On Ricardo and Surplus Value: An Excursus

I. On Ricardo and Surplus Value: An Excursus

My concern now is not to provide a comprehensive study of Marx as historian of economics with respect to Ricardo on surplus value and the related issues discussed in this chapter. I focus rather on salient features of his critique in order to sharpen comprehension of his own positive position in the Grundrisse. 36

We commence with what amounts to a defense of Ricardo against the charge by Malthus that he had failed to understand surplus value – the excess of value over production costs – when in reality “of all economists, [he] alone had grasped it, as his polemic against A. Smith’s confusion of the determination of value by wages and by the labour time objectified in the commodity shows” (MECW 28 : 252). For to treat the two notions of value as equivalent implied that if “a man’s labour had become doubly efficient, and he could therefore produce twice the quantity of a

35 Although Engels had not seen the Grundrisse document, he must have had some intimations of its contents from Marx. For example, we know that Marx had written briefly to him of

having “demolished” the Ricardian theory of profit (above, pp. 235–6). But he may in fact have intended the documents of the late 1840s (see Chapter 7, p. 194). 36 The charge that Ricardo had confused s/v with s/c+v has been noted above, p. 252.

I. On Ricardo and Surplus Value: An Excursus 261 commodity, he would necessarily receive twice the former quantity in exchange for

it . . . the reward of the labourer [being] always in proportion to what he produced” (Ricardo 1951–73 1 : 14); and that the wage is not “in proportion” to labor’s output is, of course, an essential feature of the Marxian perception of surplus value. In fact, in this context Marx explicitly allowed that Ricardo “understands the emergency of surplus value as the prerequisite of capital.”

There are other concessions. Thus Ricardo was “too classical to commit the absurdities of those who claim to improve him, who ascribe the increase in value resulting from the growth of productivity to the fact that one party sells more dearly in circulation” (275). Ricardo himself, when treating productivity improvement by way of new technology and foreign trade (1951–73 1 : 279, 128f), is said to have appreciated surplus-value as surplus labour time; and though this was in an aggregative sense, rather than with respect to the working-day, the difference is said to be inconsequential:

Ricardo does not speak . . . about the working day; that, if the capitalist previously exchanged half a day’s objectified labour for the entire living working day of the worker,

he gained, au fond, only half a living working day, since he gives the other half to the worker in objectified form and gets it back from him in the form of living labour, i.e. pays the worker half a working day; [he presents it] rather in the form of simultaneous working days, i.e. of the working days of different workers. This changes nothing in the substance of the matter, only in its expression. [As a result of the increase in productive power] each of these working days provides so much more surplus time. If formerly the capitalist’s limit was the working day, he now has 50 days, etc. (276).

Again: “According to Ricardo himself [1951–73 1 : 95], the element of the accu- mulation of capitals is posited just as completely by relative surplus labour – and indeed it cannot be otherwise – as it is by absolute surplus labour” (271).

But such commendations, it emerges, were only relative to Ricardo’s con- temporaries – “the new economists [who] are nothing but shallow simple- tons” (252). Consider Marx’s objections to Ricardo arising during a discussion of Sir George Ramsay. Ramsay (Marx argued) had based a set of conclusions (Ramsay 1836: 49–55) on the implicit assumption that “the quantity of labour bestowed upon . . . capital had been fully paid for,” whereas in fact the capitalist “appropriate[s] a part of labour without equivalent” (474). Ramsay’s error was “rooted in a fundamental defect of [Ricardo’s] . . . analysis,” reflecting “the fact that Ricardo himself was not clear about the nature of the process [of capitalist production], nor, as a bourgeois, could he be” (473–4). And at this point Marx refers to what he now represents as Ricardo’s abortive or incomplete criticism of Smith’s confusion between value determination by labor commanded and labor embodied.

