Chapter 13 The System of Industrial Capital

In: The Spectre of Capital: Idea and Reality
Christopher J. Arthur
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§8 The System of Industrial Capital in Its Double Determination

I begin with an overview of the way the system of industrial capital is explored in the following presentation. The Table on The System of Industrial Capital below is key to their articulation. It shows how categories treated formally in the previous chapter are embodied in material differences, beginning with the fundamental relation of capital and labour. The categories of industrial capital arise from the double determination of ‘particularity’, both in logical form, and in the finite specificity of investment in definite lines of production.

The System of Industrial Capital (The Box numbers give the order of exposition of paras in the text)

Reflection into self




Reflection into other


(difference ‘within’ capital)


Universality (§ 81 capital as such reflected into itself) Row 1

Box 1. (§81.1) The Rate of Surplus Value

Box 2. (§81.2) The metamorphoses of capital

Box 3. (§81.3) Simple price =

Cost price plus profit.

Rate of profit

Particularity (§ 82 difference between capitals) Row 2

Box 4. (§82.1) Many capitals in competition

absolute & relative surplus value

Box 5. (§82.2) Organic composition of capital

Box 6. (§82.3) Production price =

Cost price plus uniform rate of profit

Singularity (§ 83 systemic unity of social capital) Row 3

Box 7. (§83.1) General law of capital accumulation

Box 8. (§83.2) Reproduction of total social capital via Departments of Reproduction

Box 9. (§83.3) Reproduction price

General Rate of Profit

Col. 1

Col. 2

Col. 3

Here capital is objectively articulated in two essential determinations, those forms that pertain to capital reflected into itself, and those forms that reflect capitals into one another. While the structure here is demarcated logically, the categories concerned are ‘mixed categories’ because the logical forms are here borne by material relations that have their own economic effectivity. While formal determination is at work, there is at every point the interpenetration of logical form with material shapes having a material nature. Thus the system is determined both by the ideal and the material. Capital in its notion unfolds itself into a world of finitude, in which objective relations are established between capitals, and between them and the whole system of total social capital.

In the Table the three rows and three columns show this concept of capital distributed on two axes, capital’s reflection into itself to articulate its interior moments, and capital’s reflection against itself generating difference between capitals. The significant conceptual arrangement is characterised by the moments of the concept, namely Universality, Particularity and Singularity, as differently specified thus in the glosses attached to them in the Table.

The intersection of the rows and columns generates nine ‘boxes’ subject to determination along rows and down columns. The point of this nine-box table is not merely to display the logical relations in which these moments of capital stand to each other, but to assert that the logic determines on this basis their mutual interactions. (The box numbers in the Table are there simply to show the order in which the categories are discussed here.)

It follows from the way it is organised that each box presupposes what is to the left of it and what is above it. This is because the order of determination is from Universality to Singularity in both rows and columns. The top-left box (presupposing what has already been achieved here) is the core idea of capital, as self-valorising, which then unfolds itself, finally to arrive at the concrete complex shown in the bottom-right box. The sections below (§81, §82, §83) follow the categories of this Table by going row by row. This sequence traces the inter-action of capitals reflected against one another, finally treating the laws of the whole. By contrast, the movement along columns, subsumed in the larger movement, traces the inner-action of capital reflected into itself to achieve its self-relation in its rate of profit. Both culminate systemically in the determination of the general rate of profit.

The rows are ordered by conceptual level; these go from the most abstract shape of the Idea, with relatively few determinations, to the most concrete, exhibiting systemic determinations.

The first row goes through what capital is in its notion, the forms that make it what it is. Notice that this has itself three subdivisions according to a dialectic of reflection-into-self, exhibited in the Boxes numbered 1 to 3. To begin with there is the simple self-identity of capital as productive of surplus value, which then is determined within itself in its metamorphoses, and finally capital measures itself against itself in the form of the rate of profit.

The second row treats the reflection of capital against its others as these many differ relevantly; here are marked, in Boxes 4 to 6, the forms that shape differences between capitals, as they immediately pertain to surplus value and profit. Thus, the identity of capital is realised in its determinacy only as it is determined ‘for another’, that is, in competition to maximise the rate of surplus value. This is achieved in two ways, the generation of absolute surplus value and relative surplus value.

When the terms v and c were introduced earlier they were the cost associated with the purchase of labour power and means of production. Now they are to be considered as variable capital and constant capital. This inner difference in the composition of capital is also the source of important differences between capitals. Moreover, not only may capitals differ in their organic composition, but such a difference between them has significant consequences when the many capitals relate to each other.

The final box of this row asserts the requirement that capitals ideally share a uniform rate of profit. Thus the ‘simple price’ of the previous row is replaced by a system of production prices.

The third row treats the systemic unity of total social capital, through Boxes 7 to 9, and especially the way the capital relation leads us to group these material determinations at a ‘macro’ level in the distinction between wage goods and capital goods. Finally we elaborate the forms of the ‘general rate of profit’ and of ‘reproduction price’.

Price and profit issues are ordered in the right-hand column, namely capital in its conceptual development as self-related, through the phases in which it measures itself against itself in its rate of profit. In §81 capital as such is treated, and in §81.3 we define formally the rate of profit; but in §82 the competition between the many capital is introduced, and especially the fact that these different capitals have different organic compositions, so in §82.3 their unity is concretised in ‘production price’ on the rule that a uniform rate of profit is imposed; then, finally, in §83, total social capital as the interweaving of complementary circuits is introduced, and I take up especially Marx’s genial suggestion that the whole is best disaggregated in ‘Departments’ of industry, and in §83.3 is treated total social capital in its existence as the unity of its interior determinations, yielding reproduction price and the general rate of profit. These are three levels of form-determination of price and profit, each having a specific effectivity, carried forward in the whole development.

It is important to the presentation that the movement from ‘simple price’, to ‘production price’, to ‘reproduction price’, is not temporal but conceptual. So at every level at which price and profit are addressed certain physical givens are taken as constant, notably the real wage, but also the mix of means of production and labours. The question is: how and where are prices to be determined?

It is a feature of my presentation of the Idea of capital that the movement of thought from abstract to concrete does not register merely an initial deficiency in our knowledge of the system; the deficiency is ‘out there’; it is an ontological one in that the more abstract level fails to achieve actuality even as a model. Certainly, initially the magnitudes of c and v are to be taken merely as ‘given’, because the relevant variables are not yet conceptually determinate in the presentation; so how their magnitudes are determined is unknown here.

I shall present the system row by row; but within each row the columnar determinations have their effect. Thus we move from the elementary identification of the meaning of the row through inner difference to the way in which the form concerned relates to itself in and through the movement across it. In the first row, the surplus aimed at by capital is secured through the reiteration of the circuit that recreates every moment of valorisation through their mutual mediation, finally to measure itself as the relation of a monetary increment to the original investment in a rate of profit. In this the entire capital, (c + v), is considered as what is reproduced and accumulated, not just its fructiferous part. This is not merely how capital registers the surplus it generates in its books, it is actually effective in the drive for accumulation (note the importance in this respect of reducing the cost ‘c’). Again, in the second row, the elementary dialectic of competition, outlined in Box 4, moves through relevant differences in the composition of the capitals concerned to the resultant prices of production predicated on a uniform rate of profit. This is how the system of capital imposes itself on commodities, the notional simple prices are now seen as unactual, when systemic determination is considered. Finally, in the third row, the reproduction of the capital relation, at the level of the system as a whole, mediated through exchanges between departments of reproduction, allows the actuality of systemic reproduction as it is registered in reproduction prices of c and v. So the third row is the unfolding of the systemic unity of capital, while the third column yields the final registration of the relation to itself of capital. Both culminate in the general rate of profit.

All the above determinations are required before it is meaningful to speak of capital as self-grounded. For only the whole is actual because that is where there is a structure of capital capable of sustaining itself. The importance of distinguishing levels of abstraction in the presentation is pertinent to this. If we consider an exposition moving down the rows this is a process of concretisation in that row one abstracts from row two, and row two from row three. Thus the Row 1 is formal in its elucidation of capital as such; thence I move to the specific differences between capitals (Row 2) and finally I take them in the unity of the social whole, the most concrete level of the system (Row 3). If the third column only is considered in this context then we see it outlines how capital takes the measure of its output, first in general (simple price), then as many capitals in competition (production price), finally as a single system (reproduction price).

In this chapter I treat the dialectical development of form, from elementary and abstract to complex and concrete. It follows that it is not possible to show, even abstractly, how the magnitudes of price and profit are determined until the very end (§83.3). Earlier forms are too partial to provide any such determination. The system becomes determinate in this sense only with the forms of ‘reproduction price’ and ‘general rate of profit’. In accordance with this systematic arrangement, there follow these sections:

§81 Capital as such Reflected into Itself (as shown in Row 1);

§82 The Difference of Capitals (as shown in Row 2);

§83 Systemic Unity of Total Social Capital (as shown in Row 3).

Remark There is a difference between this exposition and Marx’s; for I treat the material in a very different order from that of Capital. While my columns roughly correspond to Marx’s volumes, my presentation is orthogonal to his, such that, instead of following the columns as he does, it follows the rows. I believe my order is superior to his because it first exhibits capital in its notion in which its reflection into itself, achieved in its rate of profit, is its own measure of itself. The rate of profit completes, as much as it disguises, the concept of capital accumulation. Moreover, Marx’s order is more complicated than mine, for mine conforms better to the principle of moving from the abstract to the concrete, from the mere notion of capital to its system wide concreteness. Marx continually moves, volume by volume, to the concrete whole and back again to another elementary form. I think my expositional order is especially perspicuous in that I exhibit the transformation procedure, as it copes with the inadequacy of simple price and profit, before the more concrete level of reproduction, as the outcome of the interplay of its departments. Because he treats production prices later than departments of production, Marx is forced to abstract violently from organic composition when showing, in his Volume Two, how departments reproduce; this comes at the cost of arbitrarily setting the compositions as equal in his arithmetical examples. The fact of multiple compositions has no effect on the transformation procedure we shall see, but it is crucial to the principle of equating input/output prices of departments.

§81 Capital as such Reflected into Itself

The presentation of the system of industrial capital begins with the core notion of capital as such, identical to itself. This core notion resumes the upshot of my earlier investigations, especially that of the genesis of surplus value (§81.1). This is accomplished in reality within the circuit of capital, wherein the metamorphoses of capital expand the simple self-identity of capital to its process of production of itself through particular phases, as it achieves valorisation (§81.2). From this results the rate of profit, in which a capital measures itself against itself, and it registers its success in its own rate of profit (§81.3). These elementary forms are presented in the following sections: §81.1 Rate of Surplus Value; §81.2 Metamorphoses of Capital; §81.3 Simple Price and the Rate of Profit.

§81.1 The Rate of Surplus Value

As showed earlier, capital is self-valorising value, but it depends upon the exploitation of living labour that new value arises; this is divided, and distributed, to the worker in the form of a wage and to capital in the form of surplus value. Thus, in order to illuminate how capital is constituted, I emphasise its dependence on labour. Right at the start, I say the value of a commodity is ‘c + new value’, and this expands to ‘c + (v + s)’, where ‘c’ is the value of the means of production used up plus that of the raw material used up, and the added value is ‘(v + s)’, where ‘v’ is given as a revenue for labour, which covers the cost of the commodity component of the existing real wage, and ‘s’ is the surplus value arisen. This takes its proper measure in the rate of surplus-value: s/v. (This may be expressed in percentage terms, for example as 80 %.)

Now this is also a measure of the rate of exploitation of labour. Thus, the working day, albeit it seems homogenous, may be divided into the time of necessary labour and the time of surplus labour. ‘Necessary labour’ is defined here as the labour time yielded in return for the wage with which to purchase so-called ‘subsistence goods’, however priced. (It is very important to notice that this time has no necessary relation to the time required to produce the said goods: I return to this issue later.) There remains the surplus labour time appropriated by capital in the form of surplus value.

If the composition of commodity value is ‘c + v + s’, how is this to be properly conceptualised? Is it to be resolved into ‘c + (v + s)’, or into ‘(c + v) + s’? In the first case ‘v’ is conceived as arising with ‘s’, both being divisions within new value-added. In the second case ‘v’ is conceived as an input to commodity value along with ‘c’.

I distinguish between the constitution of capital, to which the first formula applies, and the movement of constituted capital, within which the second composition interests the capitalist. Since the organic composition of capital (c/v) is not explained until the next section, on difference, and yet the symbols ‘c’ and ‘v’ are used now, these cannot stand for ‘constant’ and ‘variable capital’ initially. But this is all to the good because I do not accept that the term ‘variable capital’ makes sense when discussing the original constitution of capital as yielding a ‘value added’. Once that is understood, then we may give it a different meaning later when we deal with already constituted capital. Then, taking it as a part of ‘cost price’, for simplicity I shall treat both c and v as capital advanced, when I take capital as already constituted valorised-value in the process of its circuit.

I shall follow, then, Marx’s rather clumsy terminology in speaking of ‘constant and variable capital’. What is important is that new value is traced to the exploitation of labour; it is really a residual once c is deducted from the returns gained from the sale of commodities. For c is not really a value ‘carried forward’, as it is said, because it disappears with the consumption of its material bearer. (Below we say more on the importance of this point: see §82.3.)

What is wrong with ‘(c + v) + s’? This formulation obscures the origin of new value in living labour; it makes it seem as if s arises from capital, since capital paid for both c and v, and this investment is surely the source of it. But the other formula, ‘c + (v + s)’, makes explicit that labour produces its own wages as well as profit. So, at this level of analysis, there is no question of assembling from somewhere a ‘wage fund’. (The figure of the circuit, below, will show funds for both c and v arise from previously valorised value in principle.)

However, both resolutions of commodity value have their place. For capital, working with already constituted capital, both c and v count as costs whenever they are paid for, and wherever the funds come from. Yet it is fundamental to our theory of capital constitution that workers produce their own wages (the political relevance of this is obvious), as well as capital’s profit. (In fact, the workers give the capitalists credit, insofar as they are paid after, not before, contributing their labour.) The capitalists are under the illusion that they provide wages out of their capital, whereas it is a conceptual truth that they disburse it from new value added, regardless of the relative length of the production period and the wage period.

