Economic and Philosophical Manuscripts of 1844 Chapter 2 Profit of Capital

Author: Karl Marx Publisher: Publish Date: Review Date: Status:💥

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THE RULE OF CAPITAL OVER LABOUR AND THE MOTIVES OF THE CAPITALIST

The consideration of his own private profit is the sole motive which determines the owner of any capital to employ it either in agriculture, in manufactures, or in some particular branch of the wholesale or retail trade. The different quantities of productive labour which it may put into motion, and the different values which it may add to the annual produce of the land and labour of his country, according as it is employed in one or other of those different ways, never enter into his thoughts. (Ibid., p. 335.)

The most useful employment of capital for the capitalist is that which, risks being equal, yields him the greatest profit. This employment is not always the most useful for society: the most useful employment is that which draws benefit from the productive powers of nature. (Say, t. II, pp. 130-31.)

The plans and projects of the employers of capitals regulate and direct all the most important operations of labour, and profit is the end proposed by all those plans and projects. But the rate of profit does not, like rent and wages, rise with the prosperity and fall with the declension of the society. On the contrary, it is naturally low in rich and high in poor countries, and it is always highest in the countries which are going fastest to ruin. The interest of this class, therefore, has not the same connection with the general interest of the society as that of the other two… The particular interest of the dealers in any particular branch of trade or manufactures is always in some respects different from, and frequently even in sharp opposition to, that of the public. To widen the market and to narrow the sellers’ competition is always the interest of the dealer. This is a class of people whose interest is never exactly the same as that of society, a class of people who have generally an interest to deceive and to oppress the public. (Smith, Vol. I, pp. 231-32.)

THE ACCUMULATION OF CAPITALS AND THE COMPETITION AMONGST THE CAPITALISTS

The increase of capitals, which raises wages, tends to lower the capitalists’ profit, because of the competition amongst the capitalists. (Ibid., p. 78.)

“If, for example, the capital which is necessary for the grocery trade of a particular town is divided between two different grocers, their competition will tend to make that each of them sells cheaper than if it were in the hands of one only; and if it were divided among twenty, their competition would be just so much the greater, and the chance’ of their combining together, in order to raise the price, just so much less.” (Ibid., p. 322.)

Since we already know that monopoly-prices are as high as possible, since the interest of the capitalists, even from the point of view commonly held by political economists, stands in hostile opposition to society, and since a rise of profit operates like compound interest on the price of the commodity (ibid., pp. 87-88), it follows that the sole defence against the capitalists is competition, which according to the evidence of political economy acts beneficently by both raising wages and lowering the prices of commodities to the advantage of the consuming public.

But competition is only possible if capitals multiply, and are held in many hands. The formation of many capitals is only possible as a result of multilateral accumulation, since capital comes into being only by accumulation; and multilateral accumulation necessarily turns into unilateral accumulation. Competition among capitals increases accumulation of capitals.

Accumulation, where private property prevails, is the concentration of capital in the hands of a few, it is in general an inevitable consequence if capitals are left to follow their natural course, and it is precisely through competition that the way is cleared for this natural destination of capital.

We have been told that the profit on capital is in proportion to the size of the capital. A large capital therefore accumulates more quickly than a small capital in proportion to its size, even if we disregard for the time being deliberate competition.

Accordingly, the accumulation of large capital proceeds much more rapidly than that of smaller capital, quite irrespective of competition. But let us follow this process further.

With the increase of capitals the profits on the capitals diminish, because of competition. The first to suffer, therefore, is the small capitalist.

The increase of capitals and a large number of capitals presupposes, further, a condition of advancing wealth in the country.

“In a country which had acquired its full complement of riches, … as the ordinary rate of clear profit would be very small, so the usual market-rate of interest which could be afforded out of it would be so low as to render it impossible for any but the very wealthiest people to live upon the interest of their money. All people of small or middling fortunes would be obliged to superintend themselves the employment of their own stocks.” (Ibid., p. 86.)

This is the situation most dear to the heart of political economy.

