus value to the capitalist. Here Marx assumes a non-capitalist society, maybe his future communist society; the revenue is split, the wage to the worker and the surplus value to the same worker. Marx does not say why part of the revenue should still be called surplus value; he does not say how to make the split. Also, it seems that in this society there is no interest on loans.

The prices of the commodities will approximately correspond to their values, assuming that the commodity is produced in approximately sufficient quantities needed for mutual requirements, something that is a natural outgrowth of continual trading.

The value of the commodity is the center of gravity around which the price fluctuates. Some commodities are produced under conditions more or less favorable than average; the necessary labor time required is different from the average so their individual values are different.
That you can sell commodities produced under the least favorable conditions does not prove that this production is needed to satisfy the demand. If the price had been higher than the average market value, the demand had been less and vice versa. At a certain price, a commodity occupies just so much place on the market. If demand is strong, the price increases to make production under less favorable conditions profitable. This is only possible if demand is greater than usual or if supply drops below usual. Within each sphere, the price of production is regulated and this price of production is the mean value around which the market price moves.

Similar commodities will be sold at their values if the individual values are equalized at one market value. For the market price to correspond to the market value, competition must force the sellers to bring enough commodities to the market to fill the social requirements. If more or less commodities are brought to the market, the market price will be lower or higher than the market value.

This is supply and demand: if price increases, demand decreases and vice versa. So far Marx understands it. With the world working the way it does, always changing and developing, it does not make much sense talking about a mean value around which the market price moves. What Marx does not understand is that there is no "usual" supply or demand; when one goes up, the other goes down.

If supply equals demand, they cease to act, and for this reason commodities are sold at their market values. Whenever two forces operate equally in opposite directions, they balance one another, they exert no outside influence, and any phenomena taking place in these circumstances must be explained by causes other than the effect of these two forces.

If you go fly fishing, there is a small gadget you might want to take with you. It is a tubular balance with a hook on a spring and a calibrated scale. When you hang a fish on the hook, it pulls the spring till the force from the spring balances the weight of the fish; you got two forces operating equally in opposite directions. According to Marx this means that any phenomena taking place in these circumstances must be explained by causes other than the effect of these two forces; the balance indicator setting at a specific weight cannot be explained by two equal forces working in opposite directions. He is wrong. The indicated weight is set by two equal forces working in opposite directions.
If you put a book on a table, it stays there because the gravitational force from the book is countered by an equal force from the table working in the opposite direction; I do not know what Marx believes keeps the book on the table when it can't be gravitation.

Marx assumes there is a "usual" supply and a "usual" demand. Like there should be a "usual" fish and a "usual" spring. When he does this, he does not, as usually does, consider changes in production, changes in standard of living, commodities being replaced by other commodities. Changes affecting supply and demand. He does not see the world as changing, living, with interactions and contradictions.
You can measure the weight of a human. You can measure it regularly and calculate a mean value, for the first year, for the second year and so on. You can calculate the mean value for the first decade, for the second decade and so on. Maybe the weight doesn't change much after the first twenty-five years; maybe it does. The weight depends on factors working up and down; like how much you eat, how much you move, genetic factors. To select some mean value, for some arbitrary time period or for the time from birth to death, and say that this mean value is the "usual" or "real" weight; that this mean value is decided by factors others than those making the weight move above or below; it is nonsense.

A mathematically precise proof

The capitalist is interested in making an extra profit, a profit bigger than the average profit. There are different methods: overwork, wage reduction, more efficient production.
This is a mathematically precise proof that even if there is fighting among the capitalists, together they form a brotherhood against the working class.

Mathematically precise proof? Where is the math? Where is the precision? Where is the proof? It is an assertion, albeit plausible, that the capitalist wants to maximize his profits.

That's all folks

Marx writes a lot about commercial capital and ground rent. It's just as muddle-headed as usual, with the same absurdities. I'll leave it, it's not that fun.

© Anders Floderus