Although ‘v’ may be taken as determined by the so-called ‘value of labour power’, that last expression itself makes no sense since labour power is not a capitalistically produced commodity to be productively consumed. Labour has a price but no value.

I use the letters ‘v’ and ‘c’ in the presentation simply to stay in line with Marx’s familiar notation, in which ‘v’ stands for so-called ‘variable capital’, contrasted with so-called constant capital, ‘c’. In truth ‘v’ is simply a revenue derived from added value; it is not merely equal to wages, it is here identical. Moreover ‘variable capital’ is a bogus notion. The category makes no sense because there is nothing that varies. Even if v were to be advanced before production begins, it does not swell; rather when labour power is employed, the new value it yields has no necessary relation to its cost. (That depends, for example, on the length of the working day beyond the necessary part, while new value arises in proportion to the length of that day.) At all events, although I use ‘v’ in my notation, here it means a revenue distributed by capital to workers from the new value arising.

Thus a simple price is the sum of c and new value. This new value is then distributed to the workers (equal to ‘v’) and capital (equal to ‘s’).

The elements of constant capital must be in place materially before production begins, and its material consumption notionally results in the ‘transfer’ of this cost to the value of the product. The difference between constant capital and the wages of labour is that constant capital is a product of capital to be paid for and then consumed by capital; yet labour power, while its consumption is necessary to generate new value, is not produced by capital, but comes from the domestic sphere, as wages are spent on ‘subsistence goods’. Thus constant capital is internal to exchanges within capital as a whole but capital faces labour power as something other than itself. It is not part of capital to be reproduced as a commodity in a similar way to means of production.

In sum the unexplained m treated in Division I is combined with the secret of valorisation shown in Division II. This is presented in the circuit of capital.

§81.2 The Metamorphoses of Capital

I consider next differences within capital as it moves in its circuit. What is dealt with in the following discussion is no longer simple commodity circulation, but the circulation process of capital. This is because I now have to deal with the circulation, not of commodities as uncomprehended givens, but of products of capital, and therefore shapes of capital’s own life cycle, necessarily appearing as its results as well as its premises, hence as essentially reproduced within the self-determining capitalist totality. Now I do not treat capital in the process of becoming, but begin with capital which has become. There follow three sections: §81.21 Fluidity and Fixity of Capital; §81.22 The Three Circuits of Capital; §81.23 The Circuit in Its Conceptual Unity.

§81.21 Fluidity and Fixity of Capital

The basic principle of capital’s circulation process is that all those presuppositions which originally appear as prerequisites of its becoming – and therefore could not arise from its action as capital – now appear as results of its presence. Capital, setting out from itself, creates the presuppositions for its maintenance and growth, it maintains itself through maintaining them.

In the metamorphoses of capital and its circuits I consider the particularity of capital as it concerns specific shapes the same capital takes on as it is reflected into itself. (I do not yet consider the difference arising between capitals, which is reached in Row 2.) Even with capital in its self-relation (§81.1), there are found many inner differences, e.g. the division of the working day and the division within value added. However, these are not particular forms of capital. Such forms emerge when we show that valorisation is a process in which the same capital changes in shape, from money capital, to capital in the production process, to valorised value in the output, a process of metamorphosis. These different functional forms of industrial capital are money capital, productive capital and commodity capital. Moreover capital functions as capital only insofar as it remains qualitatively identical with itself in the different phases of its circuit, which occur in succession. These three functional forms are particularisation of capital. Industrial capital is present only in the unity of its particular moments, its functional forms, as well as determining itself to them. These forms are held together only by their connection in the movement aimed at accumulation. It is repeated to make a circuit proper.

As a result of this totalisation, in the circuit the separate existence of circulation in the narrow sense, and of production, are sublated. Money capital, productive capital, and commodity capital, do not denote independent varieties of capital, whose functions constitute the content of branches of business that are independent and separate from one another. They are simply particular forms of industrial capital, which takes on all three shapes in turn. However, a delicate dialectic is played out here, for in the circuit the guarantee of valorisation depends on capital assuming a certain fixity in appropriate forms, namely money, means of production, product, and so forth. Thus capital as circulating capital, requires the transition from one phase to another. But it is, in each phase, also posited in a specific determination, which negates it as the subject of the movement as a whole. Capital is the negative unity of these its negations.

In the dialectic of fluidity and fixity, capital maintains its identity with itself through its flow; we are not faced with a Heraclitean flux, nor a set of things disconnected from each other, but a truly dialectical concept: identity and difference unified in motion. It its process of determination capital is fixed in a certain substance, for however long it takes to gather itself for the next transition. But all fixity is relativised in the fluidity of circulation as a total process.

§81.22 The Three Circuits of Capital

When discussing the generation of a monetary increment I showed this in the context of the circuit of money capital, in which an initial ‘M’ expands to ‘M + m’. However, it is not only important that money returns to itself in its circuit but that every moment of the circuit reproduces itself through the mediation of the others. Because the system of determination takes the form of a circuit, the point of departure is posited as the point of return and the point of return as the point of departure. However, as a circuit, any point may be taken as such a departure and return. Thus I distinguish three such views of the circuit of capital in its metamorphoses.

These are: the circuit of money capital; the circuit of productive capital; and the circuit of commodity capital.

§81.22/1 The Circuit of Money Capital

The general formula for capital, which I treated earlier, was M–C–M′. If I now concretise this by including the process of production, we have a circuit we shall explore below: M–C (mp & lp) … P … C′–M′. Superficially this seems to show that capital makes money advances in order to purchase means of production (mp) and labour power (lp). (‘P’ refers to capital in the phase of the production process.) However, it is essential to this formula that it is circular; the ‘M’ at the start is nothing but that coming out of the previous circuit. (I abstract, at this elementary level, from any bank loans taken out to accelerate the accumulation process.) Moreover, in real life, wages, and other costs, may be paid out at any time during a period of production. Nonetheless the notion of ‘cost price’, which merges very different things, has to be accepted as we follow capital’s form of appearance. (See its importance for profit below: §81.3.)

It is merely for expositional clarity that the formula begins with the phase of purchases and ends with that of sales. Thus, with respect to the purchase of the elements of production and of labour power, these purchases are placed in our formula at the start of the monetary circuit regardless of when, during a period of production, a capital in practice expends the relevant funds. (We stick with this even if some capitals pay no wages until funds are made available from sales.)

As I have said, ‘in its concept’ so-called variable capital is not capital at all but a revenue distributed to the workers who ‘created’ it. Nevertheless as a necessary disbursement, it is counted by capital as a cost. Insofar as I have moved from discussing the constitution of capital to the movement on its own basis of already constituted capital, the exposition of the metamorphoses of capital treats so called variable capital along with constant capital as an expenditure required to ensure production is maintained. Although wages are always paid ex post, the labour contract is ex ante, so capital generally knows what will have to be ‘advanced’ for wages at some point, so for simplicity we consider this disbursement at the opening of the monetary circuit alongside the cost of means of production.

Here I therefore start from the already constituted concept of a capital, and I treat wages as a virtual ‘input’ along with the constant capital. So the money capital circuit begins with money depicted as expended on both ‘c’ and ‘v’ in order that capital may be valorised in production. Only now is there a certain sense in which we can speak of ‘variable capital’ (and thus later of the ‘composition of capital’). Nonetheless, despite my doubts about the term, I shall use it henceforth.

The conceptual character of capital is such that it cannot be immediately identified with any of the forms M, P, C. It is rather their unity, a process going on through their connection in a circuit of transformation of capital. Money, for example, is not in itself capital; it is so only in relation to the other elements of the circuit, a whole within which the moments are internally related. However, it is equally important that capital assumes the money form, because money is required to pay for labour power and means of production. Yet capital value in its monetary shape can perform only monetary functions, and no others. What makes these into functions of capital is their specific role in the movement of capital, hence also the relationship between the stage in which they appear and the other stages of the capital circuit. Isolated from this determination ‘M–C’ would be expenditure of a revenue whose object would be consumption of diverse use-values, including services.

I am dealing here with the money circuit of capital, which has expositional priority over the other circuits, because only in the shape of money does value possess an independent form by means of which its identity with itself may be asserted. Only here do both start and finish of the circuit come to capital as a homogeneous entity; it measures itself against itself as pure quantity and hence determines whether or not its current employment generates acceptable ‘wealth’ (given this social form of measure of wealth of course).

Taken in this context, the money pictured as opening the circuit is nothing but that brought forward from from the end of the previous circuit. It is therefore not a simple sum but conceals within it the complex form of valorised value, namely capital in its identity with itself, as money capital, which I symbolise as ‘K’. Therefore the form of the monetary circuit is pictured as follows:

K–C (mp & lp) … P … C′–K′

Having started with money capital, the next stage in its circuit is the transformation of money capital into ‘productive capital’. Money capital functions both to bring together the factors of production, and therewith to form them as the use-value of capital.

Capital as value in motion invests itself, in its phase as productive, in means of production and labour power. This is only possible because capital finds labour power can be constituted as a value form insofar as the wages system is evolved. Capitalist production presupposes the appropriation of all the ‘objective’ and ‘subjective’ preconditions of production in value form and hence their constitution as elements of capital. With regard to those inputs that are not products, some – notably labour power and land – nonetheless are priced. So, again, money payments are required. At the same time it is important to note about this circulation phase that this form of capital is only possible on the basis of a certain social relation whereby labour is excluded from its object. This presupposition is a function of the universality of the capitalist production process. Money can purchase labour power and thus transform itself into productive capital only because of this. Thus the circuit of capital is not possible unless a class of wage labourers exists. This presupposition is reproduced through the system’s own effectivity.

Next I consider the final transformation: that of productive capital into ‘commodity capital’ in the shape of the product. If, at the end of the whole circuit, the value of the output is realised in money form, then the capital value and surplus value exist again in the same form of value as that which was advanced. However, there is an internal relation involved in the merely quantitative measure of this sum, it no longer appears as mere money, but is expressly posited as money capital, expressed as value that has valorised itself. Thus it appears as a sum of values that is conceptually internally differentiated. But this is expressed simply as a result, without the mediation of the process whose result it is. This circuit therefore occludes the importance of the phase of production, in which it may be taken as ‘devalorised’. From its point of view the surplus seems to arise simply from a ‘mark up’ over costs.

Money as the independent existence of value thereby expresses the ‘drive’ of capital for valorisation, within which aim productive activity appears simply as a middle term between sums of money capital. As such an aim, the new money capital must reopen a new circuit.

Given this repetition of the circuit, we can separate off other points with which to start and finish it, namely P … P and C–C′.1 Now I turn to examine the circuit again from these angles.

§82.22/2 The Circuit of Productive Capital P … C′–K′–C … P

Here circulation narrowly considered appears only as the mediator of production, and hence money only as an evanescent form. As Marx says, this circuit ‘constitutes a critique’ of the first insofar as it demonstrates money has no independence as locus of valorisation. More generally, neither in the form C′ nor in the form M′ is the valorisation that has taken place a function of the money capital or the commodity capital; whereas it is the case with productive capital.

But, conversely, it is a mistake to derive the properties of productive capital from its mode of existence as the means of production etc. At this material level P … P cannot be distinguished from non-capitalist labour processes. Indeed, on this account money may be taken as a mere ‘veil’ of the ‘real’ economy. Once again, it is form that makes a difference, and, once again, the form of the matter is given in the totality of the relations and processes established in and through the circuit of capital.

§81.22/3 The Circuit of Commodity Capital C′–K′–C … P … C′

Turning now to the circuit of commodity capital, this capital is, for example, neither 10,000 lbs of yarn, nor its value of £ 500, if it is to be grasped as capital. It is only an internal relation that makes the yarn into commodity capital, namely the relation comprised in the magnitude of its value compared with the value of the productive capital contained in it before it was transformed into commodities. Insofar as commodity capital is necessarily a result of valorisation (whereas money capital and productive capital could be taken merely in their simplicity as advanced capital), commodity capital has the inner complexity of being valorised value. Even though ‘M … M′’ sets the aim of capital and ‘P … P’ reproduces it, what is reproduced above all through the movement of circulation and production is the material wealth of the social whole.

I differentiate this form from the others on the ground that it starts from already valorised value. Taken in isolation, a bushel of corn in a warehouse is simply a product not a value and, even if considered as having value, any putative surplus value is simply not visible. However, it must be taken within the totality of determinations that constitute it not just as a commodity but as valorised value.

§81.23 The Circuit in Its Conceptual Unity

These circuits are purely internally related figures of a given whole of self-positing capital which unifies its own phases and exists in their unity. In their distinction they are characterised as follows: the circuit of money capital expresses the drive of valorisation in its form; the circuit of productive capital starts with the valorisation process itself; the circuit of commodity capital begins and ends with valorised value. But industrial capital exists in, and reproduces, all phases simultaneously, so the entire circuit is the real unity of its three forms. The forms are therefore fluid forms, and their simultaneity is mediated by their succession. It is necessary to grasp the phases of its motion, as internally related to each other; for in isolation its moments lose this determinate economic meaning, being reduced to determinations characteristic of simple circulation or production in general. Hence capital can be conceived only as motion, not as a thing at rest.

The technical name appropriate for characterising the manner in which capital and its specific functioning emerges in the relationships of the three moments of its circuit all of which have their own functional specificity – all as such less than capital – is ‘sublation’. This is a special case of the phenomenon of ‘emergent properties’ in which the emergent property does not merely passively reflect the epiphenomenal effects of the functioning of the ‘original’ or ‘basic’ elements, but itself has an active principle or law which turns its determinants into determined determinants, and hence it shapes the functioning of the base elements in accordance with the requirements of the emergent function. In this case the emergent function of valorisation dictates the terms on which M–C, C … P … C, and C–M are undertaken, i.e. circulation and production become dominated not by the use-value considerations ‘originally’ to the fore, but valorisation. The original functions become ‘sublated’.

So capital does not appear in its complete determinacy in any of its phases but only in the whole circuit. The shapes can stand alone and operate as money, commodity etc., but not thereby as capital; only in the circuit does this function emerge for them. Thus the three shapes of capital, M, C, P, are not species of a genus but internal self-differentiations of a single whole, and acquire their potency as shapes of capital only within this whole.

