~300 words, ~2 min reading time


The previous chapters were considering the rate of profit for a single “turnover” of capital – effectively a single productive period. In this chapter, Marx broadens the analysis to examine the annual rate of profit if there are multiple turnovers of capital in one year. For example, if I advance $100 in wages at the beginning of the year for wages, and workers make a product I can sell for $110 at the end of the week, then I can “turnover” the $100 from my revenue to pay for wages in the next week. As a result, the same $100 can be spent on wages 52 times over the course of the year, resulting in a profit of $520, while I only had to advance $100 – a 520% return. Marx shows that the annual rate of profit is simply the rate of profit for a single turnover multiplied by the number of turnovers in a year.

Why It Matters

If you’ve read his previous volumes, you’ll know that Marx is a bit obsessed with the idea of “turnover” with capital. The reason is simple: it is what makes capital self-replicating in the Marxian system. So, it makes sense that, as Marx is turning to questions of profit, that he would consider how profit is affected by turnover.

Where Marx Goes Wrong

Marx’s devotion to the labor theory of value muddies his analysis because his price theory is a bit goofy. Sensibly, if a particular set of labor and materials allows for twice as high a turnover, and therefore twice the rate of profit, it seems obvious that entrepreneurs would bid up the wages and material prices, which, in turn, lowers the per-turnover rate of profit. Marx’s system doesn’t seem to allow for this, because it is bound by the labor theory of value.

3 thoughts on “Marx”

  1. I am not trying to be provocative but I really have no idea what the last paragraph means, so let me try to ask questions to figure out what you are saying.

    1) If a particular set of labor and materials (combination of productive inputs) allows for twice the turnover, the entrepreneurs would bid up wages and material prices. Agreed.

    But I don’t understand where apparently this is not in the text?

    For this is then very much a question of the distinction between fixed and circulating capital, which Marx already discussed about in Vol 2 and references in this chapter this distinction as well.

    For the turnover is really based on the turnover of the capital advanced and therefore, once the fixed capital is fully consumed. So a rapid turnover could bid up prices but so could a non-rapid turnover since a long-term project would require a greater outlay.

    “The amount of variable capital invested in his business is something the capitalist himself does not know in most cases. We have seen in Chapter VIII of Book II, and shall see further along, that the only essential distinction within his capital which impresses itself upon the capitalist is that of fixed and circulating capital. He takes money to pay wages from his cash-box containing the part of the circulating capital he has on hand in the form of money, so far as it is not deposited in a bank; he takes money from the same cash-box for raw and auxiliary materials, and credits both items to the same cash-account. And even if he should keep a separate account for wages, at the close of the year this would only show the sum paid out for this item, hence vn, but not the variable capital v itself. ”

    So it is exactly materials and wages which are going to be bid up up; to the extent that fixed capital is worked harder, it will also require more circulating capital (i.e. running a machine, fixed capital, on fuel, coal) and this will create a demand-pull on material prices.

    One of the reasons why the distinction between circulating and fixed capital is ***somewhat*** absent in earlier political economists is because fixed capital didn’t really exist (so in the distinction between fixed and circulating capital, Adam Smith actually regresses below the Physiocrats).

    So it is not the question about the intentionality of the circuit (as he focuses in Chapter 4-5 of Vol.1) but more a question of a distinction between the **revenue** in the country (that which falls to workers and capitalists) and then the turnover of fixed capital (which also includes, believe it or not, the population. Meaning circulating capital as wages, replenishes labor-power but people are fixed capital).

    1. Real quick response to the question about where the adjustment in prices isn’t in the text. Marx seems to deny such an adjustment when he says…

      “If either the composition, the rates of surplus-value, the working-day, or the wages, are unequal in the two compared cases [one with 2 turnovers a year, and one with just one], this would naturally produce further differences in the rates of profit; but these are independent of the turnover and, for this reason, do not concern us at this point.”

      The key phrase: “independent of the turnover”.

      After reading your comments, I’m curious: have you written a commentary on Marx? I think it would be very interesting to see.

  2. Professor Engelhardt,

    It is possible that he abstracts from changes in prices for this section but just two chapters later he is going to talk about the effect of changes in input prices. I guess I would take this part as a price-taker, since changes in market prices would certainly affect demand and supply and therefore, have effects on the time of circulation and even production (if there is a market spike) and so that statement you quoted could not be taken as final.