“The proportion between capital and revenue, therefore, seems everywhere to regulate the proportion between industry and idleness; wherever capital predominates, industry prevails; wherever revenue, idleness.” (Ibid., p. 301.)

What about the employment of capital, then, in this condition of increased competition?

“As stock increases, the quantity of stock to be lent at interest grows gradually greater and greater. As the quantity of stock to be lent at interest increases, the interest … diminishes…” (i) because “the market-price of things commonly diminishes as their quantity increases…” and (ii) because with the increase of capitals in any country, “it becomes gradually more and more difficult to find within the country a profitable method of employing any new capital. There arises in consequence a competition between different capitals, the owner of one endeavouring to get possession of that employment which is occupied by another. But upon most occasions he can hope to jostle that other out of this employment by no other means but by dealing upon more reasonable terms. He must not only sell what he deals in somewhat cheaper, but in order to get it to sell, he must sometimes, too, buy it dearer. The demand for productive labour, by the increase of the funds which are destined for maintaining it, grows every day greater and greater. Labourers easily find employment, but the owners of capitals find it difficult to get labourers to employ. Their competition raises the wages of labour and sinks the profits of stock.” (Ibid., p. 316.)

Thus the small capitalist has the choice: 1) either to consume his capital, since he can no longer live on the interest—and thus cease to be a capitalist; or: 2) to set up a business himself, sell his commodity cheaper, buy dearer than the wealthier capitalist, and pay increased wages—thus ruining himself, the market-price being already very low as a result of the intense competition presupposed. If, however, the big capitalist wants to squeeze out the smaller capitalist, he has all the advantages over him which the capitalist has as a capitalist over the worker. The larger size of his capital compensates him for the smaller profits, and he can even bear temporary losses until the smaller capitalist is ruined and he finds himself freed from this competition. In this way, he accumulates the small capitalist’s profits.

Furthermore: the big capitalist always buys cheaper than the small one, because he buys bigger quantities. He can therefore well afford to sell cheaper.

But if a fall in the rate of interest turns the middle capitalists from rentiers into business men, the increase in business capitals and the smaller profit consequent thereon produce conversely a fall in the rate of interest.

“When the profits which can be made by the use of a capital are … diminished, … the price which can be paid for the use of it, … must necessarily be diminished with them.” (Ibid., p. 316.)

“As riches, improvement, and population have increased, interest has declined,” and consequently the profit of capitals, “after these are diminished, stock may not only continue to increase, but to increase much faster than before… A great stock though with small profits, generally increases faster than a small stock with great profits. Money, says the proverb, makes money.” (Ibid., p. 83.)

If, however, this large capital is opposed by small capitals with small profits, as it is under the presupposed condition of intense competition, it crushes them completely. The necessary result of this competition is a general deterioration of commodities, adulteration, fake-production and universal poisoning, evident in large towns.

An important circumstance in the competition of large and small capitals is, furthermore, the relationship between fixed capital and circulating capital.33

“Circulating capital is a capital which is employed in raising provisions, in manufacture or trade. The capital employed in this manner yields no revenue or profit to its employer while it either remains in his possession or continues in the same shape. It is continually going from him in one particular shape in order to return to him in another, and it is only by means of such circulation, or such successive exchanges and transformations that it yields any profit. Fixed capital consists of capital invested in the improvement of land, the purchase of useful machines, instruments of trade, and such-like things.” (Ibid., pp. 243-44. In quoting it, Marx has abbreviated this passage.)

“Every saving in the expense of supporting the fixed capital is an improvement of the net revenue of the society. The whole capital of the undertaker of every work is necessarily divided between his fixed and his circulating capital. While his whole capital remains the same, the smaller the one part, the greater must necessarily be the other. It is the circulating capital which furnishes the materials and wages of labour, and puts industry into motion. Every saving, therefore, in the expense of maintaining the fixed capital, which does not diminish the productive powers of labour, must increase the fund which puts industry into motion.” (Ibid., p. 257.)

