Volume III changes the level of analysis. Volumes I and II analysed capital "in general" — the production and circulation of surplus-value in their inner constitution. Volume III follows capital out to the surface of society, into the forms in which it appears to the agents of production themselves and acts through competition: profit, the general rate of profit, interest, rent. The governing thesis of the whole volume is that these surface forms systematically disguise the depths that produced them, so that the origin of surplus-value in unpaid labour becomes ever more thoroughly veiled the closer one gets to the categories of everyday economic consciousness. Part One takes the first step of this descent. It shows how surplus-value assumes the form of profit and how the rate of surplus-value assumes the form of the rate of profit — two transformations that, in one stroke, hide the source of the surplus in the variable capital by referring it instead to the total capital advanced. The cost-price category (k = c + v) obliterates the distinction between constant and variable capital on which the whole theory of exploitation rests; profit (the surplus reckoned against the whole outlay) then appears as an offspring of capital as such rather than of living labour. Chapters 1 through 3 establish the two transformations and the relation between the rates; Chapters 4 through 7 examine how turnover, economies in the use of constant capital, and price fluctuations modify the rate of profit — all of them further loosening the visible tie between profit and its real source.

Marx introduces the cost price, the sum the capitalist actually lays out — constant capital plus variable capital, k = c + v. Because the surplus labour costs the capitalist nothing, the value of the commodity C = c + v + s can be rewritten from his standpoint as k + s, and the surplus, reckoned now against the whole outlay, presents itself as profit. The value-formula becomes the profit-formula, and in the passage the source of the surplus is lost.

Marx fixes the category at the outset: what the commodity costs the capitalist and what its production really costs are two different magnitudes.

When we combine the various portions of commodity value that simply replace the capital value spent in the commodity’s production, under the heading of cost price, we express on the one hand the specific character of capitalist production. The capitalist cost of the commodity is measured by the expenditure of capital, whereas the actual cost of the commodity is measured by the expenditure of labour..

Marx, Capital III, page 118.

And he warns at once that the category, though it explains nothing about the production of value, will nonetheless come to pose as one of its real determinants.

If I know that five-sixths of a commodity value of £600, i.e. £500, is simply an equivalent, a replacement value, for the capital of £500 that has been spent, and that this is therefore just sufficient to buy back, the material elements of this capital, I still neither know how this five-sixths of the commodity’s value which forms its cost price was produced, nor can I explain the origin of the last sixth that forms its surplus-value. Our investigation will show, however, that cost price does none the less, in the economy of capital, present the false semblance of an actual category of value production..

Marx, Capital III, page 119.

Because the surplus appears indifferent to the internal division of the advance, it presents itself as sprung from the capital as a whole — the step by which surplus-value takes on the profit form.

However this might be, the upshot is that the surplus-value springs simultaneously from all parts of the capital applied. The deduction may be substantially abbreviated, as in the clear and simple words of Malthus: ‘The capitalist… expects an equal profit upon all the parts of the capital which he advances.’ As this supposed derivative of the total capital advanced, the surplus-value takes on the transformed form of profit. A sum of value is therefore capital if it is invested in order to produce a profit, or alternatively profit arises because a sum of value is employed as capital..

Marx, Capital III, page 126.

If we call profit p, the formula C = c + v + s = k + s is converted into the formula C = k + p, or commodity value = cost price + profit. Profit, as we are originally faced with it, is thus the same thing as surplus-value, save in a mystified form, though one that necessarily arises from the capitalist mode of production. Because no distinction between constant and variable capital can be recognized in the apparent formation of the cost price, the origin of the change in value that occurs in the course of the production process is shifted from the variable capital to the capital as a whole.

Marx, Capital III, page 127.

The cost price is thus the first veil. It sets a floor beneath which the capitalist cannot sell without losing capital, so he treats it as the commodity's "real inner value"; and because the difference between cost price and value is precisely the surplus-value, a whole band of possible selling prices opens up between them, within which a commodity can be sold below its value and still at a profit. This gap — value minus cost price — is what makes competition's price movements possible, and Marx flags here that the general rate of profit and the prices of production analysed in Part Two will rest on exactly this difference.

Marx spells out how the capitalist’s own standpoint consolidates the illusion, to the point where the surplus seems to arise from the act of sale.

From this standpoint alone, the capitalist is inclined to treat the cost price as the real inner value of the commodity, as it is the price he needs merely to preserve his capital. Added to this, however, is the fact that the cost price of the commodity is the purchase price which the capitalist has himself paid for its production, i.e. the purchase price determined by the production process itself. The excess value or surplus-value realized with the sale of the commodity thus appears to the capitalist as an excess of its sale price over its value, instead of an excess of its value over its cost price, so that the surplus-value concealed in the commodity is not simply realized by its sale, but actually derives from the sale itself..

Marx, Capital III, page 128.

The second transformation follows. Surplus-value measured against the variable capital that produced it is the rate of surplus-value, s/v — the exact index of exploitation from Volume I. Surplus-value measured against the total capital advanced is the rate of profit, s/C = s/(c+v). To the capitalist only the second is visible, and it necessarily understates the first, since its denominator is larger. Marx first restates plainly where profit comes from.

The capitalist's profit, therefore, comes from the fact that he has something to sell for which he has not paid. The surplus-value or profit consists precisely in the excess of commodity value over its cost price, i.e. in the excess of the total sum of labour contained in the commodity over the sum of labour that is actually paid for.

Marx, Capital III, page 133.

Historically and phenomenally, moreover, the order of discovery runs the other way round: the surface form comes first, and the essence has to be excavated from it.

It is the transformation of surplus-value into profit that is derived from the transformation of the rate of surplus-value into the profit rate, not the other way round. In actual fact, the rate of profit is the historical starting-point. Surplus-value and the rate of surplus-value are, relative to this, the invisible essence to be investigated, whereas the rate of profit and hence the form of surplus-value as profit are visible surface phenomena..

Marx, Capital III, page 134.

But because the capitalist relates the surplus to his whole capital and not to its variable part alone, the rate of profit obscures the rate of exploitation. The same rate of surplus-value can appear as very different rates of profit depending on the composition of capital, and the same rate of profit can conceal very different rates of surplus-value. The rate of profit is the surface form in which the rate of exploitation is at once expressed and hidden — expressed because it derives from it, hidden because its magnitude no longer reveals it.

The chapter’s summary formulation carries the whole argument of the Part.

Thus even if the rate of profit is numerically different from the rate of surplus-value, while surplus-value and profit are in fact the same and even numerically identical, profit is still for all that a transformed form of surplus-value, a form in which its origin and the secret of its existence are veiled and obliterated. In point of fact, profit is the form of appearance of surplus-value, and the latter can be sifted out from the former only by analysis. In surplus-value, the relationship between capital and labour is laid bare. In the relationship between capital and profit, i.e. between capital and surplus-value as it appears on the one hand as an excess over the cost price of the commodity realized in the circulation process and on the other hand as an excess determined more precisely by its relationship to the total capital, capital appears as a relationship to itself, a relationship in which it is distinguished, as an original sum of value, from another new value that it posits..

Marx, Capital III, page 139.

The mystification, Marx adds, only deepens as the analysis moves toward the concrete forms.

It appears to consciousness as if capital creates this new value in the course of its movement through the production and circulation processes. But how this happens is now mystified, and appears to derive from hidden qualities that are inherent in capital itself. The further we trace out the valorization process of capital, the more is the capital relationship mystified and the less are the secrets of its internal organization laid bare..

Marx, Capital III, page 139.

The longest chapter of the Part works out the exact mathematical relation between the two rates. The rate of profit equals the rate of surplus-value multiplied by the ratio of variable capital to total capital: p′ = s′ · (v/C). From this single relation Marx derives the behaviour of the profit rate as each of its determinants varies — the rate of surplus-value, the value of labour-power, the length and intensity of the working day, and above all the composition of capital. The upshot that matters for the volume is structural: because the profit rate depends on the composition of capital as well as on the rate of exploitation, two capitals exploiting labour at exactly the same rate will show different rates of profit if their compositions differ, and the higher the proportion of constant to variable capital, the lower the rate of profit for a given rate of surplus-value. This dependence of the profit rate on composition is the hinge on which both Part Two (the equalization of profit rates across differing compositions) and Part Three (the tendency of the profit rate to fall as composition rises) will turn.

The decisive corollary is stated in both directions: the two rates have come apart as magnitudes.

We saw above, with the variations in ν/C, how one and the same rate of surplus-value can be expressed in the most varied rates of profit. Here we see that one and the same rate of profit can be based on very different rates of surplus-value..

Marx, Capital III, page 160.

And the chapter’s governing statement of the determinants:

The rate of profit is thus determined by two major factors: the rate of surplus-value and the value composition of the capital. The effects of these two factors can be briefly summarized as follows, and we are able now to express the composition in percentages, since it is immaterial here in which of the two portions of capital the change originates..

Marx, Capital III, page 161.

The remaining chapters of the Part show how the visible rate of profit is pulled about by circumstances that have nothing to do with the rate of exploitation, widening still further the gap between profit and its source. Chapter 4 (added by Engels) brings in turnover: since the mass of surplus-value produced in a year depends on how many times the variable capital turns over, the annual rate of profit rises with the speed of turnover, so that a faster-turning capital shows a higher profit rate at the same rate of exploitation — the Volume II result carried into the theory of profit. Chapter 5 examines economies in the use of constant capital: by driving down the value of the constant capital advanced (crowding more workers under one roof, working machinery in shifts, recycling waste, cheapening raw materials), the capitalist raises the rate of profit without raising the rate of surplus-value, and Marx notes bitterly that these economies are largely wrung from the worker's life and limb — ventilation, safety, space sacrificed to the profit rate. Chapter 6 analyses the effect of price fluctuations, especially in raw materials, on the profit rate, and the "release" and "tying-up" of capital these produce; Chapter 7 gathers supplementary remarks. Across all of them the lesson is the same: the rate of profit is a surface magnitude, responsive to turnover, economy, and price, and its movements no longer read off the rate of exploitation beneath them — which is exactly why the profit rate can become, for the agents of production and for vulgar economics, an apparently self-standing property of capital.

On turnover, the Volume II result enters the profit calculation directly.

The effect of the turnover on the production of surplus-value, and consequently also of profit, has already been discussed in Volume 2. To summarize it in brief, the time required for the turnover has the effect that the whole capital cannot be simultaneously employed in production. One part of this capital therefore always lies fallow, whether in the form of money capital, stocks of raw materials, finished but still unsold commodity capital, or outstanding debts that are not yet due for payment. The capital that is in active production, active in the production and appropriation of surplus-value, is always reduced by this amount, and the surplus-value that is produced and appropriated is reduced in the same proportion. The shorter the turnover time, the smaller is this idle portion of capital compared with the whole; the greater therefore is the surplus-value appropriated, other conditions being equal..

Marx, Capital III, page 163.

On economy in the use of constant capital, Marx names what the “economy” consists of.

The contradictory and antithetical character of the capitalist mode of production leads it to count the squandering of the life and health of the worker, and the depression of his conditions of existence, as itself an economy in the use of constant capital, and hence a means for raising the rate of profit. Since the worker spends the greater part of his life in the production process, the conditions of this process are to a great extent conditions of his active life process itself, his conditions of life, and economy in these conditions of life is a method of increasing the profit rate..

Marx, Capital III, page 179.

The indictment is generalized a few pages on.

If we consider capitalist production in the narrow sense and ignore the process of circulation and the excesses of competition, it is extremely sparing with the realized labour that is objectified in commodities. Yet it squanders human beings, living labour, more readily than does any other mode of production, squandering not only flesh and blood, but nerves and brain as well. In fact it is only through the most tremendous waste of individual development that the development of humanity in general is secured and pursued, in that epoch of history that directly precedes the conscious reconstruction of human society..