Remark The implicit functional differences here become the possibility of a real opposition when these moments are externalised, as finance, commerce, industry. (See Chapter 15.)

Capital itself is an emergent form that cannot be reduced to a particular inner moment or phase of its cycle of activity; but only through these stages is capital constituted as capital, and these forms of its movement are constituted as its forms only by virtue of the real unity of the circuit. If the circuit is analytically broken down into its parts, into disconnected stages, there is no longer any trace of capital; all that is left is simple circulation and the immediate process of production.

Furthermore, it is precisely the circuit of money capital that makes this explicit. The other versions of the circuit yield interesting insights but they are subordinate to M–M′, for P … P, and C–C′, give no clue in their end points that there is a drive to expand and accumulate capital in monetary form. Only M–M′ embodies this drive for m. For example, in isolation P … P may be understood as production for the sake of production, whereas it is for the sake of m, i.e. for valorisation. This is the all-embracing moment of the circuit. But M–M′ must not be taken in isolation, forgetting the moment of valorisation is required through the mediator P.

As earlier noted with respect to the M–M′ circuit, in positing the circuit so, the material process of production – wherein valorisation actually originates – is occluded. In order to focus on that it is necessary to reduce money merely to its function of purchasing under their commodity form those particular factors of production that allow a labour process to be simultaneously a valorisation process. The circuit ‘P … P’ therefore brings this into prominence by positing circulation merely as a means of renewing, and expanding, valorisation, which requires its passage through the universal again.

Yet something special happens in this form; it is the material character of the process that becomes important; for the particular commodities bought are productive capital only because as factors of production they can be consumed in such a manner as to yield their potential for producing specific commodities. The values are consumed for the sake of the use-value of transforming their material properties and functions into a new value. This is especially true of labour power of course; for it is only the fixing of the labour it yields in a particular product that grounds the valorisation process. But these material forms are predicated on the material particularisation of capital (not immediately as particularisation of value) on which they depend for their effectivity. Capital as money capital must transform itself into them when particular productive activities are undertaken and commodities are sold as valorised value so as to realise the profit generated during production. It is precisely this material particularity of productive capital that gives rise to all sorts of technical problems in its movement. Thus, the proportions in which a production process can be expanded are prescribed by technical factors.

The material determinations of productive capital, which in a general way feature in all industry, may come in varying proportions according to how labour intensive (or not) is a particular industry. (This therefore is a potential difference between capitals that is effective in the corresponding form of the value composition when taken down column 2 to Box 5.)

It is a basic fact of the distribution of resources in capitalist society that all commodities are privately owned and thus only available through purchase. Because of the social division of labour, inputs to one industrial capital are generally products of other capitals. We see here then that not only does a single capital have its essential form as a circuit but that this circuit necessarily intertwines with others. The problem of realisation of the output, together with the need to find inputs in the same form, point to the system of wealth, and relates the comodity capital circuit to the revolution of the entire ‘social capital’. It is primarily, therefore, the form in which to consider the confrontation and interchange between individual capitals, and between capital and households, to grasp the overarching individuality of total social capital as a circuit of circuits. Thus it forms a transition from this part to such matters as reproduction schemes.

Capital is essentially motion, albeit its determinateness is secured only in the moments of its circuit. However, for capital there is always the danger of dissolution should it not be able to move freely in its substance; for capital must invest itself in matter, something that may in fact be resistant to it. While everything is inscribed in the value form this matter is always ‘in excess’ of this conceptual determination. So the material basis of the capital circuit introduces an element of contingency.

In virtue of its form, capital aims to appropriate and reproduce all its conditions of existence. Even if this is judged unproblematic in the case of produced means of production, it seems questionable where land and labour are concerned; for land is not produced at all and labour power is reproduced outside the capitalist factory, namely in the ‘domestic’ sphere. However, while materially this is true, socially land and labour are subject to the capitalist system, which reproduces their value form. Labour power requires value inputs for its reproduction, as well as domestic labour, and it can gain these only through marketing itself as a value. The dull compulsion of economic necessity forces the labourers to make themselves available to the capital circuit, and the reproduction of the capital relation perpetuates this necessity. Thus the domestic economy is thoroughly subsumed under capital, albeit it has something of the character of a ‘black box’ in the reproduction of the capitalist social formation insofar as this is conceptualised from capital’s point of view. Ideally all its inputs and outputs are value formed because it is inscribed within the hegemonic commodity capitalist system. (For more on domestic labour see §101.1.) Nonetheless there is no doubt that in depending on land and labour at the material level, capital falls short of the ideality of its concept of self-reproduction.

Conceptually, capital exists as a circuit of successive forms; it is the identity in difference of all its functional forms; each such form is less than capital because it has only the functions appropriate to it as a differentiated form, while at the same time, as integrated in the total form, these very same functions acquire the significance of stages in the process of valorisation; hence each form of capital is determined in its ideal significance by its relations to the others and to the whole; for all premises of the process appear as its results.

§81.3 Simple Price, Profit, and the Rate of Profit

In order to set up the category of ‘profit’ I must transform the definition of commodity value as ‘c + (v + s)’ to ‘(c + v) + s’ (in money magnitudes), in which ‘(c + v)’ is termed the cost price. This cost price, whatever its money magnitude, is compared with the surplus value, whatever its money magnitude, to give the rate of profit. So the ‘s’ when now compared with the cost price is transformed into ‘profit’, and instead of the rate of surplus value ‘s/v’, we now consider the rate of profit: ‘s/(c + v)’.

Here, wages, treated as deductions from value-added in §81.1, appear as a ‘virtual cost’, such that they count as part of the cost price, ‘c + v’. (Note that other revenues industrial capital is forced to disburse, such as rent and interest, need not be treated here as virtual costs, because only the wage bill is the ‘cost’ that absolutely must be paid, because capital needs to exploit labour if surplus value is to arise.)

The concept of valorisation involves the comparison of successive quantities. Indeed, it is only this that establishes the category of value with any substantial content. Time is a feature of all economies, but of capital above all. For the whole idea of valorisation rests conceptually on just such a comparison of capital value across time. It is between these times that capital accomplishes its circuit of transformations. Its rate of profit is existent therefore only as a rate over time, for example per annum. This notion of the rate of profit per annum is an important turn in the presentation because this is the shape in which capitals compare themselves immediately (see §82.3).

Even though labour produces its own wages the simple result of the circuit takes into account that, if the original constant capital is used to generate new value out of living labour, the wage must be deducted, as a virtual cost, before concretising the form of surplus value in profit. The form ‘simple price’ is thus analysed as ‘cost price plus profit’. With regard to the generation of profit, an ideal activity of valorisation cannot produce the surplus product but the material reality of this product is imputed as the bearer of its value because the latter is the concrete fixing of the abstract act of positing value, including the surplus value.

What then of the magnitude of ‘simple prices’? Notionally, commodities exchange in exact alignment with the only determination of value thus far presented, namely socially necessary labour time. However, this is a radical simplification of capitalist reality; we shall see that further determinations of value, such as the organic composition of capital, replace simple prices with production prices. This means that simple price magnitudes are purely notional; they are impossible in reality because the structure of production and circulation so far outlined is so abstract it has no self-sufficiency even as a model. For the capitalist system to be seen to be self-sufficient requires a discussion of how it reproduces itself through competition; we are as yet far from having determined its conditions of reproduction.

Remark For simplicity I accept throughout that all living labour is materially exploited alike as the consequence of system-wide class forces; similarly I treat the real wage as uniform and as constant (until we treat the falling rate of profit).

Thus what are sometimes called ‘labour values’ have no actuality. They are virtual prices at best, the result of abstracting the class relation from the whole order, and then registering in a price form the material fact of exploitation. This last is an ahistorical notion, and as such may well involve other factors than sheer time; but here, time is to be considered as a virtual determinant within capitalism’s terms of reference.

Why then even speak of simple prices? Why is it useful first to elucidate the form of simple price, especially since its supposed magnitude is merely virtual, given it is unactual? Even in the further presentation it remains the case that price is defined in form as ‘cost price plus profit’; the issue yet to be explored is how these magnitudes are determined. The magnitude is a money price, and it arises in my scheme simply to reflect immediately the fundamental capital relation through which each and every capital exploits living labour. It is important that this determination is registered separately from the further determinations bound up in actual prices, because without this one there is no consistent profit-making, as we argued earlier. Simple price, however, is too simple to claim actuality, so we undertake a further conceptual development of the systemic determination of price to a form that does have a coherent claim to actuality. The conceptual gain won in ‘simple price’ is the idea that labour time appears qualitatively as value, here taken over abstractly, hence the determination of price magnitude is to be further analysed.

It is important that the system of industrial capital becomes determinate only as a whole. In this the effect of competition is crucial, and I shall develop this notion in §82. If we take on board what has just been said then values are indeterminate at this level of abstraction; so I take discussion of a single capital to refer to capital only in its elementary notion; in this way differences between capitals are blended away. The problem remains that this level of analysis is very abstract and requires further concretisation. I shall argue later that the finished form of value is that of what I shall call ‘reproduction price’.

At the level of the constitution of the idea of capital as a relation of capital and labour, the only consideration relevant is the maximisation of the exploitation of labour. This, however, is concealed when organic compositions are taken into account later. Notwithstanding the paucity of determinations so far elucidated we have enough to explain the form of profit even though we have abstracted from differences between capitals.

Moreover, when I turn next to discuss the effects of competition it must be borne in mind that, if simple prices are superseded, the formula ‘c + v + s’ becomes true at the level of the whole by comprehending it in terms of some total social capital exploiting the working class. However, if total new value has ontological priority, then the inability to determine so-called ‘individual values’ at this level, because simple price is inadequate, is immaterial. From my standpoint, the notion of an ‘individual value’ prior to its placement in the whole makes no sense. Value is always socially determined; even the notion of ‘socially necessary’ is conditioned by the relation of commodities to each other.

§82 Capital in Its Difference from Itself

The following sections treat differences between capitals on the basis of which they are in competition with each other; initially this is sheer difference (§82.1), which means that the self-relation of capital is achieved only through the competition of many capitals. Here we treat the concretisation of surplus value. Then we consider how particular differences in capital ‘composition’ (§82.2) result through competition in ‘production prices’, rooted in a uniform rate of profit (§82.3). The divisions are as follows:

§82.1 Competition: Absolute and Relative Surplus Value

§82.2 Organic Composition of Capital

§82.3 Uniform Rate of Profit and Production Price.

§82.1 Competition: Absolute and Relative Surplus Value

At the start, I treat the difference of capital as merely numerical (but with implicit differences in size), and the relation of these differing capitals as that of (formal) competition. This form is simultaneously structured by its presence in the form of ‘self-identity’ because what makes capital what it is depends minimally on the interaction of the determinate elements of the capital relation. While further differences between capitals are addressed later, capital in its simple self-identity is the search for a surplus. In what sense then can the category of particularity be cashed out here? The answer is that, if the more specific differences are left to the next section, all I need discuss here is that the Idea of capital is concretised finitely in the context of competition.

Earlier we argued that the complementary action of capital on capital is required to realise the concept of capital as inherently bent on accumulation. In this sense competition is intrinsic to the concept. Now, at this more concrete level of discussion of competition, there are two differences to be considered when competition takes place. There is that between capitals in the same line of business, termed ‘dynamic competition’; here this struggle tends to reduce socially necessary labour time. Then there is that competition between capitals in different lines of business, termed static competition; here the commodities exchange in accordance with current socially necessary labour time; but there is still competition in that other imbalances bringing about unequal profit rates will be rectified by the entry of new capital into the most profitable sectors.

Remark The concept of socially necessary labour time used in this book refers strictly to the immediate production process. No account is taken of the idea of a socially necessary pattern of production to meet the current pattern of demand. I believe it is wrong to entertain such an equivocation in reference, and I dissent from variants of value-form theory that run with this second, very different, sense of socially necessary at this level. (It is indeed true that there is a relationship between effective demand and socially necessary labour time as far as economies of scale are concerned; but that issue must be addressed at a more concrete level of analysis.) Why do I insist on distinguishing between these two senses of socially necessary? It is because they are pertinent to different level of abstraction. When considering the idea of capital as such, supply and demand are bracketed. Only when a more concrete discussion of competition is reached should factors affecting market value be introduced to the theory.

Remark It is intrinsic to capital that differences in supply and demand mediate competition such that the notion of a ‘balance’ is purely virtual. It is merely for convenience in the presentation that at this high level of abstraction it is taken as obtaining.

The pure movement of capital’s difference from itself is that of many capitals in competition with each trying to maximise their rate of surplus value. There are two ways of increasing surplus value: absolute, and relative. These flow directly from the elementary terms of the capital relation in which capital pumps out surplus labour from the workers.

In §81.1 I developed the rate of exploitation s/v. Here, I unfold the difference of the two factors of this rate, both from itself, as their ratio changes, but, more particularly as each component changes relative to the other. Thus, s may change if the working day expands while v remains the same, such that more surplus value is expropriated; this is termed an increase in ‘absolute surplus value’. On the other hand, v may itself fall while the length of the working day remains constant, thus also increasing s; this is termed an increase in ‘relative surplus value’.

Not only is it logically possible to extend the working day so as to appropriate more surplus labour, more surplus labour may be appropriated if necessary labour is reduced for whatever reason. Should the price of labour power fall, because improvements in productivity directly or indirectly change values in wage goods industries, necessary labour naturally falls, and surplus labour increases to the same extent within a set working day; thus ‘relative surplus value’ increases.

It is here that a fuller account of relative surplus value is needed on the basis of the way that competition inflects the notion of the exploitative capital relation. Every individual capital in a certain branch of production has an interest in increasing the productivity of labour; in this way if it succeeds in selling all the output at the prevailing price then necessary labour time is reduced and more surplus value appropriated. However, dynamic competition in this branch soon brings about a generalisation of the new method, socially necessary labour time falls, the value of the commodity concerned falls, prices fall, the advantage of the innovator disappears, and (other things being equal) we are back to square one with the original rate of surplus value restored. The advantage of this process now redounds to the consumers who have cheaper commodities at their disposal. Here comes the twist. What if the branch of production concerned supplies means of subsistence for workers? If the real wage is kept constant its value now falls. Now, for all capitals ‘v’ may be reduced, and relative surplus value increased. Historically capital soon exhausted the material possibilities of increasing absolute surplus value. Thus the search for increasing exploitation has been largely directed at increasing relative surplus value.

