The “Transformation”

F. The “Transformation”

We come now to the dilemma created by a uniform rate of surplus value across all sectors but differential organic compositions – the Transformation problem

of Capital. 28 All the relevant elements are to be found in the Grundrisse : initial uniformity of rates of surplus value between sectors based on the fundamental theory of the source of surplus; the consequential non-uniformity between rates of profit assuming differential organic compositions or the ratios “between raw materials, machinery and wages;” and the solution involving the redistribution of the aggregate surplus between sectors by way of “competition” – entailing appro- priate output variation – to yield a uniform general profit rate satisfying equality of demand and supply and systematic deviation of prices from values. The passage deserves to be spelled out in full considering the fact that it renders irrelevant the endless discussions regarding Marx’s comprehension of the “solution” to the value-price conundrum when he composed Capital 1 :

A general rate of profit becomes possible only . . . if a part of surplus value – which corresponds to surplus labour – is transferred from one capitalist to another. If, for example, in 5 branches of business, the rate of profit is respectively

a b c d e 15%

8% 5% the average rate of profit is 10%. But for this rate to exist in reality, capitalists A and B

must give up 7% to D and E, i.e., 2% to D and 5% to E, while in the case of C things remain as they are.

Equality of the rate of profit on the same capital of 100 [in the cases considered] is impossible, since the proportions of surplus labour [to the outlays of capital] are com- pletely different [in them], depending on the productivity of labour and the proportions

28 See note 15 on the conditions for a uniform rate of surplus value.

255 between raw materials, machinery and wages, and the scale on which the profit must

F. The “Transformation”

generally be produced. But assume that branch e is necessary, e.g. that of bakers, then the average 10% must be paid to it. But this can only happen, if a and b transfer part of their surplus labour to the credit of e. The capitalist class to a certain extent distributes total surplus value among its member in such a way that, to a certain degree, the cap- italists [share in it] in proportion to the size of their capital, instead of to the surplus values actually created by the capitals in the particular branches. The larger profit which arises from actual surplus labour within one branch, from surplus value really created in that branch, is forced down to the general level by competition, and the minus of surplus value in the other branch is forced up to the general level by withdrawal of capital from that branch and the resulting favourable relationship between demand and supply. Competition cannot depress the general level itself, but only tends to create such a level (MECW 28 : 363–4). 29

Here Marx conceded only that “appearance” pointed away from the surplus-value doctrine by suggesting that equal surpluses are yielded by equal capitals : “The general level is realised by the relationship of prices in the different branches, which in the one branch fall below value, in the other rise above it. This creates the appearance that an equal sum of capital in different branches creates equal surplus labour or surplus value” (364).

Oakley hesitates to weigh this formulation heavily: “what Marx was not clear about was the mechanism through which this redistribution [of total surplus value] would take place” (Oakley 1985 1 : 185). 30 Howard and King are only willing to allow that “Marx had posed the problem of the general rate of profit in the Grundrisse in 1857–58, and had identified the need for a transfer of surplus value from one capitalist to another in accordance with the size of their capitals”; and – citing Oakley as reference – they assert that “the first comprehensive exposition of his solution, invoking the concept of ‘price of production’ and its deviation from labour values, came in 1862 in correspondence with Engels and in the manuscript . . . Theories of Surplus Value” (Howard and King 1989: 23).” 31

I do not appreciate the particular standards of exposition to which appeal is made that would justify a minimization of the clarity of the 1857–58 formulation. Only with respect to the designation of branch e as “necessary” (see note 29) is the analysis wanting. But Marx is perfectly clear regarding the competitive mechanism of redistribution involving expansion of sectors yielding above average rates of return and contraction of sectors yielding below average rates of return, such that

29 The reference to “branch e” as “necessary” can be understood by reference to the following: “Let us suppose a large number of capitals employed in particular branches of industry, which

are all necessary (in the sense that if there were a massive flight of capital from one branch, the supply of products in this branch would fall below the demand, hence market price would rise above the natural price)” (MECW 28 : 470). 30 Similarly: “No attempt was made in the Grundrisse to formalize ‘prices of production,’ and without this category, Marx’s analysis could go no further” (Oakley 1979: 300). 31 For the correspondence in question, see Chapter 10, pp. 300–1.

1857–1858 I: Surplus Value

a uniform rate is “realized” across all sectors with prices emerging below values in the first category and above values in the second.