Marx, Capital III, page 182.

This Part contains the analysis for which Volume III is most fought over: the transformation of values into prices of production. Part One left a puzzle. Since the rate of profit depends on the composition of capital, capitals of different composition but equal size, exploiting labour at the same rate, would produce different rates of profit — a capital rich in living labour (low composition) yielding more surplus-value, and therefore more profit, than a capital rich in machinery (high composition). Yet competition will not tolerate lasting differences in the profit rate; capital flows from low-profit to high-profit branches until a general, average rate is established across the whole economy. The consequence is that commodities cannot, in general, sell at their values. They sell at prices of production — cost price plus the average profit on the capital advanced — and these diverge systematically from values, above value where composition is high, below value where it is low. Chapter 8 poses the problem of differing compositions; Chapter 9 forms the general rate of profit as the average and derives the price of production, showing that at the level of the whole social product the two great aggregate equalities hold — total profit equals total surplus-value, total price of production equals total value; Chapter 10 shows how competition enforces the equalization; Chapters 11 and 12 add the effects of wage movements and supplementary remarks. The "transformation problem" — whether Marx's procedure of transforming outputs while leaving inputs in value terms is consistent — is the great battlefield of twentieth-century value theory. This brief lays out Marx's own construction and the two aggregate equalities he rests it on, and holds the debate in view for the later read-through without adjudicating it.

Marx sets out the problem with worked examples. Five capitals of equal size but differing organic composition, applied at the same rate of surplus-value, produce different masses of surplus-value — the more variable capital a given total contains, the more living labour it sets in motion and the more surplus-value it yields. If each sold its product at value, each would show a different rate of profit. This directly contradicts the observed fact that capitals of equal size tend to earn equal profits regardless of the trade they are in. The chapter fixes the contradiction precisely, so that Chapter 9 can resolve it: the profit rate as it actually rules the market cannot be the value-determined rate of the individual capital, because competition will not let unequal rates on equal capitals survive.

The chapter’s conclusion states the result of the whole demonstration.

We have shown, therefore, that in different branches of industry unequal profit rates prevail, corresponding to the different organic composition of capitals, and, within the indicated limits, corresponding also to their different turnover times; so that at a given rate of surplus-value it is only for capitals of the same organic composition – assuming equal turnover times – that the law holds good, as a general tendency, that profits stand in direct proportion to the amount of capital, and that capitals of equal size yield equal profits in the same period of time..

Marx, Capital III, page 252.

And Marx immediately names the scandal this creates for the theory of value — the problem the next chapter exists to resolve.

The above argument is true on the same basis as our whole investigation so far: that commodities are sold at their values. There is no doubt, however, that in actual fact, ignoring inessential, accidental circumstances that cancel each other out, no such variation in the average rate of profit exists between different branches of industry, and it could not exist without abolishing the entire system of capitalist production. The theory of value thus appears incompatible with the actual movement, incompatible with the actual phenomena of production, and it might seem that we must abandon all hope of understanding these phenomena..

Marx, Capital III, page 252.

The resolution treats the whole social capital as one. The total surplus-value produced by all capitals is pooled and redistributed over them in proportion to their size, yielding a single general rate of profit — the ratio of total surplus-value to total social capital. This general rate is the weighted average of the individual rates.

The category is defined the moment the averaging is posed.

The prices that arise when the average of the different rates of profit is drawn from the different spheres of production, and this average is added to the cost prices of these different spheres of production, are the prices of production. Their prerequisite is the existence of a general rate of profit, and this presupposes in turn that the profit rates in each particular sphere of production, taken by itself, are already reduced to their average rates..

Marx, Capital III, page 257.

Marx then derives the divergence of profit rates and their equalization in a single movement.

As a result of the differing organic composition of capitals applied in different branches of production, as a result therefore of the circumstance that according to the different percentage that the variable part forms in a total capital of a given size, very different amounts of labour are set in motion by capitals of equal size, so too very different amounts of surplus labour are appropriated by these capitals, or very different amounts of surplus-value are produced by them. The rates of profit prevailing in the different branches of production are accordingly originally very different..

Marx, Capital III, page 257.

These different rates of profit are balanced out by competition to give a general rate of profit which is the average of all these different rates.

Marx, Capital III, pages 256–257.

From the average follow the two category definitions on which the rest of the volume runs.

The profit that falls to a capital of given size according to this general rate of profit, whatever its organic composition might be, we call the average profit. That price of a commodity which is equal to its cost price, plus the part of the annual average profit on the capital applied in its production (not simply the capital consumed in its production) that falls to its share according to its conditions of turnover, is its price of production..

Marx, Capital III, page 257.

The image Marx reaches for is the joint-stock company: each capital draws its dividend on the common surplus.

The various different capitals here are in the position of shareholders in a joint-stock company, in which the dividends are evenly distributed for each 100 units, and hence are distinguished, as far as the individual capitalists are concerned, only according to the size of the capital that each of them has put into the common enterprise, according to his relative participation in this common enterprise, according to the number of his shares..

Marx, Capital III, page 258.

Each capital then draws profit at this common rate on its advance, and the price at which its commodity sells becomes cost price plus that average profit: the price of production. Marx restates the formula exactly once the general rate is in hand.

The formula that the price of production of a commodity = k + p, cost price plus profit, can now be stated more exactly; since p = kp′ (where p′ is the general rate of profit), the price of production = k + kp′.

Marx, Capital III, page 265.

Prices of production therefore deviate from values: a high-composition capital sells its product above value (it draws more profit than the surplus-value it produced), a low-composition capital sells below value. Surplus-value is redistributed among capitals by competition, so that each receives a share proportional to its capital rather than to the labour it exploited. This is why individual prices no longer show values. But the redistribution is a redistribution, not a creation: at the level of the total social product, nothing is added or lost, and the two aggregate identities hold.

Marx states the identity first for the five-capital example, generalizing on the spot.

The total price of commodities I-V would thus be the same as their total value, i.e. the sum of the cost prices I-V plus the sum of the surplus-value or profit produced; in point of fact, therefore, the monetary expression for the total quantity of labour, both past and newly added, contained in commodities I-V. And in the same manner, the sum of prices of production for the commodities produced in society as a whole – taking the totality of all branches of production – is equal to the sum of their values..

Marx, Capital III, page 259.

The sum of the profits for all the different spheres of production must accordingly be equal to the sum of surplus-values, and the sum of prices of production for the total social product must be equal to the sum of its values.

Marx, Capital III, page 273.

These two equalities are the anchor of Marx's claim that the price-of-production system is only a redistributed form of the value system, not a departure from the labour theory of value: total value governs total price, total surplus-value governs total profit, and the deviations at the level of individual commodities cancel in the aggregate. The consistency of this claim — given that Marx transforms the outputs into prices of production but leaves the cost-price inputs reckoned in values — is exactly what Bortkiewicz, and after him the whole twentieth-century literature, contested. The brief records Marx's construction and its two anchoring equalities; the adjudication belongs to the later read-through against the transformation debate.

The acknowledgment on which that debate fastened is Marx’s own, made in the course of the chapter: once prices of production exist, they enter into the cost prices of other commodities, so the cost price itself can no longer be read as a sum of values.

The development given above also involves a modification in the determination of a commodity’s cost price. It was originally assumed that the cost price of a commodity equalled the value of the commodities consumed in its production. But for the buyer of a commodity, it is the price of production that constitutes its cost price and can thus enter into forming the price of another commodity. As the price of production of a commodity can diverge from its value, so the cost price of a commodity, in which the price of production of other commodities is involved, can also stand above or below the portion of its total value that is formed by the value of the means of production going into it. It is necessary to bear in mind this modified significance of the cost price, and therefore to bear in mind too that if the cost price of a commodity is equated with the value of the means of production used up in producing it, it is always possible to go wrong..

Marx, Capital III, page 264.

And the chapter already draws the epistemic consequence that Part Two bequeaths to everything after it: the transformation hides the origin of profit from every agent inside the system.

It is important for him only in so far as the quantity of surplus-value created in his own branch intervenes as a co-determinant in regulating the average profit. But this process takes place behind his back. He does not see it, he does not understand it, and it does not in fact interest him. The actual difference in magnitude between profit and surplus-value in the various spheres of production (and not merely between rate of profit and rate of surplus-value) now completely conceals the true nature and origin of profit, not only for the capitalist, who has here a particular interest in deceiving himself, but also for the worker. With the transformation of values into prices of production, the very basis for determining value is now removed from view..

Marx, Capital III, page 268.

Chapter 10 shows the mechanism that produces the general rate: competition, working through the migration of capital. Where the profit rate is high, capital pours in, output expands, prices fall; where it is low, capital withdraws, output contracts, prices rise — until rates are levelled. Marx distinguishes two levels of this process. Within a single branch, competition among the many producers establishes a market value (the value of the commodity produced under the socially average conditions of that branch), around which market prices oscillate. Between branches, competition establishes the general rate of profit and the prices of production. He is careful to insist that value remains the regulator behind the surface: prices of production are governed by, and gravitate around, the values from which they are derived, and the market price oscillates around the price of production as the price of production oscillates around value. The law of value is not abolished by the equalization of profit rates; it operates through it, one level removed. This is the point at which the "esoteric" categories of Volumes I and II and the "exoteric" categories of competition are shown to be connected rather than opposed — the connection that vulgar economics, seeing only the surface, cannot make.

The mechanism itself, in Marx’s words:

Capital withdraws from a sphere with a low rate of profit and wends its way to others that yield higher profit. This constant migration, the distribution of capital between the different spheres according to where the profit rate is rising and where it is falling, is what produces a relationship between supply and demand such that the average profit is the same in the various different spheres, and values are therefore transformed into prices of production..

Marx, Capital III, page 297.

Within each sphere, the regulating magnitude is the market value.

Market value is to be viewed on the one hand as the average value of the commodities produced in a particular sphere, and on the other hand as the individual value of commodities produced under average conditions in the sphere in question, and forming the great mass of its commodities. Only in extraordinary situations do commodities produced under the worst conditions, or alternatively the most advantageous ones, govern the market value, which forms in turn the centre around which market prices fluctuate – these being the same for all commodities of the same species..

Marx, Capital III, page 279.

On the priority of value over price of production, Marx is explicit in both the systematic and the historical register.

The exchange of commodities at their values, or at approximately these values, thus corresponds to a much lower stage of development than the exchange at prices of production, for which a definite degree of capitalist development is needed..

Marx, Capital III, page 277.

Apart from the way in which the law of value governs prices and their movement, it is also quite apposite to view the values of commodities not only as theoretically prior to the prices of production, but also as historically prior to them..

Marx, Capital III, page 277.

Two shorter chapters close the Part. Chapter 11 examines what a general rise or fall in wages does to prices of production. Because a wage change alters the rate of surplus-value uniformly and therefore lowers or raises the general rate of profit, it shifts prices of production in opposite directions according to composition: a wage rise lowers the price of production of commodities made by high-composition capitals and raises that of low-composition capitals, while the price of a commodity of average composition (where price of production coincides with value) is unchanged. This refutes the Ricardian and vulgar view that wage rises simply raise all prices. Chapter 12 gathers supplementary remarks, including the observation that the capitalist's own consciousness registers the price of production, not the value, as the "natural" price, and that the whole apparatus of average profit makes the connection between profit and surplus labour invisible to the agents who live inside it — preparing the ground for the still deeper mystifications of interest and rent in the Parts to come.

Chapter 11’s demonstration begins from the average capital, where profit and surplus-value coincide.

A general rise in wages, everything else being equal, means a fall in the rate of surplus-value. For the average capital, profit and surplus-value coincide. Say that wages rise by 25 per cent. The same amount of labour which previously cost 20 to set in motion now costs 25. We then have a turnover value of 80c + 25ν + 15s, instead of 80c + 20ν + 20s. The labour set in motion by the variable capital still produces a value sum of 40, as before. But if ν rises from 20 to 25, the excess s or p is now only 15. A profit of 15 on 105 is 14 2/7 per cent, and this would be the new average rate of profit.

