Capital Vol. III Part I
Chapter 7 Supplementary Remarks
(This post is part of an ongoing project: a close reading of volume 3 of Kapital, one post per chapter. I hope that others who are tackling this book for the first time might find my summaries and thoughts useful. I also hope that others might leave their own thoughts, criticisms, help, etc. here so that this blog might become a good collective resource for those brave souls who take on Vol. 3.)
Marx begins by repeating some points from earlier. The fact that capitalists realize the value of their product in the market causes them to believe that it is through the market that value is created. Marx doesn’t complete this point but if he had perhaps he would remind us that the world of appearance, the subjective valuations between buyer and seller in the market, are the mechanism through which the law of value operates. The law of value is formed through the indirect linkage of all of the social labor process through this act of individual market exchange. Therefore it is easy to confuse the value-creating powers of labor with the subjective valuations that happen in exchange. We have seen, throughout these opening chapters, how that profit comes wholly from surplus value. Yet the rate of profit is modified by a variety of other factors like changes in the value of constant capital, turnover time, changes in value of labor power, etc. This is one more way in which we confuse these changes for the cause of value. We might notice that increased turnover time increases profit but this doesn’t mean that time itself creates value. We might notice that a decrease in constant capital costs causes profits to rise. But this doesn’t mean that constant capital is creating more value.
Is it possible for a firm to increase in size and maintain the same rate of profit? Obviously the mass of surplus would increase but this surplus would be calculated against a larger cost-price so the rate or profit will stay the same if all of the internal portions of capital stay the same: the organic composition and the rate of exploitation. This distinction between mass of profit and rate of profit will be crucial in Part 3 when Marx discusses the falling rate of profit. _____________________
What causes the rate of profit to change? A change in ratio of surplus value to the price of producing this surplus value is what causes the rate of profit to change. Thus changes in the rate of exploitation, the organic composition of capital, or the market prices of constant and variable capital all act to influence the rate of profit. If the market price of an input is changing this shows us the way productivity is really a social phenomenon. The difference between the labor time it takes a particular, concrete firm to produce a commodity and the labor-time it takes society in general to produce something is the difference between necessary labor time and socially necessary labor time. This explains the devaluation or appreciation of inputs. In general a rising organic composition of capital means a falling rate of profit. A falling organic composition means a rising rate of profit. If just the money value of capital changes due to a change in the value of money itself, then the profit rate only changes in name, not real values.
These brief remarks don’t tell us anything new but they do a good job of summarizing some of the crucial points from the last 100+ pages. It is now easy to see how the origin of profit in exploitation is obscured by all of the other contingent factors effecting the rate of profit. This obfuscation will be taken further in Part 2.