It is clear from the outset that the relationship of fixed capital and circulating capital is much more favourable to the big capitalist than to the smaller capitalist. The extra fixed capital required by a very big banker as against a very small one is insignificant. Their fixed capital amounts to nothing more than the office. The equipment of the bigger landowner does not increase in proportion to the size of his estate. Similarly, the credit which a big capitalist enjoys compared with a smaller one means for him all the greater saving in fixed capital—that is, in the amount of ready money he must always have at hand. Finally, it is obvious that where industrial labour has reached a high level, and where therefore almost all manual labour has become factory-labour, the entire capital of a small capitalist does not suffice to provide him even with the necessary fixed capital.34

The accumulation of large capitals is generally accompanied by a corresponding concentration and simplification of fixed capital relative to the smaller capitalists. The big capitalist introduces for himself some kind of organisation of the instruments of labour.

“Similarly, in the sphere of industry every manufactory and mill is already a more comprehensive combination of a larger material fortune with numerous and varied intellectual capacities and technical skills serving the common purpose of production… Where legislation preserves landed property in large units, the surplus of a growing population flocks into trades, and it is therefore as in Great Britain in the field of industry, principally, that proletarians aggregate in great numbers. Where, however, the law permits the continuous division of the land, the number of small, debt-encumbered proprietors increases, as in France; and the continuing process of fragmentation throws them into the class of the needy and the discontented. When eventually this fragmentation and indebtedness reaches a higher degree still, big landed property once more swallows up small property, just as large-scale industry destroys small industry. And as larger estates are formed again, large numbers of propertiless workers not required for the cultivation of the soil are again driven into industry.” (Schulz, Bewegung der Produktion, pp. 58, 59.)

“Commodities of a particular kind change in character as a result of changes in the method of production, and especially as a result of the use of machinery. Only by the exclusion of human power has it become possible to spin from a pound of cotton worth 3 shillings and 8 pence 350 hanks of a total length of 167 English miles (i.e., 36 German miles), and of a commercial value of 25 guineas.” (Ibid., p. 62.)

“On the average the prices of cotton cloths have decreased in England during the past 45 years by eleven-twelfths, and according to Marshall’s calculations the same amount of manufactured goods for which 16 shillings was still paid in 1814 is now supplied at 1 shilling and 10 pence. The greater cheapness of industrial products expands both consumption at home and the market abroad, and because of this the number of workers in cotton has not only not fallen in Great Britain after the introduction of machines but has risen from forty thousand to one and a half million. As to the earnings of industrial entrepreneurs and workers: the growing competition between the factory-owners has resulted in their profits necessarily falling relative to the amount of products supplied by them. In the years 1820-33 the Manchester manufacturer’s gross profit on a piece of calico fell from four shillings 1 pence to one shilling 9 pence. But to make up for this loss, the volume of manufacture has been correspondingly increased. The consequence of this is … that separate branches of industry experience over-production to some extent; that frequent bankruptcies occur causing property to fluctuate and vacillate unstably within the class of capitalists and masters of labour, thus throwing into the proletariat some of those who have been ruined economically; and that, frequently and suddenly, close-downs or cuts in employment become necessary, the painful effects of which are always bitterly felt by the class of wage-labourers.” (Ibid., p. 63.)

“To hire out one’s labour is to begin one’s enslavement. To hire out the materials of labour is to establish one’s freedom… Labour is man; but the materials of labour, on the other hand, contain nothing human.” (Pecqueur, Théorie sociale, etc., pp. 411-12.)

“The element of matter, which is quite incapable of creating wealth without the other element, labour, acquires the magical virtue of being fertile for them,35 as if by their own action they had placed there this indispensable element.” (Ibid.)

“Supposing that the daily labour of a worker brings him on the average four hundred francs a year and that this sum suffices for every adult to live some sort of crude life, then any proprietor receiving 2,000 francs in interest or rent, from a farm, a house, etc., compels indirectly five men to work for him; an income of 100,000 francs represents the labour of two hundred and fifty men, and that of 1,000,000 francs the labour of two thousand five hundred individuals (and 300 million [Louis Philippe] therefore the labour of 750,000 workers).” (Ibid., pp. 412-13.)

