III. The Capitalist's Grounds for Compensating
It has been said that competition levels the rates of profit of the different spheres of production into an average rate of profit and thereby turns the values of the products of these different spheres into prices of production. This occurs through the continual transfer of capital from one sphere to another, in which, for the moment, the profit happens to lie above average. The fluctuations of profit caused by the cycle of fat and lean years succeeding one another in any given branch of industry within given periods must, however, receive due consideration. This incessant outflow and inflow of capital between the different spheres of production creates trends of rise and fall in the rate of profit, which equalise one another more or less and thus have a tendency to reduce the rate of profit everywhere to the same common and general level.
This movement of capitals is primarily caused by the level of market prices, which lift profits above the general average in one place and depress them below it in another. Merchant's capital is left out of consideration as it is irrelevant at this point, for we know from the sudden paroxysms of speculation appearing in certain popular articles that it can withdraw masses of capital from one line of business with extraordinary rapidity and throw them with equal rapidity into another. Yet with respect to each sphere of actual production — industry, agriculture, mining, etc.— the transfer of capital from one sphere to another offers considerable difficulties, particularly on account of the existing fixed capital. Experience shows, moreover, that if a branch of industry, such as, say, the cotton industry, yields unusually high profits at one period, it makes very little profit, or even suffers losses, at another, so that in a certain cycle of years the average profit is much the same as in other branches. And capital soon learns to take this experience into account.
What competition does not show, however, is the determination of value, which dominates the movement of production; and the values that lie beneath the prices of production and that determine them in the last instance. Competition, on the other hand, shows: 1) the average profits, which are independent of the organic composition of capital in the different spheres of production, and therefore also of the mass of living labour appropriated by any given capital in any given sphere of exploitation; 2) the rise and fall of prices of production caused by changes in the level of wages, a phenomenon which at first glance completely contradicts the value relation of commodities; 3) the fluctuations of market prices, which reduce the average market price of commodities in a given period of time, not to the market value, but to a very different market price of production, which di-verges considerably from this market value. All these phenomena seem to contradict the determination of value by labour time as much as the nature of surplus value consisting of unpaid surplus labour. Thus everything appears reversed in competition. The final pattern of economic relations as seen on the surface, in their real existence and consequently in the conceptions by which the bearers and agents of these relations seek to understand them, is very much different from, and indeed quite the reverse of, their inner but concealed essential pattern and the conception corresponding to it.(1)
Further. As soon as capitalist production reaches a certain level of development, the equalisation of the different rates of profit in individual spheres to general rate of profit no longer proceeds solely through the play of attraction and repulsion, by which market prices attract or repel capital. After average prices, and their corresponding market prices, become stable for a time it reaches the consciousness of the individual capitalists that this equalisation balances definite differences, so that they include these in their mutual calculations. The differences exist in the mind of the capitalist and are taken into account as grounds for compensating.
Average profit is the basic conception, the conception that capitals of equal magnitude must yield equal profits in equal time spans. This, again, is based on the conception that the capital in each sphere of production must share pro rata to its magnitude in the total surplus value squeezed out of the labourers by the total social capital; or, that every individual capital should be regarded merely as a part of the total capital, and every capitalist actually as a shareholder in the total enterprise, each sharing in the total profit pro rata to the magnitude of his share of capital.
This conception serves as a basis for the capitalist's calculations, for instance, that a capital whose turnover is slower than another's because its commodities take longer to be produced, or because they are sold in remoter markets, nevertheless charges the profit it loses in this way, and compensates itself by raising the price. Or else, that investments of capital in lines exposed to greater hazards, for instance in shipping, are compensated by higher prices. As soon as capitalist production, and with it the insurance business, are developed, the hazards are, in effect, made equal for all spheres of production (cf. Corbeth); but the more hazardous lines pay higher insurance rates, and recover them in the prices of their commodities. In practice all this means that every circumstance, which renders one line of production— and all of them are considered equally necessary within certain limits — less profitable, and another more profitable, is taken into account once and for all as valid ground for compensation, without always requiring the renewed action of competition to justify the motives or factors for calculating this compensation. The capitalist simply forgets — or rather fails to see, because competition does not point it out to him — that all these grounds for compensation mutually advanced by capitalists in calculating the prices of commodities of different lines of production merely come down to the fact that they all have an equal claim, pro rata to the magnitude of their respective capitals, to the common loot, the total surplus value. It rather seems to them that since the profit pocketed by them differs from the surplus value they squeezed out, these grounds for compensation do not level out their participation in the total surplus value, but create the profit itself, which seems to be derived from the additions made on one or another ground to the cost price of their commodities.
In other respects the statements made in Chapter VII, p. 116,(2)
concerning the capitalists' assumptions as to source of surplus value, apply also to average profit. The present case appears different only in so far as a saving in cost price depends on individual business acumen, alertness, etc., assuming the market price of commodities and the exploitation of labour to be given.