Value, Price and Profit
By Karl Marx
IX. Value of Labor
We must now return to the expression, value, or price of labor. We have seen that, in fact, it is only the value of the laboring power, measured by the values of commodities necessary for its maintenance. But since the workman receives his wages after his labor is performed, and knows, moreover, that what he actually gives to the capitalist is his labor, the value or price of his laboring power necessarily appears to him as the price or value of his labor itself. If the price of his laboring power is three shillings, in which six hours of labor are realized, and if he works twelve hours, he necessarily considers these three shillings as the value or price of twelve hours of labor, although these twelve hours of labor realize themselves in a value of six shillings. A double consequence flows from this.
Firstly. The value or price of the laboring power takes the semblance of the price or value of labor itself, although, strictly speaking, value and price of labor are senseless terms.
Secondly. Although one part only of the workmans daily labor is paid, while the other part is unpaid, and while that unpaid or surplus labor constitutes exactly the fund out of which surplus value or profit is formed, it seems as if the aggregate labor was paid labor.
This false appearance distinguishes wages labor from other historical forms of labor. On the basis of the wages system even the unpaid labor seems to be paid labor. With the slave, on the contrary, even that part of his labor which is paid appears to be unpaid. Of course, in order to work the slave must live, and one part of his working day goes to replace the value of his own maintenance. But since no bargain is struck between him and his master, and no acts of selling and buying are going on between the two parties, all his labor seems to be given away for nothing.
Take, on the other hand, the peasant serf, such as he, I might say, until yesterday existed in the whole of East of Europe. This peasant worked, for example, three days for himself on his own field or the field allotted to him, and the three subsequent days he performed compulsory and gratuitous labor on the estate of his lord. Here, then, the paid and unpaid parts of labor were sensibly separated, separated in time and space; and our Liberals overflowed with moral indignation at the preposterous notion of making a man work for nothing.
In point of fact, however, whether a man works three days of the week for himself on his own field and three days for nothing on the estate of his lord, or whether he works in the factory or the workshop six hours daily for himself and six for his employer, comes to the same, although in the latter case the paid and unpaid portions of labor are inseparably mixed up with each other, and the nature of the whole transaction is completely masked by the intervention of a contract and the pay received at the end of the week. The gratuitous labor appears to be voluntarily given in the one instance, and to be compulsory in the other. That makes all the difference.
In using the word value of labor, I shall only use it as a popular slang term for value of laboring power.
X. Profit is Made by Selling a Commodity at its Value
Suppose an average hour of labor to be realized in a value equal to sixpence, or twelve average hours of labor to be realized in six shillings. Suppose, further, the value of labor to be three shillings or the produce of six hours labor. If, then, in the raw material, machinery, and so forth, used up in a commodity, twenty-four hours of average labor were realized, its value would amount to twelve shillings. If, moreover, the workman employed by the capitalist added twelve hours of labor to those means of production, these twelve hours would be realized in an additional value of six shillings. The total value of the product would, therefore, amount to thirty-six hours of realized labor, and be equal to eighteen shillings. But as the value of labor, or the wages paid to the workman, would be three shillings only, no equivalent would have been paid by the capitalist for the six hours of surplus labor worked by the workman, and realized in the value of the commodity. By selling this commodity at its value for eighteen shillings, the capitalist would, therefore, realize a value of three shillings, for which he had paid no equivalent. These three shillings would constitute the surplus value or profit pocketed by him. The capitalist would consequently realize the profit of three shillings, not by selling his commodity at a price over and above its value, but by selling it at its real value.
The value of a commodity is determined by the total quantity of labor contained in it. But part of that quantity of labor is realized in a value for which an equivalent has been paid in the form of wages; part of it is realized in a value for which NO equivalent has been paid. Part of the labor contained in the commodity is paid labor; part is unpaid labor. By selling, therefore, the commodity at its value, that is, as the crystallization of the total quantity of labor bestowed upon it, the capitalist must necessarily sell it at a profit. He sells not only what has cost him an equivalent, but he sells also what has cost him nothing, although it has cost his workman labor. The cost of the commodity to the capitalist and its real cost are different things.
I repeat, therefore, that normal and average profits are made by selling commodities not above, but at their real values.