“The human law has given owners the right to use and to abuse—that is to say the right to do what they will with the materials of labour… . They are in no way obliged by law to provide work for the propertiless when required and at all times, or to pay them always an adequate wage, etc.” (Ibid., p. 413.) “Complete freedom concerning the nature, the quantity, the quality and the opportunity of production; concerning the use and the disposal of wealth; and full command over the materials of all labour. Everyone is free to exchange what belongs to him as he thinks fit, without considering anything other than his own interest as an individual.” (Ibid., p. 413.)

“Competition is merely the expression of the freedom to exchange, which itself is the immediate and logical consequence of the individual’s right to use and abuse all the instruments of production. The right to use and abuse, freedom of exchange, and arbitrary competition—these three economic moments, which form one unit, entail the following consequences; each produces what he wishes, as he wishes, when he wishes, where he wishes, produces well or produces badly, produces too much or not enough, too soon or too late, at too high a price or too low a price; none knows whether he will sell, how he will sell, when he will sell, where he will sell, to whom he will sell. And it is the same with regard to purchases. The producer is ignorant of needs and resources, of demand and supply. He sells when he wishes, when he can, where he wishes, to whom he wishes, at the price he wishes. And he buys in the same way. In all this he is ever the plaything of chance, the slave of the law of the strongest, of the least harassed, of the richest… . Whilst at one place there is scarcity, at another there is glut and waste. Whilst one producer sells a lot or at a very high price, and at an enormous profit, the other sells nothing or sells at a loss… . The supply does not know the demand, and the demand does not know the supply. You produce, trusting to a taste, a fashion, which prevails amongst the consuming public. But by the time you are ready to deliver the commodity, the whim has already passed and has settled on some other kind of product… . The inevitable consequences: bankruptcies occurring permanently and universally; miscalculations, sudden ruin and unexpected fortunes, commercial crises, unemployment, periodic gluts or shortages; instability and depreciation of wages and profits, the loss or enormous waste of wealth, time and effort in the arena of fierce competition.” (Ibid., pp. 414-16.)

Ricardo in his book (Rent of Land): Nations are merely production-shops; man is a machine for consuming and producing; human life is a kind of capital; economic laws blindly rule the world. For Ricardo men are nothing, the product everything. In the 26th chapter of the French translation it says: “To an individual with a capital of £20,000 whose profits were £2,000 per annum, it would be a matter quite indifferent whether his capital would employ a hundred or a thousand men… . Is not the real interest of the nation similar? Provided its net real income, its rent and profits be the same, it is of no importance whether the nation consists of ten or of twelve millions of inhabitants.” “In fact, says M. Sismondi (t. II, p. 331), nothing remains to be desired but that the King, living quite alone on the island, should by continuously turning a crank cause automata to do all the work of England.”36

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36 The whole paragraph (including the quotation from Ricardo’s book Principles of Political Economy and Taxation and from Sismondi’s Nouveaux principes d’économie politique) is an excerpt from E. Buret’s book De la misère des classes laborieuses en Angleterre et en France, T. 1, Paris, 1840, pp. 6-7.—Ed.

“The master who buys the worker’s labour at such a low price that it scarcely suffices for the worker’s most pressing needs is responsible neither for the inadequacy of the wage nor for the excessive duration of the labour: he himself has to submit to the law which he imposes… . Poverty is not so much caused by men as by the power of things.” (Buret, I.c., p. 82.)

“The inhabitants of many different parts of Great Britain have not capital sufficient to improve and cultivate all their lands. The wool of the southern counties of Scotland is, a great part of it, after a long land carriage through very bad roads, manufactured in Yorkshire, for want of capital to manufacture it at home. There are many little manufacturing towns in Great Britain, of which the inhabitants have not capital sufficient to transport the produce of their own industry to those distant markets where there is demand and consumption for it. If there are any merchants among them, they are properly only the agents of wealthier merchants who reside in some of the greater commercial cities.” (Smith, l.c., Vol. 1, pp. 326-27.)