Marx, Capital III, page 302.

Chapter 12 then names the notion that rules the capitalist’s own consciousness.

The basic notion in this connection is that of average profit itself, the idea that capitals of equal size must yield equal profits in the same period of time. This is based in turn on the idea that capital in each sphere of production has to participate according to its size in the total surplus-value extorted from the workers by the total social capital; or that each particular capital should be viewed simply as a fragment of the total capital and each capitalist in fact as a shareholder in the whole social enterprise, partaking in the overall profit in proportion to the size of his share of capital..

Marx, Capital III, page 312.

And it closes on what that notion makes invisible.

He simply forgets (or rather he no longer sees it, since competition does not show it to him) that all these grounds for compensation that make themselves mutually felt in the reciprocal calculation of commodity prices by the capitalists in different branches of production are simply related to the fact that they all have an equal claim on the common booty, the total surplus-value, in proportion to their capital. It appears to them, rather, that the profit which they pocket is something different from the surplus-value they extort; that the grounds for compensation do not simply equalize their participation in the total surplus-value, but that they actually create profit itself, since profit seems to derive simply from the addition to the cost price made with one justification or another..

Marx, Capital III, page 312.

Marx called this the most important law of political economy, and it is the most contested law in Volume III after the transformation. It follows directly from everything established so far. As the productivity of labour rises — the whole tendency of capitalist accumulation traced in Volume I — each worker sets in motion an ever greater mass of means of production, so the organic composition of capital rises: constant capital grows relative to variable. But surplus-value is produced only by variable capital. Therefore, even if the rate of exploitation stays constant or rises, the surplus-value produced falls as a proportion of the total capital advanced, and the general rate of profit tends to fall. Chapter 13 states the law and shows it to be nothing but the profit-rate expression of rising productivity; Chapter 14 marshals the factors that counteract it, so that it operates only as a tendency; Chapter 15 unfolds the internal contradictions the law contains — the collision between the drive to develop the productive forces without limit and the narrow purpose, the valorization of existing capital, that this development undermines. The Part is the theoretical centre of Marx's account of capitalist crisis, and the phrase in which Chapter 15 names capital's self-limitation is one of the most cited lines he wrote. The brief lays out the law, its counter-tendencies, and its contradictions in Marx's own terms, and keeps in view the long controversy — from the Okishio theorem onward — over whether the law holds, without settling it here.

Marx states the law as a direct consequence of the rising organic composition of capital. If the same rate of surplus-value is spread over a total capital in which the constant part grows relative to the variable, the surplus-value falls as a fraction of the whole, and the rate of profit declines.

rising organic composition of the total capital, and the direct result of this is that the rate of surplus-value, with the level of exploitation of labour remaining the same or even rising, is expressed in a steadily falling general rate of profit. (We shall show later on why this fall does not present itself in such an absolute form, but rather more in the tendency to a progressive fall.)

Marx, Capital III, page 318.

The crucial interpretive move Marx makes is that this fall is not a symptom of weakness but the profit-rate form of capitalism's own success. The very rise in productivity that expresses capital's growing command over nature and labour is what depresses the rate of profit, because it continually replaces living labour — the sole source of surplus-value — with dead labour.

The progressive tendency for the general rate of profit to fall is thus simply the expression, peculiar to the capitalist mode of production, of the progressive development of the social productivity of labour.

Marx, Capital III, pages 318–319.

Marx at once fixes the modality of the law — a necessity that nonetheless shows itself only as tendency.

This does not mean that the rate of profit may not fall temporarily for other reasons as well, but it does prove that it is a self-evident necessity, deriving from the nature of the capitalist mode of production itself, that as it advances the general average rate of surplus-value must be expressed in a falling general rate of profit. Since the mass of living labour applied continuously declines in relation to the mass of objectified labour that it sets in motion, i.e. the productively consumed means of production, the part of this living labour that is unpaid and objectified in surplus-value must also stand in an ever-decreasing ratio to the value of the total capital applied. But this ratio between the mass of surplus-value and the total capital applied in fact constitutes the rate of profit, which must therefore steadily fall.

Marx, Capital III, page 319.

Marx also stresses that a falling rate of profit is compatible with a rising mass of profit: as total capital grows, a smaller rate applied to a larger base can yield more absolute profit than before. The two movements — falling rate, rising mass — proceed together, and the tension between them (capital straining to expand the mass while the rate erodes) is what drives the accumulation forward and, in Chapter 15, into crisis.

The compatibility of falling rate and rising mass is stated as a necessity of the system, not a curiosity.

The number of workers employed by capital, i.e. the absolute mass of labour it sets in motion, and hence the absolute mass of surplus labour it absorbs, the mass of surplus-value it produces, and the absolute mass of profit it produces, can therefore grow, and progressively so, despite the progressive fall in the rate of profit. This not only can but must be the case – discounting transient fluctuations – on the basis of capitalist production.

Marx, Capital III, page 324.

The double movement is then derived from the same laws in a single formulation.

As the process of production and accumulation advances, therefore, the mass of surplus labour that can be and is appropriated must grow, and with it too the absolute mass of profit appropriated by the social capital. But the same laws of production and accumulation mean that the value of the constant capital increases along with its mass, and progressively more quickly than that of the variable portion of capital which is converted into living labour. The same laws, therefore, produce both a growing absolute mass of profit for the social capital, and a falling rate of profit.

Marx, Capital III, page 325.

And later in the Part, Marx compresses the whole causal claim into two sentences, against any reading that would make the fall an index of slackening exploitation.

The rate of profit does not fall because the worker is less exploited, but rather because less labour is generally applied in relation to the capital invested. If a falling rate of profit coincides with a rise in the mass of profit, as we have shown, then a greater part of the annual product of labour is appropriated by the capitalist under the heading of capital (as replacement for the capital used up) and a relatively smaller part is appropriated under the heading of profit.

Marx, Capital III, page 354.

The law is a tendency because the same accumulation that raises the composition of capital also sets in motion forces that push the profit rate the other way. Marx enumerates the chief counteracting factors, all of which act by raising the mass or rate of surplus-value, or by cheapening the constant capital, against which the profit rate is reckoned. First, a more intense exploitation of labour — longer or more intense working days, so that the same variable capital yields more surplus. Second, the depression of wages below the value of labour-power. Third, and most important, the cheapening of the elements of constant capital: the very productivity that raises the technical composition also lowers the value of machinery and materials, so that the value composition rises more slowly than the technical composition, blunting the fall. Fourth, the relative surplus population — the reserve army — which, by supplying cheap labour, sustains labour-intensive branches and new lines of low composition. Fifth, foreign trade, which cheapens both the elements of constant capital and the means of subsistence, and lets capital invested abroad draw a higher rate of profit. Sixth, the increase in share capital, where enterprises yielding low returns are content with interest-like rates. These factors do not annul the law; they explain why it manifests "more in the tendency to a progressive fall" than as an uninterrupted decline, and why the fall proceeds slowly and unevenly, punctuated rather than smooth. The counter-tendencies are also the reason the law could only ever be established as a tendency — a point that the later critics who claimed to refute it by exhibiting counter-cases often missed, since Marx had already built the counter-cases into the statement of the law.

The chapter’s mandate is stated at the outset.

Counteracting influences must be at work, checking and cancelling the effect of the general law and giving it simply the character of a tendency, which is why we have described the fall in the general rate of profit as a tendential fall. The most general of these factors are as follows.

Marx, Capital III, page 339.

First, more intense exploitation of labour.

The level of exploitation of labour, the appropriation of surplus labour and surplus-value, can be increased by prolonging the working day and making work more intense. These points have been developed in detail in Volume 1, in connection with the production of absolute and relative surplus-value.

Marx, Capital III, page 336.

Second, the depression of wages below the value of labour-power — bracketed from the general analysis, yet registered as among the weightiest checks.

We simply make an empirical reference to this point here, as, like many other things that might be brought in, it has nothing to do with the general analysis of capital, but has its place in an account of competition, which is not dealt with in this work. It is none the less one of the most important factors in stemming the tendency for the rate of profit to fall.

Marx, Capital III, page 342.

Third, the cheapening of the elements of constant capital — the decisive counter-tendency, since the same productivity that multiplies the mass of machinery and materials also devalues them.

In other words, the same development that raises the mass of constant capital in comparison with variable reduces the value of its elements, as a result of the higher productivity of labour, and hence prevents the value of the constant capital, even though this grows steadily, from growing in the same degree as its material volume, i.e. the material volume of the means of production that are set in motion by the same amount of labour-power. In certain cases, the mass of the constant capital elements may increase while their total value remains the same or even falls.

Marx, Capital III, page 343.

Fourth, the relative surplus population, which the law’s own cause continually reproduces.

The creation of such a surplus population is inseparable from the development of labour productivity and is accelerated by it, the same development as is expressed in the decline in the profit rate. The more the capitalist mode of production is developed in a country, the more strikingly does the relative surplus population obtrude there.

Marx, Capital III, page 343.

Fifth, foreign trade — which, Marx notes, works both sides of the ledger.

In so far as foreign trade cheapens on the one hand the elements of constant capital and on the other the necessary means of subsistence into which variable capital is converted, it acts to raise the rate of profit by raising the rate of surplus-value and reducing the value of constant capital. It has a general effect in this direction in as much as it permits the scale of production to be expanded. In this way it accelerates accumulation, while it also accelerates the fall in the variable capital as against the constant, and hence the fall in the rate of profit.

Marx, Capital III, page 344.

The discussion of foreign trade closes with the formula that gathers the entire chapter.

The profit rate does not fall because labour becomes less productive but rather because it becomes more productive. The rise in the rate of surplus-value and the fall in the rate of profit are simply particular forms that express the growing productivity of labour in capitalist terms.

Marx, Capital III, page 347.

Sixth, the growth of share capital: enterprises content with dividend-like returns stand outside the equalization and so hold the measured average up.

This is the case with railways, for example. These do not therefore enter into the equalization of the general rate of profit, since they yield a profit rate less than the average. If they did go in, the average rate would fall much lower. From a theoretical point of view, it is possible to include them, and we should then obtain a profit rate lower than that which apparently exists and is really decisive for the capitalists, since it is precisely in these undertakings that the proportion of constant capital to variable is at its greatest.

Marx, Capital III, page 347.

The richest chapter of the Part draws out the contradictions the law contains. The falling rate of profit and the accumulation that drives it come into conflict: accumulation requires the development of the productive forces, but that development erodes the profit rate that is accumulation's whole motive. Beyond a point this produces an overproduction of capital — a mass of capital too large to be valorized at the accustomed rate, so that capital lies idle or is devalued, and this periodic devaluation, the destruction of capital in crisis, is the violent means by which the system restores a profit rate high enough to resume accumulation. Marx frames the whole tension in the formula that names capital's self-limitation.

The chapter opens by identifying the fall in the rate and the acceleration of accumulation as one movement seen from two sides.

A fall in the profit rate, and accelerated accumulation, are simply different expressions of the same process, in so far as both express the development of productivity. Accumulation in turn accelerates the fall in the profit rate, in so far as it involves the concentration of workers on a large scale and hence a higher composition of capital. On the other hand the fall in the profit rate again accelerates the concentration of capital, and its centralization, by dispossessing the smaller capitalists and expropriating the final residue of direct producers who still have something left to expropriate.

Marx, Capital III, page 346.

Crises enter the analysis not as accidents but as the very form of the solution.