Remark on the Intensity of Labour

It remains to consider another way it which it is claimed absolute surplus value is increased: namely increasing the intensity of labour. It is claimed that a speed-up of the labour process has the same effect as lengthening labour time, namely generating more value in a day. Besides time, does intensity determine the magnitude of value created? Is it the case that changes in the intensity of labour are generalised across the economy through competition between labourers? I doubt this latter point, but in any case, since time is the only relevant determinant of value, I regard intensity as irrelevant to the determination of value magnitudes.

More precisely, it is relevant only to intra-industry competition when it is translated into a lower time to produce a commodity. An increase in intensity simply means more use-values are produced in a given time, which means the unit value falls, just as if the machinery became more efficient. The illusion that intensity increases value is due to dynamic competition, where the most vicious exploiter has an advantage over the others by getting products out in a shorter time, just as with the innovator in machinery. But inter-branch commensuration is immediately independent of relative intensities; it takes into account only socially necessary labour time. It is not even to the point to argue that the intensities of labours in different industries are incommensurable (as I would), because only times count.

Remember workers do not commensurate their labours. It is capitals that commensurate, and the only thing they care about is the time it takes to produce and market a commodity. Intensity is not relevant as an additional factor of which account must be taken. It is relevant only insofar as it reduces the time embodied in each item because more are produced per hour. In sum, there is no way of assessing the degree of intensity in a given sector except by reference to its effect on the time taken per unit of output; no ‘intensive magnitudes of labour’ are in reality compared across sectors; only time is compared. (This is true even though the physical experience of exploitation may vary.)

Within the same sector, intensities may well be comparable. Every capital tries to reduce the time taken per unit of output, and one way of doing this is by increasing the intensity of labour, but when the others in the sector catch up the effect cancels out, price per unit drops, and the rate of surplus-value in money terms remains the same. There is no need to worry about whether or not intensity can be generalised across sectors, because capital takes no account of it, it being already ‘taken care of’ in its effects on time. (Moreover, I find the whole notion incomprehensible. How can the intensity of working on a factory line be compared with the intensity of computer programming? Concrete difference overwhelms any abstraction here.)

The issue here is conceptual, not practical. Even if relative intensity could be measured through charting the calorific intake required by every kind of labour, capital would not be interested in such a comparison; capital cares only about the time for which it is required to be tied up in different branches of production. So the intensity of labour helps to determine the socially necessary labour time to produce a specific commodity. But values of different commodities depend comparatively only on such socially necessary labour times. (Of course, if intensity increases in wage-goods industries then this may result in an increase in relative surplus value.)

§82.2 Organic Composition of Capital

Now I reach the intersection of two kinds of particularity; every capital has difference within itself, most notably registered in its organic composition, ‘c/v’ (the ratio of the value of constant capital to that of variable capital), but also the turnover times of its different fractions. However, these very same differences also form the basis of differences between capitals, for example, different capitals may have different organic compositions, and different turnover times.

This is the first relevant place to thematise the inner difference of the organic composition of capital. As a result of the drive to increase relative surplus value a greater mass of means of production, materially speaking, tend to be employed by labour. This is termed the ‘technical composition of capital’. Any change in this tends to be reflected in the relation of c to v. This is termed the ‘value composition of capital’. Insofar as this is determined by the technical composition it is termed the ‘organic composition of capital’, namely ‘c/v’. Note that the form of organic composition is not purely logical; because the value composition is predicated on the technical composition it is thus a ‘mixed’ category.

Remark The value composition may also change for reasons other than those relating to the technical composition.

Moreover, the organic composition of capital has no reason to be uniform; it must be assumed to vary between capitals. This variation has problematic effects (theorised in the next section), namely the formation of production prices on the basis of a uniform rate of profit.

Remark Turnover time likewise varies between capitals. I do not deal with it here. It raises problems similar to those of differences in organic composition, and is to be dealt with in a similar way.

Through the interaction of many capitals the inner differences in capital’s composition, held only implicitly in the categories of the universal, are made explicit, as competition brings them out. Moreover ‘c/v’ is both an inner and an outer difference which determines competition more concretely than in the previous section, as we shall see.

Remark As well as this ratio characterising all industrial capitals, it may also be taken on general scale, such that we may discuss the change in the composition of total social capital, we shall see (in §83).

Note that, when I come shortly to give a mathematical treatment of the transformation procedure, this is a static analysis (§82.31). The organic composition is thus given and constant. No account is taken of the dynamic consequences of changes in productivity. (Such changes are very important when considering the tendency for the rate of profit to fall; see §83.3 Addendum.)

§82.3 The Uniform Rate of Profit and Prices of Production

This section, on the development of ‘prices of production’, is rather complex. It is situated as a concretisation of the account of price and profit given above (in §81.3). But now this is considered in the context of the difference between capitals that structure competition. It follows that the rates of profit, which register the result of competition, must all be measured in the same way, namely as a rate of profit per annum. It will be recalled that we derived this notion proleptically earlier (§41). The argument there rested on the distinction between capital accumulation, incorporating what we there termed abstractly ‘a monetary increment’, as a movement across time intervals, and the changing bearers of its movement. As a purely ideal movement it is measured in the form of a rate of profit per annum, regardless of such material measures as the length of a production period. Thus in order to treat the systemic determination of the rate of profit we henceforth take it as a rate per annum.

A long-running debate on the derivation of ‘prices of production’ has been termed ‘the transformation problem’. I believe there is no genuine ‘problem’; so I prefer the term ‘transformation procedure’ (TP).

Remark I do not attempt here an interpretation of Marx. Rather I take Fred Moseley’s magisterial 2016 book, Money and Totality, as the ‘state of the art’ with respect to the so-called ‘transformation problem’. I accept its superiority to what he calls the ‘standard’ (mis)interpretation of the transformation procedure, which claims to find in it a ‘problem’ about the status of the ‘inputs’. It is important to my treatment that (following Moseley) I take the magnitudes of v, and of c, as given, although we do not initially know how they are determined. Nonetheless they are what they are and there is no occasion to enter upon a bogus ‘transformation’ of them. If I have learnt much on ‘transformation’ from Moseley, I qualify his view by drawing on Riccardo Bellofiore’s criticism of it.2 I regard Moseley’s treatment as somewhat ‘idealist’, and to be corrected therefore by the ‘materialist’ account of value relations promoted against him by Bellofiore. This tension I resolve below in the chapter on The Dual Ontology of Capital. My own position lies between them. For I believe both views may fruitfully be integrated.

It is useful to preface a more detailed discussion of the substantive issue with some reflections on method. There is a difference between conceptualising something in the empiricist one-to-one way, and the method of conceptual development. I do not move from concept to concept so much, as present the process of the concept realising itself. Thus the process of concretisation of price and profit is a matter of developing the concept from an overly abstract one to that of a self-mediating actuality. It moves from the more abstract, hence less true, to the more concrete and complex, characterisable as a system of self-supporting truth. A form such as value is only truly known when what it has in it to become (self-valorising value in the first place) is exhibited.

So, here, the less adequate notion of value, namely ‘simple price’ (SP), is supplanted by the derivation of ‘production price’ (PP). But production price is a transformed form of value. This new form of value is in truth a more concrete form of value because it is the outcome of systemic determinants abstracted from earlier. It is still true that value is sourced from living labour, whatever the price rule. Yet it apparently denies its origin in this transformed shape because there is no linear relationship between these moments.

In my view, since value gains magnitude only as price, the transformation from one price to another should be considered as a development of value, from an overly abstract form to a more concrete one. It is not simply a matter of additional complexity, as when the law of motion is modified by friction, etc. Rather, the original positing of the form of value is less true than its developed shape embedded in the system of capitalist competition. So I claim that production price is not a distorted form of value, but a stage on the way to the finished form of value, since value is fully determined only when the movement of capital has brought into play all its necessary moments, at the level of concretion achieved when the system of social capital is presented (§83.3).

It is not merely a matter of expositional strategy in moving from abstract to concrete, by adding further determinants to a simple model adequate in itself (if not to reality), a process motivated externally by the theorist’s wish to exhibit the matter perspicuously, through first abstracting the general law from contingent perturbations. Rather, a dialectical system moves immanently, through sublating the initial starting point as overly abstract in itself, and in need of grounding at a more concrete level. (For example, if the theorist abstracts commodity value from the object before us, capital, and presents the relation between two commodities in these terms, promising to bring in later money, and capital, then the result is that there is no reason whatsoever to assume that two commodities exchange at value; this claim is too abstract to stand; it requires grounding precisely through its further determination in the movement of money and capital.)

The Idea of capital is not an abstract universal covering-concept for free-standing capitals; it is actual in uniting and regulating them. But in the exposition, in order to exhibit the basic categories of capital, I first took capital as such as the focus. What is occluded therewith in the presentation is that ontologically capital as a whole is divided against itself as many capitals. However, an ‘individual’ value, prior to its placement in the whole is senseless because value is always socially determined in the systemic relationship of commodities and labours. (There is no question of reading off a so-called ‘individual value’ from the simple material facts.)

It is important when discussing ‘transformation’ to pay attention to relevant ambiguities in the word ‘determine’. There are four different notions to which the term may refer:

  1. to ‘find out’ e.g. to consult a price list;

  2. to ‘measure’ as when a judgement of worth determines value, e.g. when a bargain is concluded, ideally the price is determined to the satisfaction of both parties;

  3. to ‘causally generate’ as when surplus value arises from the exploitation of living labour;

  4. to ‘determine conceptually’ by being theoretically produced, as when water is discovered to be H2O, or when value is said to be labour objectified.

For the resolution of disputes over the transformation procedure I shall argue that finding out the magnitude of price and profit is very different from ascertaining how these magnitudes are generated through a real process of exploitation and competition.

At the start, certain magnitudes have to be presupposed as ‘given’; but then later some of them will be posited as results of systemic determination. Throughout the discussion of transformation, the real wage is taken as given; it is the result of the level of development of capitalism, and of the ongoing class struggle; but we are considering how to price products ‘after the harvest’ so to speak.

Simple price is a notional form that has no actuality; only when price and profit are actualised in a system of reproduction are they comprehended by the Idea of capital as ‘long run equilibrium prices’, so to speak. The transformation from simple price to reproduction price (RP) is a purely conceptual movement; it does not mirror any real process, nor require any objective new development of form. Rather, the existent form, namely price in its actuality, is discovered to be ‘reproduction price’ through sublating other abstract possibilities, which are shown to be unactual relative to the truth of price. Nonetheless something is won at each level of the exposition about the price of capitalistically produced commodities, albeit still incomplete as an account of it. Even the abstract level of simple price registers the need for commodities to be the outcome of a valorisation process rooted in exploitation.

Since the development is conceptual, any numbers given in the presentation at the initial levels of the treatment are merely illustrative. It is not simply that some variables, e.g. ‘v’ are unknown, they lack conceptual determination because the set of relevant determinants have not yet been theoretically produced in the exposition. Moreover, what is ontologically prior at the level of the whole is initially an indeterminate mass of products, with a measure in value socially formed in ways yet to be explained.

Let me lay out the basic categories formulaically.

Price = c + N (new value added) = c + mL. Here ‘m’ is derived from a stipulated accounting identity of new value (at prevailing prices) in aggregate and abstract labour in aggregate, giving ‘new value produced per hour of abstract labour’, and, conversely, the ‘money equivalent of labour time’ (MELT).

Surplus value = mL – v (it will be shown later how ‘v’ is to be determined).

If it is accepted that exploited labour is the source of all new value then the MELT is consistent with any set of specific prices, and even in aggregate it is correlating variables in different dimensions. Total surplus value is a residual magnitude given by deducting total v from total N (N = new value produced).

As such, the MELT is not explanatory, but relies on the labour theory of value (LTV); it is merely a stipulated accounting identity asserted as a corollary of the LTV; but the LTV itself needs its own argument. As such the MELT is not a theory of determination of value by labour. That theory we developed earlier in this book as a ‘negative’ labour theory of value (§52). However, it is to be noticed that this theory claimed merely a qualitative dependence of value on exploited labour; it does not provide a theory of determination of individual prices.

Although I propose to ascertain aggregate new value empirically through ‘adding up’ the individual cases however determined, in truth these ‘individual values’ are systemically determined in a way yet to be explained. Until the conceptual development is complete we do not yet comprehend aggregate surplus value because the notion is not yet theoretically produced. Yet it is real enough and it is the purpose of theory to explain its source.

The magnitudes c and v are unchanged through the transformation procedure, albeit there is a development of form in the presentation. Their magnitude is conceptually undetermined at this level. They become fully determined only when the system is shown in its actuality as a whole capable logically of reproducing itself in its form (see §83.3).

The givens, c and v, are not theoretically produced prior to their analysis at the level of the system as a whole. However, it is unnecessary to know how c and v are determined when treating the issue of how capital generates surplus value with these ‘inputs’. Eventually it will be explained why we determine them as ‘reproduction prices’, and how these magnitudes are derived. The problem arises when we consider that all the different capitals have different organic compositions of capital. But at this level it is legitimate to abstract from that and to consider a typical capital as if it were an aliquot part of the total social capital in play.

This section is divided as follows:

§82.31 The Derivation of Production Prices Mathematically;

§82.32 The Rationality of the Rate of Profit;

§82.33 Transformation Dynamically Considered.

§82.31 The Derivation of Production Prices Mathematically

It is intrinsic to its concept that ideally the rate of profit is uniform. This requirement of uniformity is supported by the demands of the concept, because as self-valorising value every capital is identical to every other and hence ideally will gain the same proportionate reward. Thus here I impose the category of ‘uniform rate of profit’ (URP) in order to see what would then happen to capitals in competition. The category of URP is the notional correlate of the actuality of social capital as a homogeneous mass yielding at any time a profit distribution to the many capitals pro-rata, for there is nothing that conceptually differentiates capitals as value bodies in motion. (This is true despite the inner difference in organic composition.) This URP is virtual because it pertains to the most elementary notion of capital abstracted from the systemic developments that generate the General Rate of Profit (GRP), to be treated in §83.3.

