Chapter 7 Chapter 6 Commodity Price Composition

In the early days of barbarism, the accumulation of capital and the private ownership of land had not yet taken place.At this time, there is only one standard for people to exchange items, which is the ratio of the amount of labor required by various items.For example, for the average hunting people, if killing a beaver requires twice as much labor as killing a deer, then one beaver can be exchanged for two deer.Naturally, in general cases, the produce of two days' labor is twice as valuable as that of one day's labor, and that of two hours' labor is twice as valuable as that of one hour's labor.

If one kind of labor is more difficult than another, it will naturally arouse the laborer's consideration.For an hour of this more arduous labor often yields twice as much produce as two hours of less arduous labour. If it is labor that requires extraordinary skills and intelligence to complete, it is necessary to give the labor product a higher value to show respect for laborers with such skills.Because this kind of skill often needs years of hard training to acquire, and giving the product of this labor a higher value is just a reasonable compensation for the labor and time spent by the laborer in acquiring this skill.In an advanced society the wages of labor are considered to be increased for those who do hard work, or who are particularly acquainted with a particular job.

This kind of consideration may have occurred as early as in the early savage society.The laborer then has at his disposal the entire product of his labour.Of course, he can also use the product of his labor to buy or command other quantities of labor. The size of this quantity of labor depends on the general quantity of labor required to produce this article. As capital accumulates in the hands of individuals, some of them invest it in working people.These people provide laborers with raw materials and means of subsistence, and ask them to work to produce more labor products or increase the value of labor raw materials.After the laborers have produced complete manufactured products, investors can exchange these manufactured products with currency, labor or other goods, and the exchange income is not only enough to pay the price of raw materials and labor wages, but also leave a part for entrepreneurs profit.In this case the increased value of the raw material of labour, is divided into two parts, one part is paid to the wages of the labourer, and the other part becomes the profit of the employer.

The part of the profit which the employer receives is sufficient to cover all the capital which he has expended in advancing raw materials and wages.If this profit does not exceed the capital he has advanced, he will have no interest in employing labourers; and if this profit is not in proportion to the amount of capital he has advanced, he will make small investments instead of Make big investments. The profit of capital may seem to some people only the special wages paid to the entrepreneur who supervises and directs this kind of labor.But in fact profit and wages are governed by two quite different principles, and therefore profit and wages are quite different.Moreover, the profit of capital depends on the value of the capital invested, not on the quantity, intensity and skill of supervising and directing this kind of labor.

Let's take the example of two different manufacturing industries somewhere.Suppose the ordinary annual profit of the capital of the manufactures in that place is ten per cent., and there are twenty laborers in each of these two manufactures, each at fifteen pounds a year, and three hundred pounds a year in wages to each laborer.Of these, the raw material worked up by the first manufacture is coarser, and costs only seven hundred pounds a year; while the second manufacture requires finer raw materials, which cost seven thousand pounds a year.Putting all these investments together, the former's annual investment is only 1,000 pounds, while the latter's investment is 7,300 pounds.Calculating the annual profits of the two at the rate of 10 per cent, the former gets only £100, while the latter gets £730.Although their profit amounts are different, their supervision and command are almost the same.In many large factories there is a chief clerk who conducts most of this work.

The value of that kind of labor in supervising and directing is reflected in the wages of the clerks who manage such duties.It is his labor and skill, and the responsibilities he bears, and not the capital he manages and supervises, that determine his wages.As for the owner of capital, although he hardly works, he hopes to obtain a certain profit from the capital he has invested.The profit of stock, therefore, is quite different from the wages of labour; it is governed by another and quite different principle, and is an important part of the price of commodities. In this case, the entire labor product of the laborer is no longer monopolized by the laborer himself, but a part is allocated to the owner of capital who employs him.What determines the quantity of labor to be exchanged, commanded, or purchased for a commodity is, in addition to the quantity of labor expended in acquiring or producing it, the profit of the capital which advances the wages of labour, and furnishes the materials.

No matter in any country, as long as the land has become private property, the landlords will think of getting something for nothing, and even demand the rent of the natural products on the land.In the era of common land, laborers only need to work hard to collect trees in the forest, grass in the fields, and various natural fruits on the earth; but now, laborers have to pay additional prices to obtain these natural products. Not only must he obtain the right to collect, but he must also allocate part of the products he collects to the landlord.This part (or the price of this part) is ground rent.Rent, then, becomes the third component of the price of most commodities.