Crises are never more than momentary, violent solutions for the existing contradictions, violent eruptions that re-establish the disturbed balance for the time being. To express this contradiction in the most general terms, it consists in the fact that the capitalist mode of production tends towards an absolute development of the productive forces irrespective of value and the surplus-value this contains, and even irrespective of the social relations within which capitalist production takes place; while on the other hand its purpose is to maintain the existing capital value and to valorize it to the utmost extent possible (i.e. an ever accelerated increase in this value). In its specific character it is directed towards using the existing capital value as a means for the greatest possible valorization of this value. The methods through which it attains this end involve a decline in the profit rate, the devaluation of the existing capital and the development of the productive forces of labour at the cost of the productive forces already produced.

Marx, Capital III, page 357.

Immediately before the famous sentence stands the general form of capital’s relation to its own barriers.

Capitalist production constantly strives to overcome these immanent barriers, but it overcomes them only by means that set up the barriers afresh and on a more powerful scale.

Marx, Capital III, page 358.

The true barrier to capitalist production is capital itself. It is that capital and its self-valorization appear as the starting and finishing point, as the motive and purpose of production; production is production only for capital, and not the reverse, i.e. the means of production are not simply means for a steadily expanding pattern of life for the society of the producers.

Marx, Capital III, page 358.

The passage continues, spelling out the collision of means and end.

The barriers within which the maintenance and valorization of the capital-value has necessarily to move – and this in turn depends on the dispossession and impoverishment of the great mass of the producers – therefore come constantly into contradiction with the methods of production that capital must apply to its purpose and which set its course towards an unlimited expansion of production, to production as an end in itself, to an unrestricted development of the social productive powers of labour. The means – the unrestricted development of the forces of social production – comes into persistent conflict with the restricted end, the valorization of the existing capital. If the capitalist mode of production is therefore a historical means for developing the material powers of production and for creating a corresponding world market, it is at the same time the constant contradiction between this historical task and the social relations of production corresponding to it.

Marx, Capital III, page 358.

Devaluation is then named as the immanent counter-means — and as the mechanism of crisis at once.

The periodical devaluation of the existing capital, which is a means, immanent to the capitalist mode of production, for delaying the fall in the profit rate and accelerating the accumulation of capital value by the formation of new capital, disturbs the given conditions in which the circulation and reproduction process of capital takes place, and is therefore accompanied by sudden stoppages and crises in the production process.

Marx, Capital III, page 358.

Surplus capital and surplus population stand at the two poles of one result.

The so-called plethora of capital is always basically reducible to a plethora of that capital for which the fall in the profit rate is not outweighed by its mass – and this is always the case with fresh offshoots of capital that are newly formed – or to the plethora in which these capitals, which are incapable of acting by themselves, are available to the leaders of great branches of business in the form of credit. This plethora of capital arises from the same causes that produce a relative surplus population and is therefore a phenomenon that complements this latter, even though the two things stand at opposite poles – unoccupied capital on the one hand and an unemployed working population on the other.

Marx, Capital III, page 359.

Marx is precise that the overproduction in question is an overproduction of capital, and only thereby of commodities.

Overproduction of capital and not of individual commodities – though this overproduction of capital always involves overproduction of commodities – is nothing more than over-accumulation of capital. To understand what this over-accumulation is (we shall study it in more detail below), we have only to take it as an absolute. When would the overproduction of capital be absolute? And indeed we refer here to an overproduction which does not just extend to this or that or a few major areas of production, but is rather itself absolute in scope, so that it involves all fields of production.

Marx, Capital III, page 359.

And he defines the limit case exactly.

There would be an absolute overproduction of capital as soon as no further additional capital could be employed for the purpose of capitalist production. But the purpose of capitalist production is the valorization of capital, i.e. appropriation of surplus labour, production of surplus-value, of profit. Thus as soon as capital has grown in such proportion to the working population that neither the absolute labour-time that this working population supplies nor its relative surplus labour-time can be extended (the latter would not be possible in any case in a situation where the demand for labour was so strong, and there was thus a tendency for wages to rise); where, therefore, the expanded capital produces only the same mass of surplus-value as before, there will be an absolute overproduction of capital.

Marx, Capital III, page 360.

From this Marx derives the periodic character of capitalist crisis: the drive to develop the productive forces absolutely collides with the requirement that they be developed only so far as they valorize existing capital, and the collision is resolved, again and again, by crises that destroy enough capital-value to lift the profit rate and start the cycle over. The barrier is not an external limit — scarcity, population, nature — but capital's own social form, its subordination of production to valorization. This is the point at which Marx's economics passes into his theory of the historical limits of the capitalist mode of production: the same law that expresses capital's development of the productive forces also expresses the growing contradiction between those forces and the value-relation that fetters them, the contradiction that the "expropriation of the expropriators" at the end of Volume I named from the other side. The interpretive fights over this chapter — whether the law is theoretically sound (the Okishio critique), whether crisis follows from the profit-rate fall or from disproportion or underconsumption — are held in view for the read-through; what the brief fixes is Marx's own construction of the law as the unfolding of capital's self-contradiction.

Three formulations from the chapter’s later sections belong beside the argument whole. First, the drive against the basis, and what “too much” and “too little” mean inside it.

But the contradiction in this capitalist mode of production consists precisely in its tendency towards the absolute development of productive forces that come into continuous conflict with the specific conditions of production in which capital moves, and can alone move. It is not that too many means of subsistence are produced in relation to the existing population. On the contrary. Too little is produced to satisfy the mass of the population in an adequate and humane way. Nor are too many means of production produced to employ the potential working population.

Marx, Capital III, page 366.

Then the paradox of wealth in its antagonistic form, and the law restated as the first barrier.

It is not that too much wealth is produced. But from time to time, too much wealth is produced in its capitalist, antagonistic forms. The barriers to the capitalist mode of production show themselves as follows: (1) in the way that the development of labour productivity involves a law, in the form of the falling rate of profit, that at a certain point confronts this development itself in a most hostile way and has constantly to be overcome by way of crises.

Marx, Capital III, page 366.

And finally the reason the falling rate matters at all: profit is the system’s sole motor.

And if capital formation were to fall exclusively into the hands of a few existing big capitals, for whom the mass of profit outweighs the rate, the animating fire of production would be totally extinguished. It would die out. It is the rate of profit that is the driving force in capitalist production, and nothing is produced save what can be produced at a profit.

Marx, Capital III, page 368.

Part Four analyses the first of the great functional differentiations of the total capital: the splitting-off of commercial (merchant's) capital, which takes over the buying and selling that the industrial capitalist would otherwise do himself. Two forms are distinguished — commercial capital proper, which deals in commodities (the commodity-capital phase C′–M′ made independent), and money-dealing capital, which handles the technical operations of money (payments, receipts, the management of the reserve). The central problem is a value-theoretic one, and it is the same problem the whole volume keeps posing in new forms: the merchant plainly makes a profit, yet buying and selling create no value. How, then, is commercial profit possible without breaking the law of value? Marx's answer is that commercial capital produces neither value nor surplus-value but shares in the surplus-value produced by industrial capital, drawing the average rate of profit on its own advance as a member of the total capital. Commercial profit is therefore a deduction from industrial surplus-value, a redistribution, not a new source. Chapters 16 and 17 establish this; Chapter 18 analyses the turnover of commercial capital and its effect on the merchant's mark-up; Chapter 19 treats money-dealing capital; Chapter 20 gives the long historical excursus on merchant's capital, which existed for millennia before the capitalist mode of production and whose autonomous power, Marx argues, stands in inverse proportion to the development of that mode.

Commercial capital is the commodity-capital phase of industrial capital given independent existence in a separate set of hands. The merchant advances money to buy commodities from the producer and sell them to the final buyer, performing the metamorphosis C′–M′ on the producer's behalf. Marx insists on the value-theoretic consequence: this activity, being pure circulation, adds nothing.

The definition is given at the outset: commercial capital is a portion of the total social capital, permanently resident in the sphere of circulation.

Commercial capital, then, is nothing but the transformed form of a portion of this circulation capital which is always to be found on the market, in the course of its metamorphosis, and perpetually confined to the circulation sphere. We refer here to a portion only, because another part of the buying and selling of commodities always takes place directly between the industrial capitalists themselves.

Marx, Capital III, page 380.

Commercial capital thus creates neither value nor surplus-value, at least not directly. In so far as it contributes towards shortening the circulation time, it can indirectly help the industrial capitalist to increase the surplus-value he produces.

Marx, Capital III, page 392.

By specializing circulation in one place, commercial capital reduces the total circulation costs and circulation time of the whole system, freeing more of industrial capital for production. It thus indirectly raises the mass of surplus-value produced, and it economizes the money and labour tied up in buying and selling. But none of this makes the merchant a producer of value; it makes him an agent who allows more value to be produced elsewhere, in exchange for a share of it.

The puzzle sharpens: if the merchant adds no value, how does he profit? Marx's solution folds commercial capital into the formation of the general rate of profit. The total surplus-value produced by industrial capital is divided over the total capital — industrial and commercial — so that the average rate of profit is calculated on the sum of the two. The industrial capitalist therefore sells to the merchant below the price of production, at a price that yields the industrialist the average profit on his own capital; the merchant then sells at the full price of production and pockets the difference, which is exactly the average profit on his capital. Commercial profit is thus a portion of the surplus-value produced in industry, ceded to commerce as its share.

The mechanism is stated exactly: once commercial capital enters the equalization, the average profit is calculated on the total productive and commercial capital together, and the industrial capitalist as such sells below the commodity's full production price.

The average rate of profit already takes into account the part of the total profit that accrues to commercial capital. The real value or production price of the total commodity capital is therefore k + p + m (where m is commercial profit). The price of production, i.e. the price at which the industrial capitalist sells as such, is therefore less than the real production price of the commodity; or, if we consider all commodities together, the price at which the industrial capitalist class sells them is less than their value.

Marx, Capital III, page 398.

The merchant's mark-up therefore realizes value that is already there — surplus-value the industrialist's sale price left unrealized — and the general rate of profit is formed with the merchant's deduction already reckoned in.

The merchant’s sale price is higher than his purchase price not because it is above the total value, but rather because his purchase price is below this total value.

Commercial capital is involved in the equalization of surplus-value that forms average profit, therefore, even though it is not involved in the production of this surplus-value. The general rate of profit thus already takes account of the deduction from the surplus-value which falls to commercial capital, i.e. a deduction from the profit of industrial capital.

Marx, Capital III, page 400.

commercial profit is reduced to the aliquot share of the total surplus-value that accrues to commercial capital as an aliquot part of the total capital concerned in the process of social reproduction.

Marx, Capital III, page 401.

The merchant's mark-up is therefore not an addition to value made in circulation but a slice of the surplus-value already produced in the workshop, redistributed by the same competitive equalization that formed the general rate of profit in Part Two. The value theory is preserved: no value is created by buying and selling; the commercial profit is subtracted from the industrial surplus-value. What looks, on the surface, like the merchant "buying cheap and selling dear" is, at the level of the total capital, the merchant drawing the average rate of profit on his advance out of the common pool of surplus labour.

Chapter 18 examines the turnover of commercial capital and its curious effects. Because a single commercial capital can serve many industrial capitals and turn over many times a year, the number of its turnovers governs the mass of commodities it can handle with a given advance, and thereby the commercial mark-up. But Marx warns that the merchant's own experience inverts the real relation: the merchant sees the rate of profit as determined by his turnover and mark-up, not by the surplus-value produced in industry, and so commercial turnover becomes one more surface phenomenon that hides the origin of profit in production. Chapter 19 treats money-dealing capital — the specialized handling of the money side of circulation: receipts and payments, the holding of reserves, the bookkeeping of money, later the business of banking's technical operations. Like commercial capital, money-dealing capital produces no value; it economizes the costs and labour that the circulation of money would otherwise impose on each individual capital, and draws its profit as a share of the general surplus-value for performing this technical service. Both forms are, in Marx's phrase, differentiations within the circulation of the total capital, not new springs of value.