(Note that I reserve the term GRP for the systemically determined rate. With the URP the stress is on the identity of many capitals as capitals. With the GRP the stress is on how the whole social capital measures itself as a general rate of profit even if there is a certain amount of contingent variation individually.)

Here competition is assumed to be carried on always within the context of capital in its ideality over-riding all difference through its determination at the level of the whole as imposing a URP. As a result simple price is set aside as unactual, and the form of ‘production price’ is elucidated through a transformation procedure in which value is more concretely determined as cost price (c + v) plus a pro-rata reward of surplus value, allocated, in accordance with the ‘Concept’, uniformly to each capital in proportion to this investment. For this is at the level of the relative inter-connectedness of many capitals, not that of capital as such in which fundamental determinants such as the state of the class struggle prevail.

Production prices, with a uniform rate of profit, make up a consistent and coherent result of competition. In this Transformation Procedure are taken as given the physical facts about the production process, and the division of the product between the real wage and the surplus product. However, the mass of wage goods and surplus goods, as heterogeneous use-values, lack measure as such; they become socially recognised only under their value magnitudes. It is this mass of goods that cannot be ‘redistributed’ across the derivation of their prices; but their socially recognised values are not given prior to our development of the finished form of value (namely RP); and in our presentation this concept is developed through a number of levels of abstraction.

The issue to be addressed is that of rightly determining production prices ‘after the harvest’ so to speak. This problem is distinct from that of discerning the causal process determining the values to be measured, such as capital’s drive to appropriate living labour. (Recall what I said above about the meanings of ‘determine’.) That question is ‘upstream’, so to speak, of the present problem, namely the derivation of production prices, displacing simple prices in the presentation.

A numerical illustration is provided in the table headed The Transformation Procedure.

The Transformation Procedure This Table compares variables (1) before, and (2) after, the transform

(c + v)


s/v 1



Rate of

p 2

Rate of

Price of

s/v 2


profit 1

profit 2


Capital a

40c + 60v


100 %



60 %


50 %



Capital b

60c + 40v


100 %



40 %


50 %



Total Capital



100 %



50 %


50 %


100 %

(1) Simple Price and Profit

(2) Price of Production and Profit

(c + v) = cost price, c = constant capital, v = variable capital, c/v = organic composition of capital, s/v = rate of exploitation, p = profit, r = rate of profit. Equal sizes of the capitals, a and b, is artificial, it is simply to make clear the comparison of organic composition. All capital turns over together. Total Simple Price and Total Price of Production are set equal. Total profit 1 & 2 are set equal.

NB: s/v (1a) = s/v (1b); r (1a) ≠ r (1b); r (2a) = r (2b); s/v (2a) ≠ s/v (2b) for capital a now has a rate of s/v less than 100 % and capital b more than 100 %, even though the average remains as originally assumed, namely 100%.

In the table on ‘The Transformation Procedure’ there is a left-hand (LH) side representing a purely hypothetical ‘original position’, and a right-hand (RH) side in which prices of production are formed.

Taking columns from the left we have first the cost price of each capital, and their aggregate. It is very important to observe two things. First, the numbers (always money magnitudes) are purely illustrative. If the cost of c is ‘40’ this must have been arrived at by knowing the value of c; but, at this level of the presentation that value is not yet even given a conceptual determination. (In truth it is determined as a ‘reproduction price’, but that has not yet been elucidated.) The same goes for v. Second, this very same cost price underwrites the numbers on both sides of the Table. It cannot change, for it is what it is, even though it is not known how its magnitude is determined. It is important that v and c are constants throughout the presentation of the TP, simply given at the start. Their magnitudes are effectively determined only at the level of the system; in our presentation they are shown as RP, but at the start are not conceptually determined as such.

This means the v and c are in ‘ex post prices’, so to speak; thus the TP is merely a very restricted part of their explanation, just as is the account of exploitation explaining that the prices includes a surplus value.

The next column gives the resultant organic compositions. Once the rate of surplus value, s/v, is set arbitrarily at 100 %, then the surplus, or profit, p, is derived in the following column. Adding it to the cost price yields what is termed here ‘simple price’. The final LH column shows that capitals a and b have different rates of profit. The bottom row shows the total profit is ‘100’ and the average rate of profit is 50 %.

On the RH side the first column shows the total profit split pro rata to the relevant capitals, which ensures that they both have the same profit rate of 50 %. Their prices of production in the penultimate column vary from the equivalent simple prices. The last column shows that their rates of surplus value also vary from the common rate of 100 % on the LH side.

The Table gives a highly simplified illustration of the trouble that variant organic compositions cause to the integration of the many capitals into a single system. For there is no reason to suppose a tendency towards the equalisation of their organic compositions. The LH side shows that for the two capitals (or industries) of different organic composition very different profit rates ensue.

This is contrary to the concept of capital as ideally homogeneous, merely notionally distinct in constant, and variable, capital. The concept of capital in its purity requires a uniform rate of profit. Thus my presentation of the TP is not simply predicated for simplicity on a URP. (But it does not presuppose that there is any URP in reality, still less that individual capitals aim to secure it; they are assumed here to be maximisers, and a sector normally has a stratified distribution of profit rates.)

A comparison of capitals with differing organic compositions selling at simple prices, quickly shows that such a situation conflicts with this principle of uniformity. Allocating the putative aggregate surplus value to capitals in proportion to their cost prices, yielding production prices, results in the uniform rate. This TP is simply a comparative exercise relating an incoherent set of prices to a coherent one. This latter situation is shown on the RH side of the Table, in which the surplus value distribution between capitals a and b, secures they have the same rate of profit. This generates ‘prices of production’ distinct from simple prices. (In §83.3 I go on to introduce what I call ‘reproduction prices’.)

Because the TP is simply a conceptual development, the magnitudes on the LH side of the TP chart (all in money quantities) are either algebraic variables yet to be determined, namely ‘c’ and ‘v’, or notional numbers to be replaced, namely price and profit rate. It may be asked: what is the point of the TP, as given here, if the left-hand numbers are unactual? The answer is that it is exhibited in this way why such an array is necessarily unactual, and how a consistent set of prices and profits are obtainable. Moreover, the aggregate new value produced is also treated as a given – perhaps one could say ‘empirically’ given by summing the observed added value over the economy. It is important again to notice that these are ex post prices. So in no way is the TP giving a linear derivation of prices because the aggregate SV is derived from comparing two ex post magnitudes, added value and given ‘v’. Thus it makes little sense to say that this aggregate is ‘prior’ to the derivation of production prices except in a simple expositional sense. The aggregate profit is conserved from LH to RH sides only because it is in ex post prices already (not simple prices).

It is not relevant to consider how over time the first state would turn into the second. Rather, the first state is there simply to present, and refute, a stumbling block to the ‘labour theory of value’. The intention in the transformation procedure is to show that, if there is a tendency to realise the uniform rate of profit, this is consistent with the ‘labour theory of value’ taken at the aggregate level.

At the start I consider a hypothetical situation in which commodities are produced with the same money rate of exploitation and with values in simple prices; clearly, owing to differences in organic composition (and turnover), the rates of profit will differ. It might be thought this is contrary to their ‘concept’. Then I consider a situation in which profit rates have been equalised by a distribution of surplus value in proportion to the invested capitals; this determines prices differently and generates production prices; then there are no differences in profit rates.

Here, the formation of production prices makes it appear that value is realised only in its denial, because commodities do not exchange at simple prices; but I argue that value’s determination pertains to the whole system in its complexity, not to each and every capital’s supposed generation of a determinate value and surplus value. The immediate relation of competition among capitals as such establishes capital not just as conceptually reliant on the form of many capitals, but now concretely brings back the difference between them to more complex categories than those of §81.3. Since §82.3 registers again the rate of profit here, it must be that which takes into account the difference in organic composition. It would seem that each capital has its own rate of profit, but the point here is that all such forms are located within the reflection of capitals against one another; so, given this, it has meaning to speak of a notional uniform rate, mathematically identical to the general rate of profit, albeit in reality systemically arising revolutions in value endlessly defer any tendency to uniformity.

The relation between classes at the level of total social capital underpins the general rate of profit, which is distinct from the way the distribution of capitals across industries determines the average rate of profit between them. The general rate of profit and the average rate of profit are semantically distinguishable even if they are numerically the same. The ‘general’ rate of profit has an ontological reality that the term ‘average’ does not connote.

It is important to sort out what magnitudes are to be taken as given from the outset, and – more importantly – in what sense are they given. In the case of ‘c’ and ‘v’, these are constants in the TP, but at the start they have not yet been theoretically produced, and here appear algebraically, so to speak. But the total net output, as value added, is given empirically, and then ‘accounted for’ by total labour time, regardless of the way prices are in fact determined. Hence aggregate surplus value is not adequately known, because the v to be deducted from value added is here simply presented prior to any account of its determination. It follows that the magnitude concerned is not yet theoretically produced; it remains undetermined until a full explanation of the systemic determination of the relevant variables is given later.

However, in considering the distribution of the aggregate surplus value to individual capitals this total may be properly taken as logically prior to that, if we assume that the conditions of class exploitation are uniform in principle because of the formal determination of the whole on its parts. Moreover, the social surplus product is ontologically prior to its value measure, however that measure is construed.

The Table here has a final column demonstrating that an ineluctable consequence of equalising the rate of profit of a and b is that their rates of exploitation are now correspondingly different, in money terms, which balances their different organic compositions. Should this worry us? Not at all. The only cause for alarm would be if this money rate of exploitation were to be confused with – what I call – ‘the material rate of exploitation’, which – simplifying – we assume is set socially by class struggle. In every case we assume that (in this context) the ratio of necessary and surplus labour is equal and constant for all capitals. So the experience of exploitation by all workers is the same, so long as the money wage allows the purchase of the real wage in prices of production. Notice that in this Table the aggregate rate of exploitation remains the same. The money measures of prices are capital’s concern so to speak.

Simple price is too abstract a form to have any actuality; as soon as competition between capitals is brought into the picture further determinations take effect. Nonetheless the fundamental determination of price by socially necessary labour time is always present however ‘transformed’ in its effect. At this point in the argument the oft-repeated quibble that ‘inputs should also be transformed’ may raise itself. But this is irrelevant here: v and c are what they are (although as yet not determined conceptually); it is only the subsequent prices of production that are in question.

It follows that there is only one ‘distribution’ of value, that which is derived simultaneously with the general rate of profit. Moreover, it makes little sense to treat this ‘standing distribution’ as a process of allocation from a given pot, even though it is determined by system-wide determinants such as class struggle. The aggregate and the distribution evolve together. The possibility of this in actuality must be developed in a dynamic consideration of how competition works (see 82.33). Certainly in the TP presented here there is no ‘redistribution’ of an ‘original’ distribution as a real process. There is merely a comparison of two logically incompatible distributions. There is no real movement from one to the other, just the discarding of the inadequate one.

This means that in the Table the LH side is not temporally prior to the RH one. Rather, it is merely expositionally ‘prior’. Starting from the same givens (e.g. cost price), they are alternative outcomes. The overly simple distribution on the LH is found wanting and it is replaced by the RH distribution. The LH does not generate the RH in any meaningful sense. All that the LH side says is that price must include a surplus value on top of cost price, but the cost price here is taken as given in reproduction prices.

So what is achieved here is very limited, for we take the ex post measure of c and v to derive the rate of exploitation and profit when calculating so-called SP. However, once we say v and c are given in ways yet to be determined conceptually then we already implicitly appeal to a more concrete level of development of the value concept than that of simple price. They are always already transformed values, so to speak. The elementary level is not capable of yielding fully determinate magnitudes if key variables have to be taken as given without conceptual determination.

In the transformation procedure, the distribution of surplus value to the many capitals is unaffected by their internal composition. For at this level of abstraction the ‘production prices’ here hold regardless of the different organic compositions of a and b, for all that counts is the cost price of each capital, which is taken as known. This derivation of production price holds regardless of unequal compositions; for that is finessed through taking the total cost price as the relevant basis for the derivation. So c and v stay as givens yet to be determined; they are shown later to be ‘reproduction prices’. All I do now is to replace an incoherent profit system with a feasible (if ideal) one. Moreover, when I later derive RP s from the interchange of departments of reproduction this does not have an unpleasant retrospective effect on the transform; it merely concretises it by determining just what magnitude c and v have.

Because the problem is entirely mathematical, in my view it makes no sense to interpret the transformation as occurring across production periods. Thus the physical conditions of production, and the real wage, are given; they cannot be supposed to have changed during such a period. (Of course, when real periods of production are addressed then capital goods and wage goods as inputs must have been also outputs. This issue we take up in §83.3.)

Later I come to what I term ‘reproduction prices’ (a full discussion of the notorious ‘transformation problem’ I reserve for that). It is perfectly consistent to separate these discussions because this abstract level of the presentation is concerned, not with the concrete unity of the system, but with the way in which differences between capitals are recognised, compared, and adjusted, in accordance with the demands of the immediate capital concept. But, when we come to the reproduction of total social capital, reproduction prices will be inputs to the Departments, as well as outputs, and this raises certain problems.

However, the usual discussion of this issue has been vitiated by the treatment at once of these two different questions. One is the stipulation of a uniform rate of profit and the transformation of prices consequent on that. The other flows from the requirement to balance departments. I separate these discussions. In the present scheme ‘production prices’ come before the Departments of Production and their ‘reproduction prices’. My exposition clarifies the issues at stake in this respect by first discussing how a uniform rate of profit could be secured by varying prices; then the further complication caused by the systemic requirement to balance Departments is addressed later, because this is at the level of capital as a whole system of reproduction. So the concretisation of price is divided into two; here I treat production prices, later I treat reproduction prices (in which the ‘input’ and ‘output’ prices are identical) as a consequence of the introduction of the departments. In this order of presentation there is a two-step argument; first to show that the uniform rate of profit is achievable through further determining prices; and then later to show how balanced reproduction is achieved through further price adjustments.

It is important that just as simple prices (§81.3) are hypothetically derived from a given cost price, so production prices are also predicated on the very same given cost price. In neither case do they characterise the actuality of the idea of capital, and the resultant reproduction prices. The minimum condition of capital’s actuality is that it produces not only itself in its abstract immediacy, but a system of reproduction of itself as many capitals in the interplay of the moments of the concept, universal-particular-singular, in both the dimensions articulated earlier (see the Table on the System of Industrial Capital).