XI. The Different Parts into which Surplus Value is Decomposed
The surplus value, or that part of the total value of the commodity in which the surplus labor or unpaid labor of the working man is realized, I call profit. The whole of that profit is not pocketed by the employing capitalist. The monopoly of land enables the landlord to take one part of that surplus value, under the name of rent, whether the land is used for agricultural buildings or railways, or for any other productive purpose. On the other hand, the very fact that the possession of the instruments of labor enables the employing capitalist to produce a surplus value, or, what comes to the same, to appropriate to himself a certain amount of unpaid labor, enables the owner of the means of labor, which he lends wholly or partly to the employing capitalistenables, in one word, the money-lending capitalist to claim for himself under the name of interest another part of that surplus value, so that there remains to the employing capitalist as such only what is called industrial or commercial profit.
By what laws this division of the total amount of surplus value amongst the three categories of people is regulated is a question quite foreign to our subject. This much, however, results from what has been stated.
Rent, interest, and industrial profit are only different names for different parts of the surplus value of the commodity, or the unpaid labor enclosed in it, and they are equally derived from this source and from this source alone. They are not derived from land as such or from capital as such, but land and capital enable their owners to get their respective shares out of the surplus value extracted by the employing capitalist from the laborer. For the laborer himself it is a matter of subordinate importance whether that surplus value, the result of his surplus labor, or unpaid labor, is altogether pocketed by the employing capitalist, or whether the latter is obliged to pay portions of it, under the name of rent and interest, away to third parties. Suppose the employing capitalist to use only is own capital and to be his own landlord, then the whole surplus value would go into his pocket.
It is the employing capitalist who immediately extracts from the laborer this surplus value, whatever part of it he may ultimately be able to keep for himself. Upon this relation, therefore, between the employing capitalist and the wages laborer the whole wages system and the whole present system of production hinge. Some of the citizens who took part in our debate were, therefore, wrong in trying to mince matters, and to treat this fundamental relation between the employing capitalist and the working man as a secondary question, although they were right in stating that, under given circumstances, a rise of prices might affect in very unequal degrees the employing capitalist, the landlord, the moneyed capitalist, and, if you please, the tax-gatherer.
Another consequence follows from what has been stated.
That part of the value of the commodity which represents only the value of the raw materials, the machinery, in one word, the value of the means of production used up, forms no revenue at all, but replaces only capital. But, apart from this, it is false that the other part of the value of the commodity which forms revenue, or may be spent in the form of wages, profits, rent, interest, is constituted by the value of wages, the value of rent, the value of profits, and so forth. We shall, in the first instance, discard wages, and only treat industrial profits, interest, and rent. We have just seen that the surplus value contained in the commodity, or that part of its value in which unpaid labor is realized, resolves itself into different fractions, bearing three different names.
But it would be quite the reverse of the truth to say that its value is composed of, or formed by, the addition of the independent values of these three constituents.
If one hour of labor realizes itself in a value of sixpence, if the working day of the laborer comprises twelve hours, if half of this time is unpaid labor, that surplus labor will add to the commodity a surplus value of three shillings, that is of value for which no equivalent has been paid. This surplus value of three shillings constitutes the whole fund, which the employing capitalist may divide, in whatever proportions, with the landlord and the money-lender. The value of these three shillings constitutes the limit of the value they have to divide amongst them. But it is not the employing capitalist who adds to the value of the commodity an arbitrary value for his profit, to which another value is added for the landlord, and so forth, so that the addition of these arbitrarily fixed values would constitute the total value. You see, therefore, the fallacy of the popular notion, which confounds the decomposition of a given value into three parts, with the formation of that value by the addition of three independent values, thus converting the aggregate value, from which rent, profit, and interest are derived, into an arbitrary magnitude.
If the total profit realized by a capitalist is equal to 100 Pounds, we call this sum, considered as absolute magnitude, the amount of profit. But if we calculate the ratio, which those 100 Pounds bear to the capital advanced, we call this relative magnitude, the rate of profit. It is evident that this rate of profit may be expressed in a double way.
Suppose 100 Pounds to be the capital advanced in wages. If the surplus value created is also 100 Poundsand this would show us that half the working day of the laborer consists of unpaid laborand if we measured this profit by the value of the capital advanced in wages, we should say that the rate of profit amounted to one hundred percent, because the value advanced would be one hundred and the value realized would be two hundred.