The warning against the merchant's standpoint is explicit: seen from the counting-house, price looks like a creature of circulation.

It seems in particular, through this influence of the turnover, as if the circulation process as such determines the prices of commodities, and that this is within certain limits independent of the process of production. All superficial and distorted views of the overall reproduction process are derived from consideration of commercial capital and from the notions that its specific movements give rise to in the heads of the agents of circulation.

Marx, Capital III, page 428.

Marx immediately widens the point into a statement of method — the passage that anticipates the science-and-appearance thesis of Part Seven.

As the reader will have recognized in dismay, the analysis of the real, inner connections of the capitalist production process is a very intricate thing and a work of great detail; it is one of the tasks of science to reduce the visible and merely apparent movement to the actual inner movement. Accordingly, it will be completely self-evident that, in the heads of the agents of capitalist production and circulation, ideas must necessarily form about the laws of production that diverge completely from these laws and are merely the expression in consciousness of the apparent movement. The ideas of a merchant, a stock-jobber or a banker are necessarily quite upside-down.

Marx, Capital III, page 428.

Chapter 19 defines money-dealing capital by the same operation of autonomization that produced commercial capital.

The purely technical movements that money undergoes in the circulation process of industrial capital, and, we can now add, also that of commodity-dealing, commercial capital (since this takes over part of the circulation movement of industrial capital as its own specific movement) – these movements, having acquired autonomy as the function of a special capital which practises them, and them alone, as its specific operations, transform this capital into money-dealing capital. A part of the industrial capital, and more directly also of the commercial capital, exists throughout not only in the money form, as money capital in general, but as money capital in the process of these technical functions. A definite part of the total capital now separates off and becomes autonomous in the form of money capital, its capitalist function consisting exclusively in that it performs these operations for the entire class of industrial and commercial capitalists.

Marx, Capital III, page 431.

The Part closes with a historical excursus that reverses the temporal order of the analysis. Merchant's capital is the oldest free form of capital — it existed in antiquity, in the ancient world and the Middle Ages, long before capital had seized hold of production. In those pre-capitalist settings it profited precisely by buying cheap and selling dear between communities and modes of production that did not produce for exchange, living in the "pores" of society and battening on the difference between distant price levels. Marx draws the dialectical conclusion that has attracted much later comment: the autonomous power of merchant's capital stands in inverse proportion to the development of the capitalist mode of production. Where production itself is capitalist, commerce is subordinated to industry, reduced to an agent of industrial capital's circulation, and its profit is regulated down to the average rate; where production is not yet capitalist, merchant's capital rules the exchange but cannot transform production, and its independent supremacy is a mark of the immaturity, not the maturity, of capital. Merchant's capital can help dissolve the old modes of production, but it cannot by itself create the capitalist mode; that requires the revolution in production analysed in Volume I. The excursus thus places the whole Part in historical perspective and guards against the error — common to bourgeois economics and to some socialist accounts alike — of treating profit-upon-alienation, the merchant's ancient trick, as the model of capitalist profit in general.

The historical thesis is compressed into a single dialectical formula.

The independent and preponderant development of capital in the form of commercial capital is synonymous with the non-subjection of production to capital, i.e. with the development of capital on the basis of a social form of production that is foreign to it and independent of it. The independent development of commercial capital thus stands in inverse proportion to the general economic development of society.

Marx, Capital III, page 445.

And the ancient appearance — profit born in exchange itself, the merchant pocketing a difference between unequal values — is described in full, as the pre-capitalist ground of the illusion that profit arises in circulation.

At first appearance, pure and independent commercial profit seems impossible so long as products are sold at their values. ‘Buy cheap and sell dear’ is the law of commerce, not the exchange of equivalents. The concept of value is involved here in so far as the various commodities are all values and therefore money; from the qualitative point of view, they are equally expressions of social labour. But they are not equal values. The quantitative relationship in which products exchange is at first completely accidental. They assume the commodity form in so far as they are in some way exchangeable, i.e. are expressions of some third thing. Continued exchange, and regular reproduction for exchange, gradually abolishes this accidental character. At the outset, however, this does not occur for the producers and consumers but rather for the mediator between the two, the merchant, who compares money prices and pockets the difference. It is through his movement that the equivalence is established.

Marx, Capital III, page 447.

This is the longest and most difficult Part of Volume III — the one Engels assembled, with acknowledged struggle, from Marx's most disordered and unfinished manuscripts. Its subject is the second great differentiation of capital: the splitting of profit into interest and profit of enterprise, and the emergence of interest-bearing capital as a form of its own. Here the descent into the fetishized surface reaches its lowest point. Money is lent as capital and returns as money plus interest, M–M′, and in this form capital appears to breed money out of itself as a pear tree bears pears, with no visible trace of production, labour, or surplus-value. Interest-bearing capital is, for Marx, the most externalized and fetish-like form of the capital relation, the form in which the social relation of exploitation is most completely obliterated and capital appears as a self-moving thing. Chapters 21 to 23 develop interest-bearing capital and the merely quantitative, competition-fixed division of the average profit into interest (which appears to accrue to capital as property) and profit of enterprise (which appears as the wage of the active capitalist's labour). Chapter 24 draws out the fetish in its purest expression. Chapters 25 through 35 — the credit chapters, the most fragmentary in all of Marx — analyse credit, banking, fictitious capital, the money market, and the confrontation of money capital with real capital, material that would become the starting point for all later Marxist work on finance and crisis. Chapter 36 returns historically to usurer's capital, the antediluvian form of interest-bearing capital. The brief holds the load-bearing formulations of the fetish and of fictitious capital, reconstructs the credit material at the level of its essential concepts given its unfinished state, and keeps the finance-and-crisis reception in view.

Interest-bearing capital arises when money itself becomes a commodity of a special kind: the owner of money lends it to a functioning capitalist, who uses it as capital to produce the average profit, and returns it with a portion of that profit as interest. Money thus acquires, on top of its ordinary use-value, the "additional use-value" of functioning as capital — of producing a profit. The lender parts with the money and receives it back augmented; the circuit M–M′ is complete, apparently without any intervening production. Marx stresses that capital here becomes a commodity that is sold, uniquely, without changing owners in the way ordinary commodities do — it is alienated as a loan and returns to its owner.

On the basis of capitalist production, money – taken here as the independent expression of a sum of value, whether this actually exists in money or in commodities – can be transformed into capital, and through this transformation it is turned from a given, fixed value into a self-valorizing value capable of increasing itself. It produces profit, i.e. it enables the capitalist to extract and appropriate for himself a certain quantity of unpaid labour, surplus product and surplus-value. In this way the money receives, besides the use-value which it possesses as money, an additional use-value, namely the ability to function as capital. Its use-value here consists precisely in the profit that it produces when transformed into capital. In this capacity of potential capital, as a means to the production of profit, it becomes a commodity, but a commodity of a special kind. Or what comes to the same thing, capital becomes a commodity.

Marx, Capital III, page 459.

The profit the borrowing capitalist produces then splits in two. The part he pays to the lender is interest; the part he keeps is profit of enterprise. Marx's decisive point is that this division is purely quantitative and has no basis in the production of value: interest and profit of enterprise are not two different sources of income but two shares of the one surplus-value, and where the line between them falls is settled only by the competition between lenders and borrowers — by supply and demand for loanable money capital, with no "natural" rate to anchor it. Yet the division, once made, generates a powerful mystification. Interest comes to appear as the yield of capital-as-property, of mere ownership, accruing to the sleeping owner; profit of enterprise comes to appear as the reward of the active capitalist's own labour of superintendence, a kind of wage. The single relation of exploitation is thus refracted into two apparently independent and even opposed incomes — the passive owner's interest and the active manager's "wages" — and the surplus labour that is the source of both drops entirely out of view.

That no law of value fixes where the line falls is stated without qualification.

The prevailing average rate of interest in a country, as distinct from the constantly fluctuating market rate, cannot be determined by any law. There is no natural rate of interest, therefore, in the sense that economists speak of a natural rate of profit and a natural rate of wages.

Marx, Capital III, page 484.

And the mystification bred by the quantitative division is spelled out: confronted with the antithesis of owner and functionary, everyone forgets what is being divided.

That his function as a capitalist consists in producing surplus-value, i.e. unpaid labour, and in the most economical conditions at that, is completely forgotten in the face of the antithesis that interest accrues to the capitalist even if he does not perform any function as capitalist, but is simply the owner of capital; while profit of enterprise, on the other hand, accrues to the functioning capitalist even if he is not the owner of the capital with which he functions. In the face of the antithetical form of the two parts into which profit and thus surplus-value divides, it is forgotten that both are simply parts of surplus-value and that such a division can in no way change its nature, its origin and its conditions of existence.

Marx, Capital III, page 504.

This chapter is where the fetishism that began in Volume I with the commodity reaches its consummation. In interest-bearing capital, the form M–M′ appears without any mediating content — money that makes money, value that grows of itself, the social relation of production wholly effaced into a property of a thing.

The chapter opens with the thesis in a single sentence, and with the comparison to commercial capital that measures how much further the effacement has gone.

In interest-bearing capital, the capital relationship reaches its most superficial and fetishized form. Here we have M–M′, money that produces more money, self-valorizing value, without the process that mediates the two extremes. In commercial capital, M–C–M′, at least the general form of the capitalist movement is present, even though this takes place only in the circulation sphere, so that profit appears as merely profit upon alienation; but for all that, it presents itself as the product of a social relation, not the product of a mere thing. The form of commercial capital still exhibits a process, the unity of opposing phases, a movement that breaks down into two opposite procedures, the purchase and sale of commodities. This is obliterated in M–M′, the form of interest-bearing capital.

Marx, Capital III, page 515.

Capital appears as a mysterious and self-creating source of interest, of its own increase. The thing (money, commodity, value) is now already capital simply as a thing; the result of the overall reproduction process appears as a property devolving on a thing in itself.

Marx, Capital III, page 516.

The same page carries the fetish to its finished figure — money breeding money as a natural property, the pear tree bearing pears.

In interest-bearing capital, therefore, this automatic fetish is elaborated into its pure form, self-valorizing value, money breeding money, and in this form it no longer bears any marks of its origin. The social relation is consummated in the relationship of a thing, money, to itself. Instead of the actual transformation of money into capital, we have here only the form of this devoid of content. As in the case of labour-power, here the use-value of money is that of creating value, a greater value than is contained in itself. Money as such is already potentially self-valorizing value, and it is as such that it is lent, this being the form of sale for this particular commodity. Thus it becomes as completely the property of money to create value, to yield interest, as it is the property of a pear tree to bear pears.

Marx, Capital III, page 518.

Then the inversion inside the division of profit itself: the derivative part, interest, comes to look like the original fruit of capital.

There is still a further distortion. While interest is simply one part of the profit, i.e. the surplus-value, extorted from the worker by the functioning capitalist, it now appears conversely as if interest is the specific fruit of capital, the original thing, while profit, now transformed into the form of profit of enterprise, appears as a mere accessory and trimming added in the reproduction process. The fetish character of capital and the representation of this capital fetish is now complete.

Marx, Capital III, page 516.

In M–M′ we have the irrational form of capital, the misrepresentation and objectification of the relations of production, in its highest power.

Marx, Capital III, page 516.

The chapter's most vivid figure follows: capital as a thing that bears interest whatever its owner is doing — the hoarder's dream come true.

In interest-bearing capital, the movement of capital is abbreviated. The mediating process is omitted, and a capital of 1,000 is characterized as a thing that in itself is 1,000 and in a certain period is transformed into 1,100, just as wine in the cellar improves its use-value after a given period of time. Capital is now a thing, but the thing is capital. The money’s body is now by love possessed. As soon as it is lent, or else applied in the reproduction process (in so far as it yields interest to the functioning capitalist as its owner, separate from profit of enterprise), interest accrues to it no matter whether it is asleep or awake, at home or abroad, by day and by night. In interest-bearing capital, therefore (and all capital is money capital in its value expression, or is now taken as the expression of money capital), the hoarder’s most fervent wish is realized.