The presumption of a uniform rate of profit to accommodate differences in organic composition requires the establishment of a production price for every commodity. The point of it is to show that a uniform rate of profit is consistent with the theory that all surplus value is sourced from the labour process. But this is merely a stage in our development towards the concrete whole of capital. It is still simply unifying many capitals merely abstractly. The production prices derived here merely demonstrate that capital exploits labour not so much one-to-one but as a whole, and in principle a uniform rate of profit registers this, albeit with transformed values. The rate of profit here is therefore still a virtual notion of profit rate, located within the capital relation. Moreover, the magnitude of the URP is not fully determinate, for as yet the elements of cost price are still taken merely as givens without explanation of their magnitude. The discussion therefore remains somewhat abstract. However, the apparent contradiction between simple prices immediately reflecting exploitation, and production prices congruent with it only at the aggregate level, is resolved.

Thus differences between capitals, such as organic composition, are integrated. In a sense we are comparing capitals, and unifying them, in principle. It is only later that we see capitals compare themselves in a totality of interrelatedness in which outputs become inputs as well as inputs become outputs. So the implicit reference of the circuits of commodity capital to the interrelatedness of capitalist circulation is then concretised as the reproduction of departments, which in turn gives rise to reproduction prices and a systemic rate of profit.

As a whole of reproduction this idea of capital may be properly termed concrete. Here, I still abstract from other relevant factors, for example, market fluctuations, but this is a legitimate simplification, not a vicious abstraction, if production prices have actuality in a logical sense. The set of simple prices is hypothetical, because absurd; the set of production prices is hypothetical because over-elegant, but it is coherent.

The form of total surplus value is not just a way of avoiding discussion of a so-called ‘individual value’; it reflects system-wide determinations such as the balance of class forces and the ontological priority of the universal over its individuated parts.

The transformation procedure keeps the material rate of exploitation conserved, but value, as the social form within which it is (mis)recognised, displaces this simplicity with a money rate of exploitation that cannot be reduced to the former rate in magnitude, albeit the former has an underlying effectivity on it. Certainly, if it took the whole working-day to produce the subsistence wage there would be no surplus labour; hence no surplus value; in that sense the material level is basic.

The great advantage of the form of aggregate surplus value is that the individual case is finessed because the aggregate is blind to these cases until we explain the individual case as resulting from the pro rata distribution of surplus value, achieved through competition.

The traditional reading of TP assumes there is an ‘original’ standing distribution (based on exploitation of a firm’s own workers) then subject to a re-distribution. In my case there is no need for the term ‘re-distribution’; because there is only the one distribution pro rata according to size. (There is a redistribution from industrial profit to that of other capitals in the shape of rent and interest; but here I treat the production of surplus value only.)

To end, I underline again that the magnitude of production price adduced here is unexplained. This is for two reasons. First, the magnitude of cost price in unexplained. Its elements are determined as reproduction prices; but we have yet to develop this form. Second, the uniform rate of profit notionally applied here is derived from the aggregate surplus value, itself derived from aggregate new value. But the last aggregate can only be known in ex post prices. So what is achieved by deriving production price is somewhat limited, however necessary to the levels of determination in the system of forms.

§82.32 The Rationality of the Rate of Profit

The price of production is a form of value, appearing in competition, and hence present in the consciousness of the ordinary capitalist. But it is wrong to disparage such appearances to vindicate the inner reality of value. The ‘external’ price is not a veil to be discarded as it is lacking the truth of the Concept. It is necessary that essence appear and that the actuality of the concept concretise itself at the phenomenal level. So far from being misleading, the price of production is a fully rational manifestation of the Concept and essential to its fully articulated meaning. Prices of production should not be counterposed to ‘value’ but understood as a more finished form of value. This is because value exists in determinate shape only as the result of capitalist competition; therefore, the concrete concept takes determinations springing from competition into account when arriving at its finished form. While this results in the displacement of so-called ‘individual value’, it is equally true this is bound up with the proper actuality of the value concept. To be blunt, the category of ‘individual value’ has no sense in this context.

At this level of analysis, in which differences of organic composition are taken as essential determinants, resulting in production prices, it is clear that some capitals are more efficient than others in resurrecting these original values in new form. More constant capital is transferred per hour by one production process than by another. This is properly recognised if capital-intensive industries gain more value (in the shape of production prices) in their self-valorising process than labour-intensive industries do. As capital moves through its self-valorisation process, it transfers to the result the input values (to which it has added new value) at a definite rate. Its measure of success is properly ‘s/(c + v)’. We may speak of a socially average power of resurrecting value consequent on the organic composition of capital. Here the average is socially imputed and supplants the ‘concrete’ rate of transfer, just as, at a higher level of abstraction, socially necessary labour time supplants concrete labour time.

So-called ‘constant’ capital is treated far too casually, when deriving the value of a commodity, if it is said the value of the constant capital is simply carried forward to reappear in the value of a commodity. But it is not. It is totally destroyed during the production process. The capitalist has undertaken an enormous risk in sacrificing all their capital in this way. The constant capital is all productively consumed. They can only pray that, if the commodity is sold at the right price, their capital is resurrected in new material shape. When I look at capitalist production I find that two important things go on during the valorisation process: as we know, new value is created, but as importantly, and as a condition of that, the original capital value is recreated; it must be resurrected in a reflux from its destruction.

Production is not pure activity but work on materials by labour with instruments of production, all getting used up. It both generates new value, and, also, resurrects in a new material shape the value of constant capital. (That ability to transform inputs into outputs, such that their value is resurrected, really is an intensive dimension of productive power, one might say.) If a firm turns over more social capital per hour than average, it must be rewarded accordingly, even if this changes its rate of surplus value. It turns over with greater momentum, so to speak. I conclude that the new rate is in accordance with the concept of capital.

Production may be organised within a branch of production efficiently, yet in this one respect differ between branches, namely in the mass of constant capital set in motion in the production process, and its effectiveness at resurrecting such constant capital. This underpins the formation of prices of production, co-determined by the uniform rate of profit. The resultant surplus value is predicated on the fact that each fraction has recreated capital anew in its own sphere, and it requires a reward in proportion to that success. Those branches that have higher labour costs have ‘wasted’ social labour, so to speak, because they effectively use social capital less productively than others.

In truth, the category of uniform rate of profit is a rational one. To be sure, it incorporates the falsity of the way in which all capital appears productive, not just the fructiferous part. Yet there is a real sense in which the whole of capital reproduces, and accumulates, itself. The standard treatment of constant capital, as simply carried forward into the value of the product, neglects the fact that there is a need to resurrect it materially as a constituent part of the product. Thus profit should be proportional to the whole capital in motion.

§82.33 Transformation Dynamically Considered

The Table on Transformation shows an exercise in comparative statics. The transformation procedure outlined there may appear as an artificial ‘fix’ to the possibility of very different rates of profit if sales are at simple prices. But it is intrinsic to the Idea of capital that production prices arise naturally in the development of competition, we shall show.

On a point of terminology, I speak of ‘productive power’ (singular) of capital (e.g. of items per day), reserving ‘productive forces’ (plural) for the labour, cooperation, skill, intensity, and especially machinery, etc. that contribute to this power.3

I have shown purely formally how the distribution of the total surplus value in accordance with the rule of a uniform rate of profit generates production prices differing systematically from immediate simple prices. I have underpinned this with an ontological reading of the total mass based on the notion that capital as a whole confronts the working class as a whole in the capital relation. In considering the social character of class exploitation underpinning the notion of a general rate of profit, I abstract from the greater or lesser efficiency of industrial capitals at pumping out surplus labour. If, for simplicity, we assume every capital has the same rate of surplus value, then the relevant rates of profit differ markedly. This is the problem solved by the transformation procedure.

But now there emerges a complementary problem: once a uniform rate of profit obtains then assuredly the associated rates of surplus value now differ from each other. (See the last column in the Table above.) In one sense this is of no importance; capitals aim at the rate of profit and their rate of surplus value is only one, if fundamental, determinant of that. But it may well be asked: how in reality could such different rates of surplus value emerge if the original position were assumed to be a rough equality? The answer is that, if competition within a branch leads to the introduction of new productive forces by a firm, that firm will realise extra surplus value at prevailing prices.

As other firms enter, or catch up, such that the new productive forces of that sector become generalised, then prices fall. But not to the extent that the original rate of surplus value is restored; this is because the new means of production imply extra constant capital. Thus maintaining the original rate of profit means maintaining a higher rate of surplus value. So entry to the sector dries up once the rate of profit approaches the general rate of profit, which mobile capital is always in the process of establishing.

The point of this way of thinking about it is that the higher rate of surplus value is prior to competitive adjustments across the economy (rather than its result as seen in the Table). In this dynamic treatment discrepancies between rates of surplus value arise immediately, although in the static treatment we have shown unequal rates of surplus value are a corollary resulting from transformation. In the ideal case the new price would be exactly that dictated by the virtual transformation, namely the production price reflecting the more mediated value magnitude. In effect the usual way of establishing production prices takes a static set of capitals, and harmonises the inter-sector difference in the rate of profit, at the cost of introducing different rates of surplus value. It could be argued that such a transformation procedure does not develop immanently from so-called ‘simple price’ to so-called ‘production price’, but adds externally to ‘the law of value’, in its immediate form, the requirement of a uniform rate of profit in the face of different capital compositions. A counterfactual array of prices is manipulated abstractly to generate a coherent (if ideal) set of production prices.4

However, in reality, the competition of capital works within the system to develop production prices. One might say that the theoretical need for a transformation procedure is finessed because the problem is already solved in the very moment of its arising, as production prices, and capital compositions, develop together. Difference and unity are co-determinate. Thus a sector with a higher productive power generates value at a higher rate than would be the case if value simply reflected the time of production as if value is created at the same rate. It follows that in such advanced sectors the rate of surplus value is higher, even if, because of a concomitant increase in organic composition, the rate of profit is not. However, the dynamic process just outlined shows how the higher rate of surplus value in practice arises through intra-sector competition with no generalisation of the new productive power across sectors. Nothing ‘corrects’ this variance; for there is no obvious mechanism whereby new productive powers in one industry are necessarily generalisable across the economy.

At a material level, an increase in the productive power of capital is registered in an increase in the output of use-values per day. The point at issue here is, whether this simply means that the same value is spread over this greater mass of use-value, or whether, in some fashion, a permanent increase in value arises from production of a higher power than before. Although the innovating capitalist loses much of his advantage as competitors in the same sector imitate the new productive force, there can be no such process of imitation that is necessarily effective across sectors. Rather, what happens is that, in the case where the increased productive power of capital is not costless, but is linked to a higher capital composition, then a new general rate of profit ensues, which retains within its generality a higher rate of surplus value in the innovative sector.

Even if the average rate of surplus value increases, through the generation of relative surplus value, the traditional sectors are penalised through a lower than average rate. But, since the innovative sector generates more value than average during a constant working day, necessary labour time is thus compressed. This is not because the value of labour power falls; so the extra surplus value is a form of absolute surplus-value. (However, this is a matter of semantics; if relative surplus value is defined as a shift in the division of the working day for whatever reason then here it is then a case of relative surplus value.)

I argued above that just such inequalities in the rate of surplus value emerge even in the mathematical presentation of the transformation procedure. In the first situation, there are equal rates of surplus value, and consequently unequal rates of profit. In the second situation, applying the rule of a uniform rate of profit to generate production prices yields the result that there are now unequal rates of surplus value, in money terms. So labour-intensive industries end up with a low rate of surplus value, and labour-saving sectors a high rate of surplus value. This inequality in rates of surplus value is derived, not as a consequence of the existence of differing capital compositions, but as their very premise. Thus we reach dynamically the same result as the transformation procedure above exhibits statically.

If we take the rate of surplus value to rest on the rate of exploitation, it is true that this monetary revaluation of the rate of surplus value leaves untouched what may be called the physical rate of exploitation, namely the labour time ‘embodied’ in the surplus product compared with that required to produce the real wage. It might seem that, since it is a premise of the problem that the same physical configuration is maintained across the transformation, the rate of exploitation cannot change. Yet, in money terms, it has!

This is not merely an analytical problem but a conceptual one, for it touches on the very nature of value and surplus-value. (This will be explored further in Chapter 14.)

§83 Systemic Unity of Total Social Capital

The system grasped a whole, in its unity, and the relation of capitals within it, generates systemic tendencies (§83.1). (See Glossary on ‘tendency’.) However, the system has numerous inner differences. The most notable is that the total social capital is concretised as the interweaving of many circuits; but this abstract point may be complemented by their sorting into ‘departments of reproduction’, here the production of wage goods and of capital goods. So below are considered those inner differences of social capital namely these departments and their exchanges (§83.2). When I discuss the importance of departments, and the theoretical need for them to balance both in physical terms and in value terms, I do not consider how prices are systemically determined. This issue is taken up in the final section (§83.3), in which the general rate of profit, also systemically determined, sums up the resultant of all the determinations considered; as such it is determined as a magnitude along with the distribution of surplus value through the formation of reproduction prices. Once I have theoretically conceptualised reproduction prices below, I have determined the c and the v inputs given in the mathematical determination of production price. But this is consistent with the ontological priority of the whole. (In addition, I treat at the end of this chapter a theorem on the tendency for the general rate of profit to fall.)

The Divisions of this section are:

§83.1 General Law of Accumulation: Concentration; Centralisation; Reserve Army;

§83.2 Reproduction of Total Capital via Departments of Reproduction;

§83.3 Reproduction Prices; General Rate of Profit;

Addendum A Note on the Neo-Sraffian System;

Addendum A Note on the Tendential Fall in the General Rate of Profit.

§83.1 General Law of Accumulation

The following sections are concerned neither with the way a capital relates to itself, nor to others, but with how the system of capitals relates to itself. Here the general effects of competition are present, notably the general law of capital accumulation. I draw attention to the importance in this of the dialectic of ‘attraction and repulsion’ (already treated formally in §82.1). So I reconsider the fundamental capital relation, but now on a social scale. It is systemically reproduced both across the competing capitals but also as a feature of the unity of social capital.

