II (7)

Karl Marx places capital employed in production in three categories. Fixed capital, representing establishment or plant; constant capital, representing rent, raw material, heating and lighting; and variable capital, representing wages.

The variable capital of a capitalist is the expression in money of the total value of all the labour-powers that he employs simultaneously. Its value is, therefore, equal to the average value of one labour-power, multiplied by the number of labour - powers employed.

Why should capital be constant when it is a question of raw material and variable when it is one of wages? The price of the former is subject to more rapid and more frequent fluctuations than that of the latter. Karl Marx recognises that the price of cotton may rise in the market from sixpence at the time when it enters a factory to a shilling during the process of manufacture, and that this rise in price may become incorporated in the product, but “this charge is independent of the increment or surplus value added to the value of the cotton by the spinning itself.”

That part of capital which is represented by the means of production, by the raw material, auxiliary material, and the instruments of labour, does not, in the process of production, undergo any quantitative alteration of value. I therefore call it the constant part of capital, or, more shortly, constant capital.

On the other hand, that part of capital, represented by labour-power, does, in the process of production, undergo an alteration of value. It both reproduces the equivalent of its own value, and also produces an excess, a surplus-value, which may itself vary, may be more or less according to circumstances. This part of capital is constantly being transformed from a constant into a variable magnitude. I therefore call it the variable part of capital, or, shortly, variable capital.

Profit is derived from the fact that the capitalist is able to sell a thing for which he has not paid, namely surplus labour. Consequently a ratio can be established between variable capital representing labour and the excess of that value obtained by the finished goods.

Let us examine the consequence of these notions in the light of an example given by Marx. He takes the case of a spinning mill containing 10,000 mule spindles for a week in April, 1871, and applies this to a year's working, without regard to any question of credit.

Proportion per cent:

Calculating these elements upon the total circulating capital of £2,500, we have £2,182 constant capital and £318 variable capital. The total amount expended annually in wages is 52 × £52 = £2,704, so that the variable capital of £318 has turned itself over almost exactly 8½ times in the year. The profit for the whole year is 80 × 52 = £4,160, which, in relation to the total capital of £12,500, yields 33.28 per cent. This is the rate of profit. Profit is arrived at by comparing the surplus-value of labour or of variable capital with the total capital, but this is not the profit which is apparent. The surplus-value of the variable capital is only to be compared with the variable capital, that is with the amounts paid to the workmen. We now have £80 of surplus-value, divided by £52 = 153 11\13 per cent. But inasmuch as the variable capital (£318) is turned over 8½ times in the year we have:—

This figure of surplus-value is the figure of surplus-labour, the rate of remuneration of this vampire, capital. When the employer pays £100 in wages, he makes a profit of £1,307, when he pays £1, his profit is £13.

Karl Marx and his followers have every advantage in denouncing such an exploitation of labour by capital; a declamatory socialist does not analyse the method by which this proportion was arrived at. He challenges mathematicians to demonstrate that Marx's authentic calculations are incorrect, and because no one takes up the challenge, he concludes from their silence, that Marx has proved, not in accordance with an hypothesis in the air, but by the example of an English spinning mill, that an employer made a profit of more than £13 for each pound spent in wages, during a week in 1871; that those £13 are derived from the £1 spent on labour; that they represent the surplus-value of human labour which is absorbed by capital, and that they stand for labour which has not been remunerated. Marx continues:—

The total capital is divided into £12,182 of constant and £318 of variable capital, a total of £12,500, or 97½ per cent. of constant and 2½ per cent. of variable capital. Only a fortieth part of the total capital is employed in paying wages, but it serves this purpose more than eight times a year.

The whole surplus-value, therefore, according to Marx's theory, is derived from these 2½ per cent. And he concludes by saying that:—

Capital is dead labour, that, vampire-like, only lives by sucking living labour, and lives the more the more labour it sucks.