Marx, Capital III, page 515.

Marx's word for it is that in interest-bearing capital the fetish is complete: capital appears as an automatic self-valorizing thing, money that lays golden eggs by its mere existence, and the whole apparatus of production and exploitation that actually generates the return has vanished from the form. Where the commodity-fetish (Volume I) presented a social relation as a property of things, interest-bearing capital presents the whole circuit of self-valorizing value as a property of a thing, achieved without process. It is, Marx says, the form in which vulgar economics finds its ready-made material, since here the surface offers a "capital" that yields income with no visible connection to labour at all — the perfect ground for the trinity formula of Part Seven, in which capital-interest takes its place beside land-rent and labour-wages as an apparently self-evident source of revenue.

The credit chapters are the great unfinished heart of the volume — Engels warned that here more than anywhere he worked from fragments, notes, and undigested excerpts — but their essential concepts are clear and enormously consequential. Credit-money grows out of money's function as means of payment (Volume I): the bill of exchange, the promise to pay, circulates in place of money and becomes the basis of commercial credit; banking credit then concentrates the idle money of all classes into loanable capital and advances it to production. Credit accelerates the turnover of capital, equalizes the rate of profit, economizes on money, and enables accumulation to leap beyond the limits of any individual capital — and by the same means it drives the contradictions of the system to their extreme, becoming the principal lever of overproduction and speculation, and the mechanism through which local disturbances become general crises.

Chapter 27, on the role of credit, carries the Part's most far-reaching political passages. In the joint-stock company, ownership and function come apart, and Marx reads the separation as capital's own self-transcendence.

In joint-stock companies, the function is separated from capital ownership, so labour is also completely separated from ownership of the means of production and of surplus labour. This result of capitalist production in its highest development is a necessary point of transition towards the transformation of capital back into the property of the producers, though no longer as the private property of individual producers, but rather as their property as associated producers, as directly social property. It is furthermore a point of transition towards the transformation of all functions formerly bound up with capital ownership in the reproduction process into simple functions of the associated producers, into social functions.

Marx, Capital III, page 568.

This is the abolition of the capitalist mode of production within the capitalist mode of production itself, and hence a self-abolishing contradiction, which presents itself prima facie as a mere point of transition to a new form of production. It presents itself as such a contradiction even in appearance. It gives rise to monopoly in certain spheres and hence provokes state intervention. It reproduces a new financial aristocracy, a new kind of parasite in the guise of company promoters, speculators and merely nominal directors; an entire system of swindling and cheating with respect to the promotion of companies, issue of shares and share dealings. It is private production unchecked by private ownership.

Marx, Capital III, page 567.

The cooperative factories are read as the same transition in positive form.

The cooperative factories run by workers themselves are, within the old form, the first examples of the emergence of a new form, even though they naturally reproduce in all cases, in their present organization, all the defects of the existing system, and must reproduce them. But the opposition between capital and labour is abolished here, even if at first only in the form that the workers in association become their own capitalist, i.e. they use the means of production to valorize their own labour.

Marx, Capital III, page 571.

Capitalist joint-stock companies as much as cooperative factories should be viewed as transition forms from the capitalist mode of production to the associated one, simply that in the one case the opposition is abolished in a negative way, and in the other in a positive way.

Marx, Capital III, page 572.

The same chapter states the crisis-theoretic role of credit — the lever formulation on which the whole later literature rests.

If the credit system appears as the principal lever of overproduction and excessive speculation in commerce, this is simply because the reproduction process, which is elastic by nature, is now forced to its most extreme limit; and this is because a great part of the social capital is applied by those who are not its owners, and who therefore proceed quite unlike owners who, when they function themselves, anxiously weigh the limits of their private capital. This only goes to show how the valorization of capital founded on the antithetical character of capitalist production permits actual free development only up to a certain point, which is constantly broken through by the credit system. The credit system hence accelerates the material development of the productive forces and the creation of the world market, which it is the historical task of the capitalist mode of production to bring to a certain level of development, as material foundations for the new form of production. At the same time, credit accelerates the violent outbreaks of this contradiction, crises, and with these the elements of dissolution of the old mode of production.

Marx, Capital III, page 572.

The credit system has a dual character immanent in it: on the one hand it develops the motive of capitalist production, enrichment by the exploitation of others’ labour, into the purest and most colossal system of gambling and swindling, and restricts ever more the already small number of the exploiters of social wealth; on the other hand however it constitutes the form of transition towards a new mode of production.

Marx, Capital III, page 572.

The chapter's most fertile concept is fictitious capital. Titles to future income — government bonds, shares, mortgages — are bought and sold as though they were themselves capital, at prices got by capitalizing the expected income at the going rate of interest. But this "capital" is fictitious: the money once lent to the state has been spent, the real capital of a company exists in its plant and goods, and the paper claims are only duplicate, tradeable titles to streams of revenue.

The generative principle comes first: the interest form makes any income whatever look like the yield of a capital.

The form of interest-bearing capital makes any definite and regular monetary revenue appear as the interest on a capital, whether it actually derives from a capital or not. The money income is first transformed into interest, and with the interest we then have the capital from which it derives. Likewise, with interest-bearing capital, any sum of value appears as capital as soon as it is not spent as revenue; i.e. as a ‘principal’ in contrast to the possible or actual interest it can bear.

Marx, Capital III, page 595.

The national debt is the paradigm: the lent sum was consumed long ago, yet the claim on it circulates as capital.

No matter how these transactions are multiplied, the capital of the national debt remains purely fictitious, and the moment these promissory notes become unsaleable, the illusion of this capital disappears. Yet this fictitious capital has its characteristic movement for all that, as we shall see soon.

Marx, Capital III, page 596.

The formation of fictitious capital is known as capitalization. Any regular periodic income can be capitalized by reckoning it up, on the basis of the average rate of interest, as the sum that a capital lent out at this interest rate would yield.

Marx, Capital III, page 597.

Shares differ from state paper in that a real capital stands behind them — but the capital does not exist twice, and the share is only a title.

The shares in railway, mining, shipping companies, etc. represent real capital, i.e. capital invested and functioning in these enterprises, or the sum of money that was advanced by the shareholders to be spent in these enterprises as capital. It is in no way ruled out here that these shares may be simply a fraud. But the capital does not exist twice over, once as the capital value of the ownership titles, the shares, and then again as the capital actually invested or to be invested in the enterprises in question. It exists only in the latter form, and the share is nothing but an ownership title, pro rata, to the surplus-value which this capital is to realize.

Marx, Capital III, page 597.

The summary formulation gathers the whole doctrine of moneyed capital into two sentences and a verdict.

All these securities actually represent nothing but accumulated claims, legal titles, to future production. Their money or capital value either does not represent capital at all, as in the case of national debts, or is determined independently of the real capital value they represent.

In all countries of capitalist production, there is a tremendous amount of so-called interest-bearing capital or ‘moneyed capital’ in this form. And an accumulation of money capital means for the most part nothing more than an accumulation of these claims to production, and an accumulation of the market price of these claims, of their illusory capital value.

Marx, Capital III, page 599.

Because the market value of these paper titles moves with the rate of interest and with speculative expectation, quite independently of the real capital or income they nominally represent, a whole sphere of accumulation opens up — the money market, the stock exchange — that appears wholly autonomous from production, doubling and redoubling claims on a surplus-value that has yet to be produced. Marx analyses the confrontation of this money capital with real capital across several chapters (the "money capital and real capital" chapters), the drain and reflux of the reserve, the role of the Bank of England, and his running polemic against the Currency School and the Bank Act of 1844. The material is unfinished and often merely documentary, but its concepts — credit as the lever of accumulation and of crisis, fictitious capital, the autonomization of the financial sphere — are the direct ancestors of the entire Marxist theory of finance capital and financial crisis, from Hilferding onward. The brief fixes these load-bearing concepts and leaves the reconstruction of the documentary detail for the read-through.

As with commerce, the Part closes historically. Usurer's capital is the antediluvian form of interest-bearing capital, existing wherever money exists, and it operates through the two classic channels: lending to the extravagant great (the spendthrift landowner, the prince) and lending to the small producer (the peasant, the artisan) who owns his conditions of labour. In pre-capitalist conditions usury is purely destructive and conservative at once: it ruins and expropriates the producers without transforming the mode of production, sucking the wealth out of the old society while leaving its productive basis unchanged, and so it is hated by all the old ruling classes even as they depend on it. Marx's dialectical point is that usury, like merchant's capital, plays a historically dissolving role — it helps to concentrate money-wealth and to ruin the old forms of property — but it cannot by itself create the capitalist mode of production; that required the divorce of the producer from the means of production analysed in Volume I's account of primitive accumulation. Only once the capitalist mode is established does interest-bearing capital lose its independent, destructive character and become a subordinate moment of the credit system, serving industrial and commercial capital instead of preying on pre-capitalist producers. The chapter thus completes the volume's recurring lesson: the fetishized surface forms — commercial profit, interest — have ancient pedigrees, but their meaning is wholly transformed once they are subsumed under the capitalist production of surplus-value, and to read the modern forms through their ancient appearances, as vulgar economics does, is to mistake the surface for the substance.

Ground-rent is the third great form into which surplus-value is transformed and distributed, and the most extensive Part of the volume. Its problem is set by the results of Part Two. Competition equalizes the rate of profit by letting capital flow freely between branches; but landed property is a monopoly that bars free entry to the land, and this monopoly allows the landowner to intercept, as rent, a surplus profit that would otherwise be competed away. Marx's task is to explain ground-rent strictly within the law of value — to show that rent is not a payment out of nothing, nor a mysterious productivity of the soil, but a portion of surplus-value produced by agricultural labour and appropriated by the landowner by virtue of a monopoly. He distinguishes two great forms. Differential rent arises from differences between plots — in fertility (Form I) or in the productivity of successive capital investments on the same plot (Form II) — which let the better-placed capitals produce below the regulating price of production and pocket a surplus profit that the landlord takes as rent. Absolute rent arises from landed property as such: because the monopoly prevents capital from flowing into agriculture freely, and because agriculture has historically a lower organic composition than industry (so its products contain more surplus-value than their price of production would allow), agricultural products can sell above their price of production, and the excess is absolute rent. Chapter 37 sets up the framework; Chapters 38–44 develop differential rent in exhaustive arithmetical detail; Chapter 45 derives absolute rent; Chapters 46–47 treat the rent of buildings and mines, the price of land, and — closing the whole analysis of rent — the genesis of capitalist ground-rent out of its pre-capitalist forms of labour-rent, rent in kind, and money-rent. The brief holds the essential concepts and movements and reconstructs the long quantitative demonstrations rather than reproducing them.

Marx sets the framework by insisting that capitalist ground-rent presupposes capitalist agriculture: three classes confront one another on the land — the landowner, the capitalist farmer who rents the land and employs wage-labourers, and the agricultural workers. Rent is what the farmer pays the landowner for the use of the soil, over and above the average profit on his capital. The whole analysis therefore concerns not any payment for land but the specific economic form in which a surplus above the average profit is claimed by the owner of a natural monopoly. Marx is emphatic that rent must be explained as a transformed portion of surplus-value, never as a gift of nature: the soil adds use-value, but only labour adds value, and rent is a share of the surplus labour of the agricultural workers, intercepted by landed property. The governing category is surplus profit — profit above the average — which under the monopoly of land is fixed and appropriated as rent.

The chapter opens with the juridical fact on which everything rests.

Landed property presupposes that certain persons enjoy the monopoly of disposing of particular portions of the globe as exclusive spheres of their private will to the exclusion of all others. Once this is given, it is a question of developing the economic value of this monopoly, i.e. valorizing it, on the basis of capitalist production.