Thus the organic composition of capital is not only as a mark of difference between capitals but also as an overall structure of the capital system, which develops over time. (It tends to increase, as a result of the drive by individual capitals to maximise surplus value through the introduction of machinery.)

In this context, competition gives rise to the dialectic of repulsion and attraction of capitals, to and from each other. (This is of a piece with the homogeneity of capital as a form.) Capitalist competition results in both the concentration and centralisation of capital. Concentration means an increase in the command over labour of the individual capital as it grows, while centralisation means the takeover of many capitals by one.

Increase in the accumulation of capital on a social scale implies, generally, an increase in capital’s organic composition, because the productive power of labour increases therewith; this helps to avoid the problem posed by a limited supply of workers, and a consequent upward pressure on wages. In general, the capital relation is reproduced on an expanded scale, with more, and bigger, capitals at one pole, and more wage workers at the other. The rhythm of accumulation brings about the attraction and repulsion of workers to and from the system, with the resulting creation of the ‘reserve army of labour’ a permanent feature of this development, independently of population growth.

§83.2 Reproduction of Total Social Capital via Departments of Reproduction

I deal now with social reproduction of total social capital. The reproduction of an individual capital is simply impossible to understand without examining how it interweaves with the totality of capitals. However, social reproduction clearly entails much more complex forms than are treated when considering an individual capital.

In the framework of the attempt to exhibit the actuality of value through a movement of the presentation from abstract to concrete I have now reached a level of concretion in which it is demonstrable that ideally value and capital may be reproduced systematically in a coherent fashion. More specifically this consideration is located in the Table of The System of Industrial Capital at the intersection of the Row in which I treat the forms of social unity of capital, and of the Column designating the realm in which differences within capital are presented.

Formally there are an indefinitely large number of individual enterprises, but these are unified within total social capital through exchanges between them. The circuits of individual capitals interweave with each other through commodity capital circuits. However, the category of particularity comes to the fore when I consider the most important difference between them from the point of view of establishing the reproduction of the whole, namely some firms produce means of production, or capital goods (collectively termed ‘Department I’), and other firms produce means of (final) consumption (collectively termed ‘Department II’) whether bought by workers or capitalists.

So the following reproduction schemes consider just two departments of production, namely that producing means of production and that producing means of consumption. In order to present the relation between the two in the simplest way I absent the difference marked earlier, namely differential organic composition. We assume that each department has the same organic composition of capital.

Remark The reason for it is the elegance of isolating the problem of balance without bringing in at once other determinations. Only in the following section do we then take unequal organic composition into account. Just as potential varying organic compositions have been finessed in our earlier discussion of production prices, so then such variation must be taken account of in the final determination of reproduction prices. However, then the self-realisation of price and profit requires that the input/output scheme addressed here be taken into account.

For simplicity I consider here only simple social reproduction (disregarding accumulation of capital) with the surplus, s, being spent by capitalists on their means of consumption.

Reproduction occurs through complementary interchanges between the departments, in which physical and monetary flows are balanced. For reproduction to be achieved there must be a certain material proportion of good produced by the different departments, and not merely are the different goods to be allocated to where they are needed, but for this to happen they must first appear as exchanged commodities. Hence I must explain how the monetary flows are also capable of balance.

For simplicity I assume that the total constant capital is used up in the same period of production across the economy.

Department I

Let us first consider Department I, which produces means of production. These are differentiated precisely by their destination: some are bought by firms located in Department I itself, these are collectively termed ‘cI’; while others are bought by firms in Department II, these are collectively termed ‘cII’. The total sales of the department are thus ‘cI + cII’. This income is spent as follows. The capitals in this department must each newly purchase replacements for their own means of production, which we already know (assuming simple reproduction) is collectively ‘cI’. Then the aggregate wage bill for the department will need to be met; let us term this ‘vI’. Finally there is the appropriated departmental surplus, termed ‘sI’. Capitalists will spend all this on means of consumption, under conditions of simple reproduction. In sum the following equality obtains: cI + cII = cI + vI + sI.

Department II

Now let us consider the complementary sphere, that supplying means of consumption, namely Department II. The firms in this sphere supply means of consumption to their own aggregate work force, but also to the workers in the first department. In total this amounts to ‘vI + vII’. They also supply commodities to soak up the revenues of the capitalist class in both departments, in total ‘sI + sII’. On the demand side they buy ‘cII + vII + sII’, assuming capitalists spend all their revenues. The equality here is therefore: vI + vII + sI + sII = cII + vII + sII.

The balance condition

If internal transfers are netted out we have for the first department ‘cII = vI + sI’, and for the second ‘vI + sI = cII’. So Department I sells means of production to Department II, and it receives in return means of consumption for its work-force. With Department II the converse relation applies. This identity secures the balance condition.

In summary form:

Scheme of simple reproduction (no growth; all surplus is consumed)5


















c1 + c2

c2 = v1 + s1









(v1 + v2) + (s1 + s2)

v1 + s1 = c2

† Producing means of production: both for internal use (c1) and for department 2 (c2).

‡ Producing means of consumption: both for workers (v1 and v2) and for capitalists (s1 and s2).

The logical possibility of balance considered here should in no way be confused with a metaphysical supposition about a tendency to equilibrium, or of the likelihood of balanced growth, for tendencies to balance are always upset by ‘revolutions in value’. In truth the supposition of ‘balance’ is grossly counterfactual. What is the point of discussing a counter-factual situation? In this case it is because its very counter-factuality indicates a possible source of systemic crisis: a ‘crisis of disproportionality’. So the heuristic virtue of the schemes is obvious as a benchmark to assess real situations.6

§83.3 The General Rate of Profit and Reproduction Price

In this account of total social capital we have shown formally how the two departments may balance each other (§83.2). (For conceptual reasons we present the system in uniformity and balance in §82.3 and §83.3.) However, if the reproduction of the system in its complexity is considered, all the earlier determinations must be considered when determining reproduction prices and the rate of profit. It is these reproduction prices that determine the magnitudes of c and v we have taken as given throughout, for example in the transformation procedure. As themselves values, all the determinations of value adduced earlier have a bearing on them; but their concrete determination requires as a minimum condition that they be systemically determined. Such prices depend in the first place on their ideal determination in the context of the reproduction scheme as long-run equilibrium prices (however idealised and abstract the notion of the equilibration of departments may be).

While this section looks at the consequences of the systemic determinations adduced in the third row of the Table on The system of industrial capital, these are registered under the head of the third column, namely categories of singularity. Here we find the concretisation of the rate of profit. To begin with (§81.3) there is the elementary notion that capital measures its success in its rate of profit (per annum). Then we introduce the figure of the uniform rate of profit in order to correlate conceptually the relations of different capitals (§82.3). That discussion abstracts from the problem of harmonising departments of production, and their input/output prices were not considered. Now we introduce the notion of a general rate of profit determined as that of total social capital. This may be identical in magnitude to that of the earlier deployed uniform rate of profit (underdetermined at its introduction), but it is conceptually richer because it pertains to the system taken as a whole, which reproduces itself, among other things by reproducing relations between departments.

The same concretisation applies to value. That value itself only exists concretely in money form was shown in Chapter 7. When the presentation subsequently speaks of ‘price’ it is generally the case that a price expressing value is meant. To begin with I show the immediate influence of the capital relation on prices (§81.3). Then I show these are mediated by the assumption of a uniform rate of profit, generating production prices (§82.3). Now here I take into account the differing organic composition of whole departments of production, such that I adduce the category of reproduction price (§83.3). It is these prices that in principle are those at which v and c are traded.

Only at this level of development of the concept of industrial capital is it shown as actual. Nonetheless these earlier determinants (especially exploitation) are preserved as part of the whole story. Since value is always at bottom socially determined, this means that in its finished form it is identical with reproduction price. For, taking account of the transformation of values requires the category of reproduction price to concretise it further, as a system grounded on its own inner determinations in accordance with which it reproduces itself.

Note that the category of ‘actuality’ does not refer to contingent empirical facts. Rather, a developed actuality achieves its own effectivity, which may be retained in the face of contingent disturbances of its action. Mere ‘existences’ lacking any essential reason for being, or failing to live up to it, are not properly actualities. Here total social capital is developed in its actuality, in this sense (see Glossary). It follows that the ‘finished form’ of value is ‘reproduction price’, because, if price is subject to further influences (e.g. those consequent on supply and demand), it is not thereby registering a development of value.

In §82.3 I was concerned with the identity of all capitals abstractly, taking into account only their various organic compositions. Now, at a more concrete level, it is the identity of total social capital as a unified system of reproduction of itself that is to be assessed. Here the difference in organic composition of the departments is taken into account as it affects reproduction price and the general rate of profit.

I consider only two departments because my interest is in how their bringing into balance yields the resulting reproduction of industry. In developing these categories, I make no empirical claim about equilibrium; the test of equilibrium here is a logical corollary of the perfection of competition at this level of the theoretical presentation of the capital system in its minimum articulation. Indeed, RP s are still relatively remote from the fluctuations characteristic of empirical reality. But they are logically actual in the sense that they are conceptually conformable with the minimum structural dimensions required for the reproduction of the system.

All three levels of determination of price and profit we treated are required to fully comprehend the determination of value. But the more abstract levels yield only illustrative magnitudes while in §83 we take the capital concept as a self-reproducing one. Thus individual prices and profits are not finally determined until comprehended as the result of capital’s self-determination as a concrete whole. The minimum requirement for dialectical truth here is that the Idea of capital achieves actuality as the result of its own activity.

To be avoided is a false concreteness of the abstract level of form. It is important methodologically to treat each form in the hierarchy of determination at its appropriate level of analysis. Thus our account of production price later than simple price does not cancel, but conserves at its level, the fundamental facts of exploitation. Likewise the adoption below of a neo-Sraffian derivation of reproduction price does not overthrow the earlier analysed determinations.

At the start c and v are simply given magnitudes. Now they are to be theoretically produced as reproduction prices. They are situated in terms of the systemic reproduction of capital as a unified whole. It is important to notice that the earlier development of the category of production price is abstracted from this. In effect it is a purely mathematical exercise replacing an obviously absurd array of relative prices with a coherent one. But the study of departments is about real periods of production. This is somewhat obscured because it is presupposed that input prices and output prices are to be identified; for the system is taken to be in equilibrium; so it looks like a static exercise.

Remark I underline again that, while the ratio of the organic composition of capital is a central determinant of reproduction prices, this leaves untouched the validity of the transformation procedure because there such difference is abstracted from, in using cost price as the relevant magnitude in the distribution of total surplus value. At its origin I consider v not as capital but as a revenue generated by capital; but when the system is turning over the disbursement of wages appears to capital as a cost provided from it. Since we are here concerned with such surface forms I define cost price as ‘c + v’.

Since I am interested in the philosophical significance of the value form categories rather than strictly economic analysis, I assume here that the system of simultaneous equations deployed by Piero Sraffa yields the RP.7 He constructs an input/output matrix in terms of physical quantities, labour inputs, the wage share of ‘income’, and a system of simultaneous equations based on these physical quantities. From this is derived a system of relative prices. (What is missing is the relevance of the circuit of capital in money terms.)

These RP s are then the magnitudes of the c and v that I have all through the discussion of the transformation procedure taken as given. The question of how these magnitudes came about through a conflictual process of production is a separate question.

Two issues arise of theoretical importance. Moseley raises the issue that in the Sraffa system reproduction prices and the general rate of profit are determined simultaneously in contrast to the derivation of production prices on the basis of a prior profit rate. Furthermore, neo-Sraffians claim their system of determination of these variables makes the labour theory of value redundant. My view is that the Sraffa system is perfectly consistent with the transformation procedure set out here, because they address different issues we shall see; furthermore, the Sraffa system does not make the labour theory of value redundant because it is required in order to develop the concept of capital as one structured by levels of determination. (This second issue I take up later in an Addendum to this chapter.)

Remark It is interesting that Moseley says he agrees that ‘Sraffian theory can derive prices of [re]production and a rate of profit from physical quantities without reference to values [simple prices]’.8 Moreover, he once thought this simultaneous determination of these variables consistent with his own account of the determination of production price in the context of capital’s drive for a monetary surplus.9 I think it is indeed consistent; and I assume the relative validity of both approaches.

Two different senses of ‘determine’ are pertinent here, because there are two different problems to be addressed. The simultaneous equations discover what prices and profits are ideally; but the sequential determination of prices and profits explains how they come about. There is no need to choose between these forms, because they are complementary determinations. (Moreover, borrowing this bit of economic analysis from Sraffa does not commit us to a generalised metaphysics of equilibrium which neglects capital’s incessant revolutionising of value magnitudes.) Thus, firstly, there is the discovery of a consistent array of prices; for this some ‘simultaneous’ arithmetical operation is adequate. Secondly, there is a diachronic story to tell about how these value magnitudes are brought into existence through capital’s drive to accumulate at a maximum rate of profit. It takes time to produce commodities, and this is a time of contestation over the exploitation of living labour. Both these enquiries coexist because they address different problems.

For simplicity ‘reproduction’ prices may be considered as long run equilibrium prices, and calculated on that basis by a system of simultaneous equations, in which inputs are identical with outputs across the complementary departments. If the simultaneous equations discover what the ‘reproduction’ prices are, they do not explain the process of their formation (‘upstream’ as it were). For this their determination through the capital circuit, and through the contested terrain of exploitation is required, but vanishes in the result. The capitalist production process is always latently conflictual because the exploitation of labour power leaves its imprint on the bodies of the workers because they are inseparable from their labour; similarly, their spirit must be appropriated by capital so that their activity may be directed by others.10

So, behind the mathematical determination of ‘reproduction’ prices, lies the central problem of capital’s drive to accumulate on the basis of revolutionising the process of production. Yet, if we abstract from their process of formation and take the resulting values ‘after the harvest’ so to speak, then the Sraffian theory is helpful within these limits to mechanically generate the prices and profits.

So ‘reproduction’ prices are those which would hold if the system were in equilibrium with a general rate of profit. Reproduction prices are needed so that departments reproduce each other in a coherent fashion, ideally with a uniform rate of profit.