To understand the capitalist production process was “not merely as A. Smith thinks, to see capital as “command over alien labour” for “every exchange value is that,” but to see it as the “power of approaching alien labour without exchange, without equivalent, but under guise of exchange”(474). But if Smith failed to see

1857–1858 I: Surplus Value

surplus value as unpaid labour, Ricardo did not provide the proper correction. For in approaching the confusion between value as determined by labor embodied and commanded, he focused on the variability of the commodity wage, failing to explain “how it comes about that the worker suddenly represents only use value in

exchange, or that he extracts only use value from the exchange. . . . ” 37 Had he done so, he might have hit upon the true nature of the labor-capital exchange relation – the sale and purchase of labor power – and thus of surplus value: “How, then, does it come about that the share of the workers in the value of the production is not determined by its value but by its use value, hence not by the labour time bestowed upon it but by its quality of maintaining living labour capacity?” (474–5). What needed to be properly understood was “the original relation between cap- ital and labour . . . the full reality and realisation of the bourgeois relations of production . . . ” (475). Even Ricardo’s concern with “the cost of producing the values necessary to reproduce [labor]” Marx found unsatisfactory, again because of failure to appreciate the capital-labor relation: “He does not concern himself at all with the historical process by means of which the product and living labour enter into this relation to one another.” All in all, “[t]he difference between profit and surplus value does not exist for him; proof that he is not clear about the nature of either.”

A discussion of Thomas De Quincey’s interpretation of Ricardian economics is also relevant. De Quincey understood Ricardo as concerned solely with distribu- tion, referring to the notion that price, “governed by proportional quantity of the producing labour . . . settles the fund out of which both wages and profits must draw their separate dividends” (De Quincey 1970 [1844]: 258), in place of the “old superannuated doctrine” that the sum of profits and wages determine price – the “adding-up theory” as it has come to be called in our day. Ricardian political economy was, in Marx’s paraphrase, “concerned with the dividends, while the total product is regarded as fixed, determined by the quantity of labour bestowed upon it – its value is estimated in accordance with that” (MECW 28 : 476). Marx con- cludes from this – De Quincey himself did not manage to reach the conclusion – that Ricardo may be “justifiably reproached for a lack of understanding of [the nature of] surplus value, although his opponents understand it even less. . . . The creation of [surplus value] coincides with the appropriation of alien labour with- out exchange, and it must therefore never be clearly understood by the bourgeois economists.”

Marx further elaborates his position. He cites Ramsay’s objection that Ricardo had neglected the replacement of fixed capital by treating the national dividend as composed entirely of wages and profits (citing Ramsay 1836: 174n); and represents this impression – Marx did not accept the charge (see note 14) – as the consequence of a failure to appreciate the capital-labor relation and origin of surplus: “since

37 Marx presumably refers to his earlier point that the worker receives “a particular use value” or claim to wage goods (MECW 28 : 214; see above, p. 238).

I. On Ricardo and Surplus Value: An Excursus

263 Ricardo does not conceive the relation between objectified and living labour” –

the capital-labor relation – “which cannot be deduced from the dividends of a given amount of labour, but presupposes the positing of surplus labour . . . he appears to be arguing that the total product is divided into wages and profits, so that the reproduction of capital itself is counted as part of profit” (MECW 28 : 476– 7; emphasis added). Here Marx again cites De Quincey on the “new political economy,” and observes that from this perspective, “[c]apital appears . . . not as the positing of surplus value, i.e. surplus labour, but merely as making deductions from a given amount of labour” (477). Now, this seemed to go counter to common sense, “since the capitalist knows very well that he counts wages and profits as part of the production costs and regulates the necessary price accordingly.” But this was only an apparent contradiction, easily explicable in terms of Marx’s own perspective: “This contradiction between the determination of [the value of] the product by relative labour time and the limitation of the sum of profit and wages by the sum of this labour time, and the real determination of price in practice, derives simply from the failure to conceive of profit itself as a derivative, secondary form of surplus value; and the same applies to what the capitalist correctly regards as his production costs. His profit arises simply from the fact that a part of the production costs does not cost him anything, and so does not enter into his outlays, his production costs.”

Subsequently, the same point is reiterated that “[p]rofit is merely a secondary, derived and transformed form of surplus value, the bourgeois form in which the traces of its origin” – in unpaid labor, of course – “are wiped out” (515). 38 And here Marx specifies very clearly his perspective on Ricardo’s inverse wage- profit relation: “he always speaks merely of the division of a finished quantity, never of the original positing of this distinction [between profit and wages],” whereas “an understanding of this distinction would have forced him to realise that the relation established between capital and labour differs entirely from that of exchange, and he dared not realise that the bourgeois system of equiva- lents turns into and is based on appropriation without an equivalent” (emphasis added). In fact, the doctrine of proportionate profits and wages merely expresses the fact that “if a certain total value is divided into two parts, or if any quantity is divided into two parts, the size of the two parts is necessarily inversely related. And indeed his school subsequently reduced the matter to this commonplace.” As for Ricardo’s own purpose in forwarding the inverse wage-profit doctrine, that “was not to discover the basis of the creation of surplus value.” Rather he “starts from the assumption that a given value must be divided between wages and profit . . . firstly, to assert the correct method of price determination, which he bases on value, as against the current one by showing that the limit of value itself is