Marx, Capital III, page 752.

Its historical presupposition is the separation of the producer from the land, established in Volume I's account of primitive accumulation.

In the section on ‘Primitive Accumulation’ (Volume 1, Part 8) we saw how this mode of production presupposes on the one hand that the direct producers are freed from the position of a mere appendage of the soil (in the form of bondsmen, serfs, slaves, etc.) and on the other hand the expropriation of the mass of the people from the land. To that extent, the monopoly of landed property is a historical precondition for the capitalist mode of production and remains its permanent foundation, as with all previous modes of production based on the exploitation of the masses in one form or the other.

Marx, Capital III, page 753.

Capitalism then completes the divorce, stripping the land relation of every social integument until only the monetary tax of the monopolist remains.

It is one of the great results of the capitalist mode of production that on the one hand it transforms agriculture from a merely empirical set of procedures, mechanically handed down and practised by the most undeveloped portion of society, into a conscious scientific application of agronomy, in so far as this is at all possible within the conditions of private property; that on the one hand it detaches landed property completely from relations of lordship and servitude, while on the other hand it completely separates the land as a condition of labour from landed property and the landlord, for whom moreover this land represents nothing but a certain monetary tax that his monopoly permits him to extract from the industrial capitalist, the farmer. It undoes the connection to such an extent that the landed proprietor can spend his entire life in Constantinople, while his landed property remains in Scotland.

Marx, Capital III, page 754.

And the definition of rent itself arrives with the three classes of the framework.

Ground-rent is thus the form in which landed property is economically realized, valorized. We have together here, moreover, and confronting one another, all three classes that make up the framework of modern society – wage-labourer, industrial capitalist, landowner.

Marx, Capital III, page 756.

Differential rent is the form Marx develops most fully, refining Ricardo's theory while removing its errors. Its principle: because agricultural products from land of different quality must all sell at one market price, and because that regulating price is governed by production on the worst land in cultivation (the land that must be worked to meet demand, and which must yield the average profit or it would not be farmed), the better lands produce their output below the regulating price. The difference between the individual price of production on the superior land and the general regulating price is a surplus profit, and the landowner appropriates it as differential rent.

The principle is established on the waterfall example of Chapter 38, before any question of soil fertility enters.

Firstly, the surplus profit of those producers who use natural water-power as their motive force behaves first of all just like any other surplus profit (this category has already been developed in our presentation of the price of production) which is not the chance result of transactions in the circulation process, of accidental fluctuations in market price. This surplus profit is thus similarly equal to the difference between the individual price of production of these favoured producers and the general social price of production in the sphere of production as a whole, which is what governs the market.

Marx, Capital III, page 780.

this surplus profit is transformed into ground-rent.

Marx, Capital III, page 788. The clause is Marx's statement of the general form differential rent takes; the wording is confirmed against the EPUB.

Marx distinguishes two forms of this surplus profit. Differential Rent I (Chapters 39–40) arises from differences between separate plots of land — differences of natural fertility and of location relative to markets — cultivated with equal capitals. Differential Rent II (Chapters 41–43) arises from the differing productivity of successive doses of capital applied to the same plot: as more capital is invested intensively, each dose may yield differently, and the surplus profit generated by the more productive doses again becomes rent. The long chapters work through the two forms in exhaustive tables, tracing what happens under constant, rising, and falling regulating prices, and how the two forms interact — the arithmetic that so many readers have found forbidding but which is Marx's demonstration that the whole phenomenon is generated by the value relations, not by any special power of the soil. The decisive theoretical point recurs throughout: differential rent does not raise the price of agricultural produce; it is a consequence of the price being regulated by the worst land, and it distributes to the landowners a surplus profit that would exist even if no rent were paid.

Chapter 40 states the identity of principle between the two forms — and the specific difficulty Form II raises for the landlord's capture of the surplus.

The surplus profits and the varying rates of surplus profit for different portions of capital value are formed in a uniform way in both cases. And rent is nothing but a form of this surplus profit, surplus profit in fact forming its substance. None the less, the second method does give rise to certain difficulties as regards the transformation of surplus profit into rent, this change in form that involves the transfer of surplus profits from the capitalist farmer to the proprietor of the land.

Marx, Capital III, page 813.

Differential rent explains why better land pays more than worse, but not why the worst land — which yields only the average profit and no surplus over it — pays any rent at all. Yet in reality the landowner will not let even the poorest land be farmed for nothing. To explain this rent on the marginal land, independent of any difference in fertility, Marx introduces absolute rent, and grounds it in the monopoly of landed property combined with the low organic composition of agriculture.

The barrier itself is named first — landed property as a positive obstruction that no calculation of the farmer's can wish away.

Differential rent presupposes precisely the monopoly of landed property, landed property as a barrier to capital, for otherwise the surplus profit would not be transformed into ground-rent and would not accrue to the landlord instead of to the farmer. And landed property remains such a barrier even where rent in the form of differential rent disappears, i.e. on type A land.

Marx, Capital III, page 885.

whether this absolute rent is equal to the whole extra value over and above the price of production, or only to a part of this, agricultural products are always sold at a monopoly price, not because their price stands above their value but rather because it is equal to their value, or is below their value but above their price of production.

Marx, Capital III, page 897.

The whole doctrine is then compressed into one summary statement near the chapter's close.

The essence of absolute rent consists in this: equally large capitals produce different amounts of surplus-value in different spheres of production according to their differing average composition, given an equal rate of surplus-value or equal exploitation of labour. In industry these different amounts of surplus-value are equalized to give the average profit and are divided uniformly between the individual capitals as aliquot parts of the total capital. Landed property, whenever production needs land, whether for agriculture or for the extraction of raw materials, blocks this equalization for the capitals invested on the land and captures a portion of surplus-value which would otherwise go into the equalization process, giving the general rate of profit. Rent then forms a part of the value of commodities, in particular of their surplus-value, which simply accrues to the landowners who extract it from the capitalists, instead of to the capitalist class who have extracted it from the workers.

Marx, Capital III, page 906.

The argument runs: because agriculture is (historically) a sphere of lower-than-average organic composition, the value of its products stands above their price of production — it contains more surplus-value than the average rate of profit would return. In manufacturing, competition would redistribute that excess into the general profit rate; but landed property blocks the free inflow of capital into agriculture, preventing the equalization, so the excess of value over price of production is not competed away and can be retained. Landed property intercepts it as absolute rent — a rent that exists purely because the monopoly of land withholds agricultural surplus-value from the equalization process. Absolute rent is therefore not a payment above value but a portion of the surplus-value produced in agriculture itself, kept from flowing into the general pool by the barrier of landed property. Marx notes that the argument depends on agriculture's below-average composition, a historical rather than eternal condition — a qualification his later readers have pressed hard, and which the brief flags without adjudicating.

Chapter 46 extends the analysis to rents that are not agricultural in the strict sense — the rent of building land (governed largely by location and by differential rent, and swollen by the monopoly of urban sites), the rent of mines (differential rent on the richness and accessibility of deposits), and monopoly rent proper (as with a vineyard producing a wine of unique quality that sells at a price fixed only by the buyers' ability to pay). Marx also treats here the price of land, which is nothing but capitalized rent: land, having no value (no labour produced it), nonetheless has a price, obtained by capitalizing its rent at the going rate of interest — one more instance of the fictitious-capital form from Part Five, and a demonstration that the price of land is a derivative of rent and the interest rate, not a source of value.

The concealment worked by the land's price is stated exactly: a capitalized tribute passes for a purchased equivalent.

The fact that it is only the title a number of people have to property in the earth that enables them to appropriate a part of society’s surplus labour as tribute, and in an ever growing measure as production develops, is concealed by the fact that the capitalized rent, i.e. precisely this capitalized tribute, appears as the price of land, which can be bought and sold just like any other item of trade. For the buyer, therefore, his claim to rent does not appear as something obtained for nothing, without labour, risk or the entrepreneurial spirit of capital, but rather as the return for his equivalent.

Marx, Capital III, page 910.

And the chapter lifts, for a moment, into the judgement of a future society on private property in the earth.

From the standpoint of a higher socio-economic formation, the private property of particular individuals in the earth will appear just as absurd as the private property of one man in other men. Even an entire society, a nation, or all simultaneously existing societies taken together, are not the owners of the earth. They are simply its possessors, its beneficiaries, and have to bequeath it in an improved state to succeeding generations, as boni patres familias.

Marx, Capital III, page 911.

Chapter 47, on the genesis of capitalist ground-rent, closes the Part and reaches back into history. Marx traces the forms of rent through which surplus labour has been pumped from the direct producer on the land: labour rent, where the peasant works part of the week on his own plot and part on the lord's demesne, and the surplus labour is visibly separate in time and space; rent in kind, where the surplus is delivered as a portion of the product; money rent, where it is delivered as money, which begins to dissolve the old relation and to turn the peasant into something closer to a tenant; and finally capitalist ground-rent proper, which presupposes the capitalist farmer and wage-labour, and in which rent is the surplus above the average profit. The sequence shows ground-rent to be a historically specific form of the same underlying relation — the extraction of surplus labour from the direct producer — and confirms the volume's method: the categories of the capitalist surface (profit, interest, rent) are transformed forms of surplus-value, each with a history, and none of them an original source of the wealth they distribute.

At the centre of the chapter stands the methodological declaration on which the whole comparative history of rent forms rests — the most far-reaching single statement of historical materialism in Capital.

The specific economic form in which unpaid surplus labour is pumped out of the direct producers determines the relationship of domination and servitude, as this grows directly out of production itself and reacts back on it in turn as a determinant. On this is based the entire configuration of the economic community arising from the actual relations of production, and hence also its specific political form. It is in each case the direct relationship of the owners of the conditions of production to the immediate producers – a relationship whose particular form naturally corresponds always to a certain level of development of the type and manner of labour, and hence to its social productive power – in which we find the innermost secret, the hidden basis of the entire social edifice, and hence also the political form of the relationship of sovereignty and dependence, in short, the specific form of state in each case.

Marx, Capital III, page 927.

The final Part is the culmination of the entire work. Having followed surplus-value out to its distributed forms — profit, interest, rent — Marx now assembles the finished surface of capitalist society and shows it to be a completed system of mystification. Each class draws a revenue that appears to spring from a source of its own: the capitalist's profit and interest from capital, the landowner's rent from land, the worker's wages from labour. This is the trinity formula, and it presents the three forms of revenue as though capital, land, and labour were three independent, co-ordinate sources of value — obliterating the truth established across three volumes, that all three revenues are portions of the single surplus-value produced by living labour and merely distributed among the classes. Chapter 48 dissects the trinity formula as the consummation of the fetishism that began with the commodity; Chapters 49 and 50 return to the analysis of the production process behind the distributed revenues and to the illusions competition breeds; Chapter 51 states the relation between the distribution relations and the production relations that determine them; Chapter 52, the famous fragment on classes, breaks off after two pages at the threshold of the question with which the whole work would have closed. The brief carries the load-bearing formulations of the trinity formula and the "religion of everyday life," and reconstructs the rest at the level of its essential movement, noting where the manuscript is unfinished.

The trinity formula — capital yielding profit/interest, land yielding rent, labour yielding wages — is the fully developed fetishism of capitalist production, the point at which the social relation of exploitation is most completely dissolved into the appearance of three natural, co-ordinate sources of revenue.

The chapter opens by naming its object whole, and by reducing the formula at once to its purest form.

Capital–profit (profit of enterprise plus interest), land–ground-rent, labour–wages, this trinity form holds in itself all the mysteries of the social production process.

Since it is interest that appears as the specific and characteristic product of capital, as we have already seen, with profit of enterprise appearing in contrast as a wage independent of capital, this first trinity form can be reduced to a second: capital–interest, land–ground-rent, labour–wages, where profit, the form of surplus-value specifically characteristic to the capitalist mode of production, is fortunately set aside.

