IV (1)

Karl Marx' fallacies rest upon this proposition that that which is greater than a particular magnitude cannot constitute a portion of such magnitude. Profit cannot therefore form a fraction of the capitalist's outlay. From this he draws the conclusion that profit is merely the result of unpaid human labour, and in fact falls into the old error of all protectionists, he has eyes only for production. Now production is valueless without consumption. The profit of a business is derived from its customers. The demand for a commodity or for services, the net cost at which a commodity is produced, the ease with which it is placed at the service of a purchaser, such are the constituent elements of profit. Capital is one of the coefficients of net cost. Karl Marx asserts that in the eyes of the capitalist the price of the commodity is exclusively deter mined by the labour for which he pays. The capitalist knows perfectly well that return on capital is one of the elements in the net cost of a commodity and in the example cited by him this return is an item which he takes into consideration. He waxes indignant because the owner of the capital obtains some return on it, but if the capitalist derived no profit from its employment, he would refrain from employing it. But, says Karl Marx, profit cannot form a fraction of the capitalist's. If he had taken the trouble to observe actual facts, he would have arrived at the following conclusions.

A manufacturer purchases a spinning mill, worth a particular sum of money. It is obvious that, if he were to empty it of its contents or to leave it standing idle, he would reap no profit from it. Of course, standing by itself this mill would confirm the truism that “that which is greater than a particular magnitude cannot constitute a portion of such magnitude.” But the manufacturer supplies this mill with cotton of which a quantity is spun, representing a particular sum of money, and it is for the facilities which he affords for converting raw cotton into thread that the capitalist is able to obtain a sum sufficient to pay off the cost of the mill; when this cost has been paid, the profit obtained by the manufacturer out of the work produced by this mill is increased by the paying off and recovery of the purchase price. Here we have an element of profit. As between two undertakings, the one which succeeds the more rapidly in paying off the purchase price of its mills will obtain the greater profit, and its profit will be greater during the time subsequent to the paying off than it was during the time which preceded it. Fixed capital has drawn no profit from itself. A mill does not produce a mill and a quarter or a mill and a half. But the use of the mill produces utility, and utility produced in the shape of the manufactured product enables the manufacturer to pay off its prime cost and to renew his plant. To say that the mill does not contribute to the profit is equivalent to saying that it does not contribute to production.