“The annual produce of the land and labour of any nation can be increased in its value by no other means but by increasing either the number of its productive labourers or the productive powers of those labourers who had before been employed… In either case an additional capital is almost always required.” (Ibid., pp. 306-07.)

“As the accumulation of stock must, in the nature of things, be previous to the division of labour, so labour can be more and more subdivided in proportion only as stock is previously more and more accumulated. The quantity of materials which the same number of people can work up, increases in a great proportion as labour comes to be more and more subdivided; and as the operations of each workman are gradually reduced to a greater degree of simplicity, a variety of new machines come to be invented for facilitating and abridging those operations. As the division of labour advances, therefore, in order to give constant employment to an equal number of workmen, an equal stock of provisions, and a greater stock of materials and tools than what would have been necessary in a ruder state of things, must be accumulated beforehand. But the number of workmen in every branch of business generally increases with the division of labour in that branch, or rather it is the increase of their number which enables them to class and subdivide themselves in this manner.” (Ibid., pp. 241-42.)

“As the accumulation of stock is previously necessary for carrying on this great improvement in the productive powers of labour, so that accumulation naturally leads to this improvement. The person who employs his stock in maintaining labour, necessarily wishes to employ it in such a manner as to produce as great a quantity of work as possible. He endeavours, therefore, both to make among his workmen the most proper distribution of employment, and to furnish them with the best machines which he can either invent or afford to purchase. His abilities in both these respects are generally in proportion to the extent of his stock, or to the number of people whom it can employ. The quantity of industry, therefore, not only increases in every country with the increase of the stock which employs it, but, in consequence of that increase, the same quantity of industry produces a much greater quantity of work.” (Ibid., p. 242.) Hence overproduction.

“More comprehensive combinations of productive forces … in industry and trade by uniting more numerous and more diverse, human and natural powers in larger-scale enterprises. Already here and there, closer association of the chief branches of production. Thus, big manufacturers will try to acquire also large estates in order to become independent of others for at least a part of the raw materials required for their industry; or they will go into trade in conjunction with their industrial enterprises, not only to sell their own manufactures, but also to purchase other kinds of products and to sell these to their workers. In England, where a single factory-owner sometimes employs ten to twelve thousand workers … it is already not uncommon to find such combinations of various branches of production controlled by one brain, such smaller states or provinces within the state. Thus, the mine-owners in the Birmingham area have recently taken over the whole process of iron production, which was previously distributed among various entrepreneurs and owners. See ‘Der Bergmännische Distrikt bei Birmingham,’ Deutsche Vierteljahrsschrift, No. 3, 1838. Finally in the larger joint-stock enterprises which have become so numerous, we see far-reaching combinations of the financial resources of many participants with the scientific and technical knowledge and skills of others to whom the carrying-out of the work is handed over. The capitalists are thereby enabled to apply their savings in more diverse ways and perhaps even to employ them simultaneously in agriculture, industry and commerce; as a consequence their interest becomes more comprehensive, and the contradictions between agricultural, industrial and commercial interests are reduced and disappear. But this increased possibility of applying capital profitably in the most diverse ways cannot but intensify the antagonism between the propertied and the non-propertied classes.” (Schulz, I.c., pp. 40-41.)

The enormous profit which the landlords of houses make out of poverty. House-rent stands in inverse proportion to industrial poverty. [The lower the standard of living, the higher the house-rent.]

So does the interest obtained from the vices of the ruined proletarians. (Prostitution, drunkenness; the pawnbroker.) The accumulation of capitals increases and the competition between them decreases, when capital and landed property are united in the same hand, also when capital is enabled by its size to combine different branches of production.

Indifference towards men. Smith’s twenty lottery-tickets. 37

Say’s net and gross revenue.

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Economic and Philosophical Manuscripts of 1844 Chapter 2 Profit of Capital

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