It is true that Marx had drawn attention to the contradiction in the first volume, but no explanation was forthcoming until the later volumes appeared. Having stated that the greater quantity of surplus value is the direct result of the greater proportion of circulating capital employed, he proceeds: “This law clearly contradicts all experience based on appearance. Everyone knows that a cotton-spinner who, reckoning the percentage on the whole of his applied capital, employs much constant and little variable capital, does not, on account of this, pocket less profit or surplus value than a baker who relatively sets in motion much variable and little constant capital. For the solution of this apparent contradiction many intermediate terms are as yet wanted, as from the standpoint of elementary algebra many intermediate terms are wanted to demonstrate that 0/0 may represent an actual magnitude.… Vulgar economy, which, indeed, has really learnt nothing, here, as everywhere, sticks to appearance in opposition to the law which regulates and explains them.” (Kapital, p. 274.)
It is probable that Marx was not very well satisfied with his explanation, which may account for his reluctance to publish it during his lifetime.
[977] In the example just given suppose A and B represent the total industry of the country: the whole national industry will be made up of £900 + £100 circulating capital and £100 + £900 fixed—£2000 altogether. If the surplus value be at the rate of 100 per cent. of the circulating capital, the total capital value will be £900 + £100 = £1000 on a capital of £2000, or a percentage of 50.
[978] Taking the example given on p. 427, the mean of £900 + £100 = £500, and industry A, instead of 90 per cent., will draw only 50 per cent. profit, while industry B, instead of drawing only 10 per cent., will draw 50 per cent.
[979] We have indifferently employed the terms “profit” and “surplus value” simply because the former is a much more familiar word. But we must warn the reader against thinking that the two terms are synonymous. The surplus value is all that part of the value of the produce which is over and above the expenses of labour involved in its production—that enormous slice which becomes the property of every class in society except the workers, not merely the employers, but merchants, landlords, etc.; while profit is that part of the surplus value which the employers of labour keep for their own use. The rate of profit also is something quite different from the percentage of surplus value, as we shall see later.
We must call attention once more to the different interpretations which have been given of the term “profit.” Marx and the English economists take the word to comprise the whole revenue of capital under a régime of free competition, no distinction being drawn between profit properly so called and interest. To-day we understand by profit the income drawn by the entrepreneur—as distinct from the capitalist—as the result of certain favourable circumstances, notably imperfect competition.
It would be absurd to speak of a law of equality of profit, seeing that profit, as we have defined it, is, like rent, a differential revenue.
[980] We are fully aware of the fact that our method of approach must appear absurd from the Marxian standpoint, because it lays Marx open to the charge of starting with a preconceived idea, much after the style of economists like Bastiat, for example. Such a method, it is contended, is utterly unscientific and unworthy of a great mind like Marx’s.
However great he may have been, we cannot help thinking that, in common with most scientists, he discovered just what he was looking for, and it would be difficult to prove that Marx was not a socialist long before he began the writing of Kapital, even long before he had constructed a system at all.
Our object in stating the conclusion first of all is to help the reader to an understanding of the argument, but it is quite open to anyone who thinks differently to say that Marx had not the least idea where the analysis would lead him.