38 Cf. the clarification that “profit and wages, though determined by the relation of necessary to surplus labour, are not coincident with them, but merely secondary forms of the same”

(MECW 28 : 478).

1857–1858 I: Surplus Value

not affected by its distribution in various proportions between profits and wages” (515–16); and beyond this, he sought to account for “the continuous fall in the rate of profit . . . by the rise of wages [and] this rise itself by a rise in the value of agricultural products, i.e. by the increasing difficulty of producing them, and thus at the same time to explain ground rent as not at variance with his value principle” (516). Marx notes also that the “contradictory nature of profit, labour and cap- ital” – essentially the antagonism between labor and capital – emerges from the “simple logic” of the case, though the model “also provided a polemical weapon for industrial capital against landed property which was exploiting the progress made by industry.” Marx adds that Ricardo himself denied any such antagonism, and “exerted himself subsequently to prove to the worker that the contradiction between profit and wages did not affect his real income, that, on the contrary, a proportional (not absolute) rise of wages is undesirable, because it impedes accu- mulation, and because the development of industry then benefits only the idle landowner.” But the damage had been done: “the contradiction was proclaimed, and Carey, who does not understand Ricardo, could therefore denounce him as the father of the communists, etc., and in a sense he is right, though he does not himself understand in what sense.” 39

We return to our main conclusion, that Marx’s various concessions regarding Ricardo’s comprehension of the surplus-value dimension (above, pp. 260–1) did not weaken his conviction that Ricardo had failed to convey its character as unpaid labor emerging within a fully competitive framework. In his own terminology, Ricardo had not concerned himself with “how we get from value as equivalent, determined by labour, to the non-equivalent, or to the value which posits sur- plus value in exchange, i.e. from value to capital, from one determination to the apparently antithetical one” (481). The problem was not even posed by Ricardo: “ . . . since all division here takes place on the basis of exchange, it seems in fact utterly inexplicable why one exchange value – living labour – exchanges according to the labour time realized in it, while the other exchange value – accumulated labour, capital – does not exchange according to the same standard.” Apparently, “the owner of the accumulated labour could not be exchanging as a capitalist.” Here lay a mystery, which some had sought to resolve by proposing that wages must equal product value – as with Bray’s “equal exchange between living and dead labour” (Bray 1839). Ricardo, of course, in rejecting Smith’s identity of labor com- manded and labor embodied, had closed off this line; but if in fact “the exchange of values is determined by the labour time realized in them,” then “equivalents

39 Here we recall an earlier designation of Ricardo as “the most classic representative of the bourgeoisie and the most stoical opponent of the proletariat,” though attacked by Carey “as a

man whose works are an arsenal for anarchists and socialists, for all enemies of the bourgeois order” (5 March 1852; MECW 39 : 62).

265 are exchanged. Hence a particular amount of labour time in living form would

J. Summary and Conclusion

have to exchange for the same amount of labour time in the form of past labour” (482). The problem is to explain how in fact “the law of exchange” turned into its opposite and Ricardo had “[n]ot even the faintest suspicion,” that this was the case despite his warning against the confusion of labor embodied and labor commanded.

Marx’s solution involves, of course, the purchase by capital of labor power – called “labour capacity” in this context. Even so, he finds that Ricardo’s wage- scale differentials [1951–73 1 : 20–2] approached the solution: “If Ricardo had applied his own principle, the amounts of (simple) labour to which different labour

capacities are reducible, the matter would have been simple.” 40 Unfortunately, he had the capitalist exchanging not with “labour capacity” but with “living labour” thereby unwittingly creating “an insoluble antinomy in his system, that a certain amount of living labour is not = to the commodity which it produces, in which it objectifies itself, even though the value of the commodity equals the amount of labour contained in it” (483).