    Let me see if I can think out-loud about this (for my own clarification):

    1) The rate of surplus value could be independent of turnover because you could produce more surplus-value by more intense but the period of circulation and production could still be the same. I guess it is possible that it could move closer the time for the next *advance* because you can buy new production goods and so that was left out of this chapter but that would not necessarily mean the turnover of the capital advanced. In one of my previous comments, I mentioned that a lot of this has to do with previous writings by the Physiocrats, Smith and Ricardo regarding the annual gross and net revenue – what Marx was able to pick ups up a certain aporia sometimes made (by Smith in particular) regarding the deduction of certain things (Smith talks about cattle and seed) while not including them in the revenues (in Marx’s view, this is appropriate for Smith’s time since tools and stocks were considered part of wages and profit and the distinction is really a post-industrial revolution phenomenon).

    So maybe the advances are moved forward. The issue really is that turnover is once the value of the capital advanced is used up and the whole point about the distinction of fixed/circulating capital, is that the turnovers are lengthened with the addition of fixed capital but fixed capital gives certain – both quantitative let alone the technology – that make it a worthwhile investment.

    Really, the distinction is supposed to be a concrete one, meaning Marx makes the distinction by how the capital enters into the commodity.

    A boat, which is almost always fixed capital, could be circulating capital for a capitalist if they did not own the boat but rather rented it out by day for a specific service (i.e. if you ran a water ski-ing company)- this might be extremely inefficient and highly unlikely, but it is advanced in a different way.

    So it is possible that the rate of surplus value could increase without the rate of depreciation of the advanced capital increasing (or its moral depreciation either), even if it is uncommon.

    Circulation could also be affected by the “discreteness” of the commodity (if I can abuse this term), meaning if I increased the surplus value, it might change the value composition but I might still have to wait for the full sale of the inventory to advance a new fixed capital input.

    Marx could be sneaking in differences in time of production and circulation here. That’s another fair criticism. So if the turnover is production time plus the circulation, then it could be something like production time is reduced because people work longer hours but then the circulation time increases.

    Due to the differences in methodology, it makes sense why Marx can look completely ridiculous and logically inconsistent – Rosa Luxemburg joked that Kapital is filled with Dialectical “Rococo” and in the postfaces to Vol. 1, Marx suggests he might have been difficult at times. In Lenin’s Conspectus on Hegel’s Science of Logic, he has a little aphorism where he says that none of the leaders of the Marxists understand Kapital because they haven’t read Hegel (Marx re-read Hegel’s Science of Logic while writing the Grundrisse, the plan for Kapital). And even then, the text is not “Hegelian” in the sense that rather than it being a dialectic of freedom, it is a negative dialectic. In the recently translated lectures by Adorno, “Philosophical Elements of a Theory of Society,” Adorno makes a point that Kapital is a text of “self-correction,” as in categories are introduced and then as new ones are introduced it actually changes the earlier definitions; but this is a reflection of History. In this sense, the text is similar to Hegel’s Logic – so, for example, pure being and pure nothing, in the abstract, have an abstract unity because they are both undifferentiated and thus, cannot be delineated but then in developing their “interpenetrated” aspect, Hegel can begin to develop their difference and this is what is meant by “concreteness.” And Hegel treats this grasp of their interpenetratedness, as result of history (of very early philosophy taking up one of these points in isolation – Eleatics vs Eastern Philosophy, for example).

    Likewise, the development of use-value and exchange value in that opening chapter emerge out of each other: the progress of humanity produces a diversity of use-values

    a) Use-values come to serve as intermediaries for each other; they act as money
    b) But this also, in practice, gives the potential for one to ask “well, what unites all of these? They all have exchange-ratios.”

    But likewise, “use-value” as a concept can develop because the diversity of things raises the possibility of a synthesis across a great deal of heterogeneity – what unites these different exchanged goods? They are all useful (but in fact, this had already been implicitly done by Adam Smith!).

    An early point Marx used to make (its in the Holy Family) was that the most abstract concepts are actually the most concrete, because their abstractness reflects the infinite diversity of many.

    But then, these two concepts become conditions for each other – things are produced for exchange and something has an exchange-value if it is useful. And these continue to change and, in Marx’s reading, become undermined (its not one of these Bad Leftisms that like profit is bad or exchange-value is bad but use-value is good or some other baloney- no, the point is that profit and exchange-value have allowed use-value to develop. This is common-sense to most libertarians – that it allows someone to produce something that they have no immediate interest in but can use their skills effectively – and thus, allows for an open-endedness in production. But these basic facts have been subject to just cynicism by whatever thinks of itself as Left today).

    The reason I mention this is because, and I think it is happening in this early section of Vol. 3, both things he mentioned in the earlier volumes are *changing* but also the development of other kinds of capital (part 2) and the development of market price, come to serve as conditions for previously introduced forms of capital.

