Value, Price and Profit

Contents

1. Preface 2 min 5

   Edward Aveling introduces the paper, found among Marx’s papers after Engels’s death and edited by Eleanor Marx. He praises its clarity, calls it in part an epitome of the first volume of Capital, recommends it to students alongside Engels’s Socialism and Capital itself, and explains that his own share was reading the manuscript, suggesting English forms, dividing it into chapters and correcting the proofs.

2. Preliminary 1 min 7

   Marx opens his address to the General Council of the International. A wave of strikes on the Continent makes the question of wages urgent, and the Council needs settled views on it. He honours Citizen Weston’s courage in defending unpopular opinions, promises to agree in the end with the just idea behind them, but calls his theses theoretically false and practically dangerous.

3. I Production and Wages 6 min 6

   Weston’s case rests on two premises: that national production is fixed, and that real wages are fixed. Marx answers that production grows with accumulation and productivity; that even a fixed product could be divided differently between wages and profits; and that if wages were really fixed, employers’ wage cuts would be as futile as workers’ demands. The real question is not the capitalist’s will but the limits of his power.

4. II Production, Wages, Profits 22 min 19

   Marx follows a general rise of wages through the economy. Workers spend more on necessaries, whose prices rise for a time, while luxury producers lose; capital shifts between trades until profit rates are equal again, and prices return to their old level. The lasting result is a general fall in the rate of profit, not higher prices. The evidence of 1849–59, the Ten Hours Act, rising farm wages and falling wheat prices, bears this out.

5. III Wages and Currency 11 min 6

   Weston’s second argument is that a fixed currency cannot pay higher wages. Marx shows that the amount of money needed depends on how fast it circulates and on the whole banking mechanism, which adapts to circumstances: smaller notes, bills or bullion reserves could easily meet a rise of wages. The collapse of cotton wages in the American crisis and the currency figures of 1860–62 refute the idea of a fixed currency.

6. IV Supply and Demand 5 min 4

   Weston never says what makes wages high or low. If he answers “supply and demand”, then periodic rises of wages, and strikes to test the market, are as legitimate as falls. But supply and demand explain only the swings of market prices around a value; when they balance, they cease to act, so the value itself must be explained in some other way.

7. V Wages and Prices 7 min 6

   Weston’s arguments come down to the dogma that wages determine prices. Experience contradicts it, since high-paid labour often makes cheap goods, and treating profit and rent as percentages added to wages explains nothing. Saying that the value of labour determines the value of commodities only determines value by value. Ricardo’s great merit was to destroy this fallacy.

8. VI Value and Labour 21 min 23

   Marx turns from refuting Weston to his own theory. The exchange value of commodities must express some common social substance, and that substance is social labour: commodities are values as crystallized labour, measured by the time socially necessary to produce them under average conditions. Values fall as the productive powers of labour rise. Price is the monetary expression of value; market prices oscillate around values with supply and demand but on average coincide with them. So profit must be explained on the supposition that commodities sell at their values, however paradoxical that seems.

9. VII Labouring Power 7 min 13

   There is no “value of labour”: what the worker sells is labouring power, the temporary use of his capacity to work, as Hobbes had glimpsed. A class with nothing else to sell exists only because of an original expropriation that separated labourers from their means of labour. Like any commodity, labouring power is worth the labour needed to produce it, that is, the value of the necessaries that maintain, train and replace the worker. Different kinds therefore fetch different prices, and calls for equal wages within the wages system are a mistake.

10. VIII Production of Surplus Value 6 min 9

    If a day’s necessaries cost six hours of labour, or 3s., the capitalist who pays 3s. pays the full value of labouring power. But having bought it he can use it for twelve hours, and the use of labouring power is limited only by the worker’s strength, not by its value. The six extra hours are surplus labour, realized in a surplus value the capitalist gets for nothing; this exchange is the basis of the wages system and constantly reproduces worker and capitalist. The rate of surplus value is the ratio of surplus to necessary labour.

11. IX Value of Labour 4 min 8

    Because wages are paid after the work is done, the value of labouring power appears as the value or price of labour, and all labour appears to be paid, though part of it is unpaid and forms surplus value. The slave’s paid labour looks unpaid; the serf’s unpaid days for his lord are visibly separate from his own; the wage contract mixes paid and unpaid labour and masks the whole transaction. Marx will henceforth use “value of labour” only as popular shorthand for the value of labouring power.

12. X Profit Is Made by Selling a Commodity at Its Value 3 min 4

    Marx resolves the paradox he posed earlier: profit does not come from selling commodities above their value. With a worked example in shillings he shows that the worker adds twelve hours of value but is paid the value of six; selling the product at its full value therefore yields a profit for which the capitalist paid nothing. The cost of a commodity to the capitalist and its real cost in labour are different things.

13. XI The Different Parts into Which Surplus Value Is Decomposed 8 min 11

    The surplus value, which Marx here calls profit, is shared out as rent to the landlord, interest to the money-lender and industrial profit to the employer, but it is extracted in one place, the relation between employer and wage-worker. Rent, interest and profit divide a given value; they do not add up to form it, as the popular notion holds. The rate of profit can be measured against wages (the real degree of exploitation) or against total capital (the usual, concealing measure); Marx will use the first.

14. XII General Relation of Profits, Wages and Prices 5 min 5

    The new value a worker creates is a fixed fund divided between wages and profits, so one can rise only as the other falls: a general rise of wages lowers the rate of profit but leaves values unchanged. Prices of individual goods depend instead on the productivity of labour, which is why well-paid labour can produce cheap goods and badly paid labour dear ones.

15. XIII Main Cases of Attempts at Raising Wages or Resisting Their Fall 16 min 17

    Marx surveys the main occasions of wage struggles: a rise in the value of necessaries; productivity gains that lower relative wages (the ten per cent cut after Corn Law repeal); a fall in the value of money after the gold discoveries; the lengthening and intensifying of the working day, from the anti-Jacobin war to the Factory Acts (“Time is the room of human development”); and the industrial cycle. In nearly every case the workers’ demand is a reaction to a previous action of capital.

16. XIV The Struggle between Capital and Labour and Its Results 15 min 21

    The value of labour has a physical floor and a historical, social element that struggle can expand or shrink; profit has no fixed minimum, and its rate is settled by the respective powers of the combatants. Legal limits on the working day show that labour needs political action; colonial land raises wages, while machinery and the changing composition of capital tend to depress them. Unions must keep fighting, but against effects, not causes: they should replace “A fair day’s wages for a fair day’s work!” with “Abolition of the wages system!” Three resolutions conclude.