Marx, Capital III, page 953.

The incommensurability of the three "sources" is announced immediately.

If we now look more closely at this economic three-in-one, we find, firstly, that the ostensible sources of the wealth annually available belong to completely disparate spheres and have not the slightest analogy with one another. Their mutual relationship is like that of lawyer’s fees, beetroot and music.

Marx, Capital III, page 953.

Capital-profit (or better still capital-interest), land–ground-rent, labour-wages, this economic trinity as the connection between the components of value and wealth in general and its sources, completes the mystification of the capitalist mode of production, the reification of social relations, and the immediate coalescence of the material relations of production with their historical and social specificity.

Marx, Capital III, page 968.

The dismantling proceeds term by term, and capital comes first.

Capital, land, labour! But capital is not a thing, it is a definite social relation of production pertaining to a particular historical social formation, which simply takes the form of a thing and gives this thing a specific social character. Capital is not the sum of the material and produced means of production. Capital is the means of production as transformed into capital, these being no more capital in themselves than gold or silver are money. It is the means of production monopolized by a particular section of society, the products and conditions of activity of labour-power, which are rendered autonomous vis-à-vis this living labour-power and are personified in capital through this antithesis.

Marx, Capital III, page 953.

Labour, the third term, fares no better as an independent "source".

Lastly, as the third in the league, a mere spectre – labour, which is nothing but an abstraction and taken by itself cannot exist at all, or, if we take what is actually meant here, the entire productive activity of man, through which his metabolic interchange with nature is mediated.

Marx, Capital III, page 954.

Marx dismantles it term by term. Land is a natural thing and can yield no value; "capital" is not a thing but a social relation, and cannot beget interest of itself; and labour is not a source of wages but the source of the whole new value, of which wages are only the part returned to the worker. The formula sets three incommensurable things side by side — a natural agent (land), a social relation misrepresented as a thing (capital), and human activity (labour) — as if they were three parallel sources, and in doing so it makes the historically specific capitalist form appear as an eternal, natural order of things. This is the passage in which Marx names the completed fetish-world.

the bewitched, distorted and upside-down world haunted by Monsieur le Capital and Madame la Terre, who are at the same time social characters and mere things.

Marx, Capital III, page 969.

Vulgar economics, Marx argues, does no more than systematize and celebrate this surface — it is the theoretical expression of the trinity formula, taking the appearances of competition and distribution as ultimate data and asking no further. Against it, he names the standpoint of the whole critique: the task of science is precisely to reduce the fetishized surface to the value relations beneath it.

It is the great merit of classical economics to have dissolved this false appearance and deception … this religion of everyday life, by reducing interest to a part of profit and rent to the surplus above the average profit, so that they both coincide in surplus-value.

Marx, Capital III, page 969. The ellipsis drops the intervening clause on the autonomization of the value components.

Earlier in the chapter, the standpoint of the critique is grounded in a single methodological aphorism — the sentence on which the whole essence/appearance architecture of the volume turns.

Vulgar economics actually does nothing more than interpret, systematize and turn into apologetics the notions of agents trapped within bourgeois relations of production. So it should not surprise us that precisely in the estranged form of appearance of economic relations that involves these prima facie absurd and complete contradictions – and all science would be superfluous if the form of appearance of things directly coincided with their essence – that precisely here vulgar economics feels completely at home, these relationships appearing all the more self-evident to it, the more their inner connections remain hidden, even though they are comprehensible to the popular mind.

Marx, Capital III, page 956.

And the religion-of-everyday-life passage continues directly into the account of why the trinity feels self-evident — to the agents themselves, to vulgar economics, and to the interest of the ruling classes.

It is also quite natural, on the other hand, that the actual agents of production themselves feel completely at home in these estranged and irrational forms of capital-interest, land-rent, labour-wages, for these are precisely the configurations of appearance in which they move, and with which they are daily involved. It is equally natural, therefore, that vulgar economics, which is nothing more than a didactic and more or less doctrinaire translation of the everyday notions of the actual agents of production, giving them a certain comprehensible arrangement, finds the natural basis of its fatuous self-importance established beyond all doubt precisely in this trinity, in which the entire inner connection is obliterated. This formula also corresponds to the self-interest of the dominant classes, since it preaches the natural necessity and perpetual justification of their sources of income and erects this into a dogma.

Marx, Capital III, page 969.

Chapter 49 returns behind the distributed revenues to the analysis of the total product and confronts, once more, the error Marx has pursued since Volume II Part Three: the Smithian dogma that the whole value of the annual product resolves into revenues (wages + profit + rent), leaving no component to replace the constant capital consumed. Marx shows again that the value of the total product is c + v + s, that only the newly added labour produces v + s (the fund of revenues), and that the constant capital c must be reproduced in kind and does not dissolve into anyone's income. The revenues are drawn from the new value alone; the illusion that they exhaust the product is the trinity formula's economic counterpart. Chapter 50 anatomizes the "illusion created by competition": because prices of production, wages, and rents present themselves on the surface as independently given magnitudes whose sum makes up the price, it appears that value is composed by adding up the three revenues, rather than that the revenues are shares distributed out of a value already determined by labour-time. Marx reverses the apparent order: value is not the sum of the revenues; the revenues are portions into which a prior value is divided. Competition, seeing only the surface, inverts cause and effect, and vulgar economics erects that inversion into doctrine.

The verdict on competition as explanans is delivered first.

It is quite unnecessary to wade through this absurd process again for ground-rent. We can already see that if it is carried through in any consistent way, it makes profit and rent appear as mere surcharges, determined by incomprehensible laws, on top of a commodity price determined in the first place by wages. Competition, in other words, is burdened with explaining all the economists’ irrationalities, whereas it is supposed to be the economists who explain competition.

Marx, Capital III, page 1005.

Then the source of the illusion: the value components confront their owners as independent revenues, and seem to arise from the properties that entitle to them.

Firstly, because the commodity’s value components confront one another as independent revenues, which are related as such to three completely separate agents of production, labour, capital and the earth, and appear therefore to arise from these. Property in labour-power, capital and the earth is the reason why these different value components of the commodity fall to their respective proprietors, transforming them therefore into their revenues. But value does not arise from a transformation into revenue, it must rather be already in existence before it can be transformed into revenue and assume this form.

Marx, Capital III, page 1007.

The full statement of the inversion follows — even with competition abstracted away, the real movement must appear upside-down.

Under these assumptions, then, with the values of commodities being and appearing constant, with the value component of the commodity product that is reducible to revenue forming a constant quantity and always presenting itself as such, and finally with this given and constant portion of value always breaking down in the same proportions into wages, profit and rent – even on these assumptions, the real movement would necessarily appear in a distorted form: not as the dissolution of a value magnitude given in advance into three parts which assume the mutually independent forms of revenue, but conversely as the formation of this value magnitude from the sum of the component elements of wages, profit and ground-rent, taken as determined independently and separately.

Marx, Capital III, page 1009.

And the ground of the inversion is the reproduction of the relations themselves: the result of the process forever presents itself as its premise.

The secret reason why these products of the dissolution of commodity value constantly appear as the premises of value formation itself is simply that the capitalist mode of production, like every other, constantly reproduces not only the material product but also the socio-economic relations, the formal economic determinants of its formation. Its result thus constantly appears as its premise, and its premises as its results.

Marx, Capital III, page 1011.

Chapter 51 states the relation the whole volume has been driving toward: the relations of distribution are not independent of, but determined by and identical in substance with, the relations of production. The way the product is divided — into wages for the worker, profit and interest for the capitalist, rent for the landowner — is not a separate matter that could be arranged otherwise while production stayed the same. The distribution forms are the reverse side of the production relations: wage-labour, capital, and landed property are at once the agents of a specific mode of producing and the titles to specific shares of its product. This is Marx's answer to the reformist and Ricardian-socialist idea that the capitalist mode of production could be kept while its distribution was made just — that one could socialize the shares without touching the production relation. The distribution relations, Marx insists, have the same historically transitory character as the production relations they express; to change the one is to change the other. The chapter thus draws the political conclusion latent in the whole analysis: the critique of distribution is not a demand for fairer shares but a critique of the production relation that generates the shares.

The thesis is stated in one long sentence that binds the two orders of relations together and stamps both as transitory.

The scientific analysis of the capitalist mode of production proves the contrary, i.e. that this is a mode of production of a particular kind and a specific historical determinacy; that like any other particular mode of production it assumes a given level of social productive forces and of their forms of development as its historical precondition, a condition that is itself the historical result and product of a previous process and from which the new mode of production proceeds as its given foundation; that the relations of production corresponding to this specific and historically determined mode of production – relations into which men enter in their social life-process, in the production of their social life – have a specific, historical and transitory character; and that finally the relations of distribution are essentially identical with these relations of production, the reverse side of the same coin, so that the two things share the same historically transitory character.

Marx, Capital III, page 1018.

The chapter's conclusion restates the identity and draws the consequence for every distributive politics.

The so-called relations of distribution, therefore, correspond to and arise from historically particular and specific social forms of the production process and of the relationships which men enter into among themselves in the process of reproducing their human life. The historical character of these relations of distribution is the historical character of the relations of production, and they simply express one side of these. The capitalist distribution is different from those forms of distribution that arise from other modes of production, and every form of distribution vanishes along with the particular form of production that it arises from and corresponds to.

Marx, Capital III, page 1022.

The work ends on a fragment. Chapter 52, "Classes," opens by naming the three great classes of modern capitalist society — wage-labourers, capitalists, and landowners — defined by their respective sources of revenue: labour-power yielding wages, capital yielding profit, land yielding ground-rent. This is the trinity formula read as a class structure: the three revenues are the three classes' shares, and the classes are constituted by their relation to the conditions of production. Marx then poses the question the whole analysis has earned — what makes these income-groups into classes, given that within each, incomes and situations shade into one another, and that the division of labour would seem to multiply classes without end — and, at the very moment of posing it, the manuscript breaks off. Engels's note records that the text ends here.

The fragment opens with the definition by revenue-source.

The owners of mere labour-power, the owners of capital and the landowners, whose respective sources of income are wages, profit and ground-rent – in other words wage-labourers, capitalists and landowners – form the three great classes of modern society based on the capitalist mode of production.

Marx, Capital III, page 1025.

And it breaks off at the exact moment the definition is put in question — the identity of revenues will not do, and the manuscript ends on the objection.

The question to be answered next is: ‘What makes a class?’, and this arises automatically from answering another question: ‘What makes wage-labourers, capitalists and landowners the formative elements of the three great social classes?’

At first sight, the identity of revenues and revenue sources. For these are three great social groups whose components, the individuals forming them, live respectively from wages, profit and ground-rent, from the valorization of their labour-power, capital and landed property.

From this point of view, however, doctors and government officials would also form two classes, as they belong to two distinct social groups, the revenue of each group’s members flowing from its own source. The same would hold true for the infinite fragmentation of interests and positions into which the division of social labour splits not only workers but also capitalists and landowners – the latter, for instance, into vineyard-owners, field-owners, forest-owners, mine-owners, fishery-owners, etc.

(At this point the manuscript breaks off. – F. E.)

Marx, Capital III, page 1025.

The abrupt ending is fitting and much remarked. The three volumes have traced the capitalist mode of production from the single commodity to the completed surface of classes and revenues, showing at each level how the social relation of exploitation is transformed and disguised into the apparently natural forms of everyday economic life. That the work stops at the threshold of "classes" — the point at which the economic analysis would have passed over into the theory of the class struggle and the political conclusion — leaves the transition to be made by the reader, armed now with the critique of the categories through which capitalist society represents itself to itself. The brief records the fragment as it stands and marks it as the unfinished terminus of the whole.