    Another problem passed down from the “Marxists” and “Leftists” today (who are really just tails of the Democrats and various Statists) is that they tend to treat Kapital as the Mangum Opus of Marx. Certainly, he put a lot of work into it but according to Marx, his “new” contribution to history, really was his conclusions in the 18th Brumaire (so he writes a letter to his publisher, Joseph Wedyemeyer on this point in 1852). Really, and I guess Rothbard brought this up in his writings Marx but maybe derisively, Kapital is much more “unoriginal” than people think but that is sort of the point.

    It goes back to Marx’s letter to Ruge in 1843 -that he didn’t want to raise any dogmatic banners but clarify existing ones – that the existing thinkers of his time just thought they could unfold the world through “roasted pigeons” flying out of their mouths (a phrase I have seen Mises use!). There was a deeper reason for this which has to do with Marx’s intuition about the crisis in Hegelianism showing itself to be an issue of some sort of stagnation in thought (one that the classical Bourgeois thinkers *did not face*). Most Marxists think Marx is referring to Smith and Kant and Hegel when he talks about idealism but he really means his contemporaries – so in his 1839 dissertation notebook, he notes that the Young Hegelians “reflect” Hegel whereas he “breathed the dialectic.” They became “idealist,” not because they think ideas matter but because they reified history.

    Communism was a “dogmatic abstraction” for Marx, a contradictory one but the reason he takes up a critique of the phenomenon is because he believes it is the return of the Bourgeois Revolutions (Dutch Revolt, Great Rebellion, American Revolution, French Revolution, the Burghers against the Countryside, Political Economy, Liberty, German Philosophy but really just Rousseau-Kant-Hegel) under a changed condition – and that is actually the *reason* why it is contradictory.

    [Marx]: “Lastly, it will becomes plain that mankind **will not begin any new work, but will consciously bring about the completion of its old work.** ”

    I have never written anything public on Marx, so I guess this a world premier. I don’t think I have ever even talked to people about Vol. 3, but I have discussed Vol 1 (although most people don’t make it through – they stop at the Working Day or Co-Operation or really the most important chapters, where everything he just introduced is qualitatively transformed and means something different in subsequent chapters).

    Two final points:

    1) Marxism, in my opinion, is the most spectacularly failed “science” of the 20th century, if not all of human history. It led to just horrifying terrible things – Fascism and Stalinism – I think where we might differ is not on the horror it produced but on what one takes from that, what that means and what would be required to understand this failure and whether or not this failure is tasking. But maybe I am wrong – this could just be a prejudice of mine towards you.

    If Marxism is completely wrong, I still feel tasked by Rousseau-Adam Smith – Kant -Thomas Jefferson-Hegel-Benjamin Constant-Ricardo. Marx’s view was not they were wrong but rather their standpoints had become contradictory due to a historical change

    In this sense, I have always found libertarians to be kind (this is not derisive) pseudo-Left, as in concerned with Freedom and Liberty, concerned with the original intentions of the Left, when the Left has seemed to complete abandon those. I think several libertarians have picked up on this. From Hayek’s 1956 preface to Road to Serfdom

    “…I recognize that the hot socialism against which [Road to Serfdom] was mainly directed-that organized movement toward a deliberate organization of economic life by the state as the chief owner of the means of production-is nearly dead in the Western world.

    The century of socialism in this sense probably came to an end around 1948. Many of its illusions have been discarded even by its leaders, and elsewhere as well as in the United States the very name has lost much of its attraction. Attempts will no doubt be made to rescue the name for movements which are less dogmatic, less doctrinaire, and less systematic. But an argument applicable solely against those clear-cut conceptions of social reform which characterized the socialist movements of the past might today well appear as tilting against windmills.

    Yet though hot socialism is probably a thing of the past, some of its conceptions have penetrated far too deeply into the whole structure of current thought to justify complacency. If few people in the Western world now want to remake society from the bottom according to some ideal blueprint, a great many still believe in measures which, though not designed completely to remodel the economy, in their aggregate effect may well unintentionally produce this result. And, even more than at the time when I wrote this book, the advocacy of policies which in the long run cannot be reconciled with the preservation of a free society is no longer a party matter.

    That hodgepodge of ill-assembled and often inconsistent ideals which under the name of the Welfare State has largely replaced socialism as the goal of the reformers needs very careful sorting-out if its results are not to be very similar to those of full-fledged socialism.”

    Max Eastman, by the way, has a fantastic article (when he went from being a Trotskyist to fellow-traveller of Mises and Hayek – including attending the Mount Pelerin Society conference) from 1939 where he mentions that the “current” strands of Marxism have stopped being about Freedom but were rather about Social Justice and Efficiency. He ends that article by saying (you might disagree!) that Lenin was the greatest rebel in history for freedom. That was his final olive branch to his former comrades but worthwhile.

    2) Do you find any of Hayek’s capital theory to relate to any of the Marx you have read? I was just curious

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