If, on the other hand, we should not only consider the capital advanced in wages, but the total capital advanced, say, for example, 500 Pounds, of which 400 Pounds represented the value of raw materials, machinery, and so forth, we should say that the rate of profit amounted only to twenty percent, because the profit of one hundred would be but the fifth part of the total capital advanced.
The first mode of expressing the rate of profit is the only one which shows you the real ratio between paid and unpaid labor, the real degree of the exploitation (you must allow me this French word) of labor. The other mode of expression is that in common use, and is, indeed, appropriate for certain purposes. At all events, it is very useful for concealing the degree in which the capitalist extracts gratuitous labor from the workman.
In the remarks I have still to make I shall use the word profit for the whole amount of the surplus value extracted by the capitalist without any regard to the division of that surplus value between different parties, and in using the words rate of profit, I shall always measure profits by the value of the capital advanced in wages.
XII. General Relation of Profits, Wages, and Prices
Deduct from the value of a commodity the value replacing the value of the raw materials and other means of production used upon it, that is to say, deduct the value representing the past labor contained in it, and the remainder of its value will resolve into the quantity of labor added by the working man last employed. If that working man works twelve hours daily, if twelve hours of average labor crystallize themselves in an amount of gold equal to six shillings, this additional value of six shillings is the only value his labor will have created. This given value, determined by the time of his labor, is the only fund from which both he and the capitalist have to draw their respective shares or dividends, the only value to be divided into wages and profits. It is evident that this value itself will not be altered by the variable proportions in which it may be divided amongst the two parties. There will also be nothing changed if in the place of one working man you put the whole working population, twelve million working days, for example, instead of one.
Since the capitalist and workman have only to divide this limited value, that is, the value measured by the total labor of the working man, the more the one gets the less will the other get, and vice versa. Whenever a quantity is given, one part of it will increase inversely as the other decreases. If the wages change, profits will change in an opposite direction. If wages fall, profits will rise; and if wages rise, profits will fall. If the working man, on our former supposition, gets three shillings, equal to one half of the value he has created, or if his whole working day consists half of paid, half of unpaid labor, the rate of profit will be 100 percent, because the capitalist would also get three shillings. If the working man receives only two shillings, or works only one third of the whole day for himself, the capitalist will get four shillings, and the rate of profit will be 200 per cent. If the workingman receives four shillings, the capitalist will only receive two, and the rate of profit would sink to 50 percent, but all these variations will not affect the value of the commodity. A general rise of wages would, therefore, result in a fall of the general rate of profit, but not affect values.
But although the values of commodities, which must ultimately regulate their market prices, are exclusively determined by the total quantities of labor fixed in them, and not by the division of that quantity into paid and unpaid labor, it by no means follows that the values of the single commodities, or lots of commodities, produced during twelve hours, for example, will remain constant. The number or mass of commodities produced in a given time of labor, or by a given quantity of labor, depends upon the productive power of the labor employed, and not upon its extent or length. With one degree of the productive power of spinning labor, for example, a working day of twelve hours may produce twelve pounds of yarn, with a lesser degree of productive power only two pounds. If then twelve hours average labor were realized in the value of six shillings in the one case, the twelve pounds of yarn would cost six shillings, in the other case the two pounds of yarn would also cost six shillings. One pound of yarn would, therefore, cost sixpence in the one case, and three shillings in the other. The difference of price would result from the difference in the productive powers of labor employed. One hour of labor would be realized in one pound of yarn with the greater productive power, while with the smaller productive power, six hours of labor would be realized in one pound of yarn. The price of a pound of yarn would, in the one instance, be only sixpence, although wages were relatively high and the rate of profit low; it would be three shillings in the other instance, although wages were low and the rate of profit high. This would be so because the price of the pound of yarn is regulated by the total amount of labor worked up in it, and not by the proportional division of that total amount into paid and unpaid labor. The fact I have before mentioned that high-price labor may produce cheap, and low-priced labor may produce dear commodities, loses, therefore, its paradoxical appearance. It is only the expression of the general law that the value of a commodity is regulated by the quantity of labor worked up in it, but that quantity of labor worked up in it depends altogether upon the productive powers of labor employed, and will therefore, vary with every variation in the productivity of labor.