Let us turn to the category ‘rate of profit’ and the General Rate of Profit. The rate of profit runs like a red thread through the system of capital. In our Table it runs down the third column according to the developing levels of concretion of the Idea. In §81.3 the form is derived for a typical capital simply through refiguring the surplus on the cost price to generate a rate of profit distinct from the rate of exploitation predicated solely on the so-called ‘variable capital’. But here, along with the category of reproduction price, a concretisation of the rate of profit is developed. At this level I take the systemic unity of the whole into consideration, including the consequences of a reproduction of total social capital through the interchanges of the departments of reproduction. Now I arrive at the general rate of profit on the basis of movements in the reproduction and development of total social capital. This yields what I also call the ‘systemic rate of profit.’ In sum, tracking down the third column shows the development of the rate of profit from a simple form to the measure of the system taken in its self-relation as a single whole.11

My own presentation first derives production prices, with its two aggregate conservations in place. The point of it is merely to demonstrate that a uniform rate of profit may hold if suitable valuations of commodities take place. In the second step of my presentation of the problem I consider the reproduction process required to harmonise the input/output matrix of the departments. I consider these reproduction prices to be the finished form of value; for simple prices, and production prices, have merely a virtual character because they arise at too abstract a level. Only with departments do we have a system which achieves the bare logical minimum for it to be self-sustaining (although of course many other conditions of existence must be satisfied).

Remark I distance ‘market price’ from ‘reproduction price’ by taking into account the prevailing pattern of demand. In this way, I maintain the distinction between value as an inner determination and contingent market-driven phenomena, albeit it in my own terms.

Addendum: A Note on the Neo-Sraffian System

This discussion is a diversion from the systematic presentation, but it is required in order to underline the difference between Marxism and its most trenchant critique; a counter-critique, then, serves a useful purpose.

We begin with a special case: a thought experiment in which total automation of production is envisaged. This is used as a refutation of the labour theory of value.12 The point is that even with no labour input it is argued that there are still positive profits. I agree that there may well be such ‘profit’ proportional to the time capitals are tied up in production. However, in truth this argument is a reductio ad absurdum of neo-Sraffian theory, because it shows that it cannot distinguish capitalism from other social forms of production. The so-called ‘profit’ is a hopeless abstraction from the reality of capitalist exploitation. In a totally automated economy those in possession of its fruits are not drawing profits from it but rents; for here production takes the form of a complexified natural force like a waterfall, albeit investment is required to maintain it. This error is an example of a general failure in neo-Sraffianism. Their physicalist ontology omits the central place of social forms in production. The mode of production is treated as a technical, not a social, process. Capital has a specific mode of pumping out surplus labour; it is through this that the ‘surplus’ is created in the first place; but neo-Sraffianism considers only the physical output ‘after the harvest’ so to speak. So the neo-Sraffian system is too narrowly focussed, and its latent physicalist metaphysics is wrong-headed. My work, by contrast, takes capitalism in terms of its social ontology. But the neo-Sraffians go from physics to prices such that any social concept of value is therewith made redundant. As Moseley says,13 in their system labour power is no different from any other cost; ‘exploitation’ emerges merely in the distribution of the product.

However, I think it is possible to make use of their derivation of reproduction prices on this narrow front, while rejecting their metaphysics. For me too, the general rate of profit, the aggregates, and the specific reproduction prices, become determinate simultaneously. Neo-Sraffian critics of Marx say that this means that the labour theory is an unnecessary, and in any case faulty, detour on the way to such determinate prices; this in turn leads them to reject the labour theory of value. I do not draw this conclusion. In other parts of my presentation class struggle at the point of production is brought to the fore in the genesis of surplus value.

This is the nub of the issue. Neo-Sraffianism treats the entire production process as a purely physical one, takes it as given, and then uses a set of equations to derive reproduction prices. What is missing here is the social reality that production is the site of struggle, and that is the basis of the labour theory of value. The labour theory is not a detour, it is a foundation of value theory. Production is not a function of physical inputs alone; it is a contested social terrain in which there is a historically specific mode of pumping out labour from the immediate producers.

I abstract from different organic compositions at the start, not so much for expositional simplicity, but rather to focus on the central relation of capital, namely its relation to labour. Relations among capitals themselves raise different issues, and it is here that differences between capitals (rather than their common relation to labour) are relevant, and they are important in the formation of a general rate of profit. There is a hierarchy of determinations to be explored.

Thus labour exploitation is of great importance in exhibiting the very constitution of the capital relation. Only through overcoming labour’s potential recalcitrance does capital constitute itself. This is surely the most fundamental fact about it, and it has to be developed prior to relations between capitals. Once it is seen how capital is constituted, one may leave aside any mention of class struggle through subsequent discussion of capitalist competition.

The issue may also be addressed as one of social standpoint. What is of interest to capital is the rate of profit as it is finally determined by competition between capitals. What is of interest to workers is the rate of exploitation determined by class forces on the basis of historically determined conditions of production. What is conserved throughout the transformation of values is the division between wage goods and surplus goods; but these are socially measured differently; or rather, since I attach no concrete significance to so-called simple prices, these heaps of commodities cannot have determinate measure until capital sets, and reproduces, prices through competition. The existence of a surplus is ontologically prior to its measure, but its magnitude may be measured at different levels of determination.

Addendum: A Note on the Tendential Fall in the General Rate of Profit

The entire system of categorial form, treated in this book, is largely static in the sense that movement pertains to the self-reproduction of capital. But an important corollary of this is the dynamism giving rise to a direction of growth. We saw this already in the tendency to concentration and centralisation. But now we add to our discussion of the system-wide rate of profit a theorem deriving a tendential fall in the General Rate of Profit over time (TFRP). Rather than a value form, this is a tendency inherent to the capital system.

While this is a moment of capitalist economic development, not a structural form, I wish to say something brief about it, partly because of its importance in the literature. In my account, ‘the falling rate of profit’ is a theorem about systemic change, which should in no way be considered a prediction. As a theorem it is predicated on axioms. It would be a prediction only if these axioms were to be interpreted as unalterable empirical facts.

The context of the discussion is clearly that of the competition of capitals. In order to study this in its pure form the relation of capital to labour is abstracted from (just as that relation itself must first be studied in abstraction from differences between capitals).

When studying how capital exploits workers it is relevant to take as given the real wage. The methodological reason it is taken as given, and constant, in discussing the origin of surplus value is to rule out any explanation of profit based on its reduction. This assumption of a fixed real wage is maintained throughout the presentation of production price and reproduction price.

Only now is this assumption out of place; for the falling rate of profit theorem takes as axiomatic not a fixed real wage but a fixed rate of surplus value. The latter is inconsistent with the former. If the productive power of capital increases with a constant rate of surplus value then an increase in the output of use-values necessarily results; so the real wage must rise, even if its value remains the same, as also the surplus product. In truth the benefit of the increasing productive power of the economy might be given all to the workers, or all to capital; but our axiom assumes they benefit in proportion to the given constant rate of surplus value. The other possibilities are irrelevant to the TFRP theorem.

Why, here, is it methodologically pertinent to take as constant the rate of surplus value? For one thing, the tendency of the general rate of profit to fall is very definitely not to be explained by any tendency for the rate of surplus value to fall. However, more important is the need to take each level of determination of the system separately, and for this purpose holding others constant. The relevant parameter to take as given is the rate of surplus value because we now abstract from the study of the generation of surplus value, and we assume that capital has assigned to the workers what their share of the total value output is to be. This rate of surplus value determines the two shares of the pie, so to speak, but now we consider how capitals, as ‘hostile brothers’, compete to get the largest slice of their portion, and what the unintended consequences of that might be. (But of course there is no empirical necessity for the assumption of a fixed rate of surplus value. If we were to consider it empirically then an increase in it may generate a crisis of realisation.)

The mathematics of the TFRP theorem may be simply set out. Axiom 1: a constant rate of surplus value; axiom 2: all capitals try to improve the productivity of labour in their own firm by mechanisation, therewith, ceteris paribus, increasing the organic composition of capital; axiom 3: surplus value arises only from ‘variable capital’. Conclusion: the rate of profit falls because s moves in line with v, yet c increases relative to v as more powerful machines are put at the disposal of the workers; hence the profit ratio ‘s/(v + c)’ falls.

(However, prices register not merely the presence of new value consequent on the exploitation of labour but also the resurrection of the value embodied in the constant capital productively consumed, as I explain above.)

Once it is understood we have here a theorem, then the so-called ‘counter-tendencies’ to the TFRP fall on very different logical levels. First, take an increase in the rate of surplus value; this is ruled out by the axioms and thus fails, as an objection to the theorem. Second, consider shortening of turnover time; this certainly increases the rate of profit, but it is ruled out by the usual ceteris paribus conditions accompanying all theorems. Finally, we reach a genuine counter-tendency in that it takes us to the heart of the claim here being made. This is that there is a problem with the axioms themselves; they assume that the only relevant effect of an increase in productive power is to increase the proportion of ‘c’ to ‘v’; this is because these new machines are supposed to be more expensive. But the very point of their introduction is to cheapen unit costs. Such cheapening surely applies also to these machines themselves, as their supply generalises. So, although it is likely they are more expensive than those which they replace, there is a genuine counter-tendency to consider.

The tendency is thus combined in reality with many others that I take to be outside the framework of this treatise. Moreover, in reality the ‘counter-tendencies’ may prevail over the so-called ‘tendency’. The latter, then, cannot be identified with a predictable ‘trend’. (For the distinction between an intrinsic tendency and an empirical trend see Glossary.)

It remains to refute a foolish objection: that capitalists would never do anything to reduce their rate of profit. The point here is that, under competitive conditions, every capital in a given field tries to get ahead of the others by seeking to be the first to use new technology therewith gaining a ‘technological rent’. But when everyone catches up, they are all worse off. The objection rests on a fallacy of composition: it takes all capitals to act as one does, but in reality these capitals do not act in the aggregate, but singly. Normally there are several competing firms which may be considered as forming a stratified system, with those using the best technology at the top and those still employing old technology at the bottom (the latter may still make an operating profit so are not driven out immediately). Firms seeking to improve their position in the stratification inadvertently undermine the profitability of the sector itself.14

What is the conclusion at which I arrive? The TFRP theorem is valid. However, if it is given an empirical interpretation, the axioms have to be checked against the facts, and its effects must be considered as subject to the influence of other tendencies.


This long chapter on the system of industrial capital is structured according to the moments of the Concept in two axes which intersect. There is capital’s reflection within itself, and there is the reflection of capitals against one another. The system is doubly determined throughout by the ideal value forms, such as price and profit, on the one hand, and, on the other, the material conditions of these, such as exploited labour and departments of reproduction.

The presentation begins at the most abstract level by developing the elementary notion of valorisation as a circuit of capital, showing how capital transforms itself from a monetary investment into the required factors of production; then as productive capital it valorises itself in the shape of the produced commodity, which is then transformed to money again. The most important philosophical point here is that capital cannot be identified with any of these functional forms, but is constituted in its movement through them. Only because the three forms are taken up by the encompassing circuit do they function as capital. The final term at this relatively abstract level of the presentation is that of the profit rate in which the surplus is related to the cost price. Here the term ‘simple price’ is introduced but it is important to take note of the fact that, just because of its overly simple determination, its magnitude is unexplained; any such magnitude here is to be deemed unactual. The next phase of the exposition takes a step closer to actuality by taking into consideration the effects of competition. First of all, the distinction between absolute and relative surplus value is explained. Then, having distinguished in the cost price the components constant capital and variable capital, the important notion of the organic composition of capital, namely their ratio, is introduced. This eventuates in the necessity for a transformation procedure through which the form of production price replaces simple price. Production prices are generated by adding to cost prices a surplus value on the assumption that a uniform rate of profit obtains. This is a purely conceptual argument. No claim is made about the empirical status of uniformity; nor is the actual general rate of profit explained until we address the most concrete level of the system, namely that which takes as its theme the forms characterising total social capital. This begins with the notion of a ‘law of accumulation’ (taken from Marx), which foregrounds the concentration and centralisation of capital, together with the role of a reserve army of labour. Then (following Marx again) two departments of reproduction, complementing each other, are described, one producing capital goods, and the other consumer goods. The balance condition between them is outlined but this makes no claim to empirical necessity, for revolutions in value continually disturb any such tendency. What is important now is that these departments may well differ in their organic composition. So the problem of assigning a production price, as was done earlier, is complemented by the more complex issue of finding the determinations of reproduction price on the assumption that in equilibrium input prices and output prices of the departments are consistent with each other. No claim about the empirical reality of such equilibrium is asserted. Nonetheless this is the ideal basis on which the forms of reproduction price, and the general rate of profit, are developed. Whatever further determinants of price remain to be addressed, the presentation has now reached an important result; for I concretise our investigation of valorisation within the framework of competition, and present the system in terms of its fundamental conditions of reproduction.


In his manuscripts Marx raises the possibility of a ‘fourth circuit’, see Arthur 1998, pp. 119–24.


See Bellofiore 2004.


The rest of this section owes much to Reuten 2017 (but he speaks of productive power of labour).


Reuten 2017, on the basis of his dynamic treatment of the matter in which the higher rate of surplus value is prior to competitive adjustments across the economy, argues that prices of production are redundant (and hence are all dual account systems).


Thanks are due to Geert Reuten for providing this table.


It is possible, not only that simple social reproduction may be balanced, but that balanced growth is possible. I shall not address the latter. However, Marx introduces simple reproduction only for didactic reasons. He argues it is inconsistent with capitalist production (Marx 1978, p. 586). For a treatment of Marx on expanded reproduction see Reuten 1998.


Sraffa 1960.


Moseley 2016, p. 231.


Moseley 2016, p. 25.


See Bellofiore 2004, p. 185 and p. 187.


Reproduction Prices may be calculated either by iterating outputs into inputs in the procedure of generating production prices or by calculating the set of simultaneous equations balancing departments. But it may be shown that the first method approaches asymptotically the results of the second.


See Steedman 1985, pp 125–8.


Moseley 2016, p. 31.


Stratification is exhaustively discussed in Reuten 2019. For a thorough discussion of the TFRP, considered dynamically and cyclically, see Reuten and Williams 1989, pp. 116–38.

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