O N   P R O F I T S .


IN the last chapter I endeavoured to explain the true meaning of the value of labour, and to show, that a rise or fall of labour implies an increase or decrease in the quantity of the commodity given in exchange for it.

A rise or fall of profits is sometimes spoken of as analogous to a rise or fall of labour or of wages. But profits cannot be regarded as analogous to wages. Labour is an exchangeable thing, or one which commands other things in exchange; but the term profits denotes only a share or proportion of commodities, not an article which can be exchanged against other articles. When we ask whether [63] wages have risen, we mean, whether a definite portion of labour exchanges for a greater quantity of other things than before; but when we ask whether profits have risen, we do not mean whether a definite portion of some article called profits will exchange for a greater quantity of other things than before, but whether the gain of the capitalist bears a higher ratio to the capital employed.

Mr. Ricardo appears to have considered wages, or the value of labour, and profits as equally shares or proportions of the commodity produced, and hence his doctrine, that as wages rise, or, in other words, the value of labour rises, profits must fall. “Whatever,” he says, “increases wages, necessarily reduces profits;” and again, “nothing can affect profits but a rise in wages.”

It has been shown, however, in the last chapter, that wages, or the value of labour, and profits may both rise together, because the value of labour does not entirely depend on the proportion of the whole produce, which is given to the labourers in exchange for their [64] labour, but also on the productiveness of the labour; because, in fact, a rise of profits and a rise in labour are essentially distinct in their nature, the one signifying an increase of proportion, the other an increase in the quantity which a definite portion of labour will command.

The proposition, that when labour rises profits must fall, is true only when its rise is not owing to an increase in its productive powers. If labour rises while these productive powers remain the same, profits will inevitably fall. This may be easily proved from the principles already advanced; for if labour rise in value, whoever purchases labour must give a greater quantity of other things for it, and as the capitalist purchases labour, he must pay more for it. It will be said, perhaps, that he may raise the value of his goods, that is, he may require a greater quantity of other commodities than before, in exchange for his own. But the capitalist who produces these other commodities is in the same predicament, and they cannot both raise their goods. If A raises the value of [65] his cloth, sells it at an advanced price, and purchases corn, or exchanges it directly for corn, the result is, that he gets more corn for the same quantity of cloth than he did before. If B the grower of corn does the same with his produce, he gets more cloth. But A cannot obtain from B more corn for the same quantity of cloth, at the same time that B obtains from A more cloth for the same quantity of corn. Consequently the value of goods cannot rise. Moreover, if all commodities rise, they must rise in relation to something, and as it is manifestly absurd that all commodities should at once rise in relation to each other, this something must be labour. But, by the supposition, labour itself rises in relation to all commodities; whence it is a contradiction to maintain, that a universal rise in the value of labour can increase the value of commodities.

It may be necessary to repeat the qualification with which the doctrine, that if labour rise in value profits must fall, is to be received. It is true only when the productive power [66] of labour continues the same, for if this productive power be augmented, that is, if the same labour produce more commodities in the same time, labour may rise in value without a fall, nay even with a rise of profits. This has been already shown in treating of the possibility of labour rising, although the proportion of the produce assigned to the labourer were diminished. In the case there stated it is supposed, that the whole produce of a country becomes doubled, while the quantity of labour remains the same; and that of every 100 hats, coats, and quarters of corn, the labourer before the increase received 25, and after the increase 22, so that at the latter period he would receive 44 for the same quantity of labour which before obtained 25. The capitalist for his share, before the increase, is supposed to receive 50 per cent., and after the increase 56 per cent., making 112, where he before obtained only 50. In this case, while the value of labour in relation to hats, coats, and corn, is evidently increased, that is, while a definite portion of labour ex-[67]changes for a larger quantity of those articles, the proportion assigned to the capitalist, or the rate of profits, is also augmented.

It may be asked, whether not only the proportion is raised, but the value of the same proportion? If the capitalist, for instance, receive 100 hats, coats, and quarters of corn at the latter period for every 50 at the former, would not the value of his profits have risen, although the proportion were left undisturbed?

A question whether the value of profits has risen, can have only one of three meanings :

1. Whether the proportion of the produce obtained by the capitalist has increased? 2. Whether the aggregate value of his share is greater, estimated in some of the commodities produced? 3. Whether the aggregate value has risen, estimated in labour?

1. The inquiry which I have supposed to be made, cannot be in the first sense, because one of the conditions is that the proportion remains the same.

2. If it be intended to ask whether the [68] value of the share has risen, estimated in any of the articles produced, the value of profits has undoubtedly risen. Suppose, for instance, the value to be estimated in quarters of corn, and that at the first period the whole share of the capitalist was an aggregate of 1000 coats, hats, and quarters of corn*; and suppose further a quarter of corn to exchange for a coat or a hat, then his share estimated in corn would be worth 1000 quarters of corn; but after the produce was doubled, his share would be an aggregate of 2000 coats, hats, and quarters of corn, and would consequently be worth 2000 quarters of corn, or double its former value in corn.

3. If it is meant to inquire whether, when the product of labour was doubled, the profits of the capitalist would rise in their aggregate value estimated in labour, the reply is, evidently not. For as the labourer, by the supposition, obtains double the former quantity of commodities, double the quantity of commodities must be given for the same quantity of labour, and of [69] course the share of the capitalist would command only the same labour as before. There could be a change in the value of profits estimated in labour only from an alteration in the proportions assigned to the capitalist and labourers. This is easily shown. Whatever the produce of the labour of six men might be, whether 100 or 200 or 300 quarters of corn, yet so long as the proportion of the capitalist was one fourth of the produce, that fourth part estimated in labour would be invariably the same. Were the produce 100 quarters, then, as 75 quarters would be given to 6 men, the 25 accruing to the capitalist would command the labour of 2 men: if the produce were 300 quarters, the 6 men would obtain 225 quarters, and the 75 falling to the capitalist would still command 2 men and no more. Thus a rise in the proportion which went to the capitalist would be the same as an increase of the value of profits estimated in labour, or, in other words, an increase in their power of commanding labour.

[70] Should it be objected to the doctrine of profits and the value of labour rising at the same time, that as the commodity produced is the only source whence the capitalist and the labourer can obtain their remuneration, it necessarily follows that what one gains the other loses, the reply is obvious. So long as the product continues the same, this is undeniably true ; but it is equally undeniable, that if the product be doubled the portion of both may be increased, although the proportion of one is lessened and that of the other augmented. Now It is an increase in the portion of the product assigned to the labourer which constitutes arise in the value of his labour; but it is an increase in the proportion assigned to the capitalist which constitutes a rise in his profits; whence it clearly follows, that there is nothing inconsistent in the supposition of a simultaneous rise in both*.