In addition to ground rent, there are two other parts that make up the price of commodities, namely, the wages of labor and profits that have been decomposed.The measure of the real value of these three constituent parts is the quantity of labor which each can purchase or command.This must be pointed out. No matter what society the price of a commodity is in, it will eventually be decomposed into three parts, land rent, labor wages, and profit, or one or two of them.In advanced societies the prices of the great majority of commodities consist more or less of these three parts. Let's take grain prices as an example.The price of corn is divided into three parts: the first part is the rent, which is paid to the landlord; the second part is the wages, which is paid to the laborers who carry out the productive activities;These three parts make up, directly or indirectly, the whole price of corn.It may be thought that there should be a fourth component in the price of corn, namely, the consumption of draft animals or other implements.But this consumption is only a part of the replenishment of the farmer's capital, which, together with the price of all agricultural implements, is included in the three parts mentioned above.Take the plow horse as an example, the price it consumes includes the rent of the land needed to raise the horse, the labor wages for the horse herding, and the capital for the farmer to advance the rent and wages.Therefore, although the price of corn includes a part of the cost of the plough-horses and their maintenance, yet it is the rent, the labor, and the profit which directly or ultimately constitute the whole price.

Taking the price of flour as an example, the price of grain cannot be considered alone, but the profit of the flour mill owner and the wages of the flour mill employees must also be added.If flour is made into bread, then not only the price of flour should be considered, but also the profit of the baker and the wages of the employees in the bakery.Add to this the amount of labor required to transport the corn from the farm to the mill, where it is ground into flour and transported to the baker.Both the wages and the profits of this labor require the advance of certain capitals, which form part of the price of flour and bread.

The price of flax, like that of corn, consists of three parts.If the flax is spun into linen, additional labor is required of the flaxseers, spinners, weavers, and bleachers.These labors need to be performed by different workers, so the employers who employ these workers need to advance capital separately.To the price of the linen, therefore, naturally add the wages of such labour, and the profit of such capital. In the manufactures of goods, the wages and profit part of the price of the goods is greater than the rent of ground, the nearer is the nearer the time of completion of the goods.Moreover, as the latter stage requires more capital than the former stage, the manufacturer of the latter stage earns a greater profit than the manufacturer of the former stage.In the case of employing weavers and spinners, the former must be greater than the latter.Because, when employing weavers, in addition to paying the wages of the spinners like hiring spinners, the wages and profits of the weavers must be paid separately.The ratio between profit and capital is always constant.

Of course, there are also a few commodities whose prices consist of only labor wages and capital profits, and even a very small number of commodities that only need to pay labor wages.This phenomenon occurs from time to time even in the most advanced societies. For example, the price of marine fish usually only includes the payment of the labor of the fisherman and the payment of the capital profit of the fishery.This price includes ground rent only in rare cases.This point will be explained below.River fisheries tend to differ from sea fisheries, and this difference is even more pronounced in most of Europe.In Europe, the salmon industry essentially pays "ground rent".Strictly speaking, this "rent" cannot yet be called land-rent, but it no doubt forms a part of the price of salmon, like wages and profit. A small mottled stone called "Scotch agate" is one of the very few commodities for which labor wages are paid.This small mottled stone comes from certain parts of Scotland.A few poor people gather them from the coast and sell them to stone carvers.When the stone carving industry buys this kind of mottled small stone, it only needs to pay the labor wages of the poor, and does not need to pay land rent and profits. In short, no matter what kind of commodity it is, its entire price composition must ultimately include labor wages, land rent, and profits, or one or two of these three parts.The profit part of the price of a commodity is that part which remains after deducting the rent of the ground and all the labor necessary for the production, manufacture, and even transportation of the commodity. These three parts, wages of labour, rent, and profit, or one or two of them, constitute, in the smaller part, the price or exchange-value of every commodity; prices, and were allocated to different residents of the country.The whole of the goods (or the price of the whole of the goods) gathered or produced by labor in the society is thus distributed each year among the different members of the society.The sources of all income and of all exchangeable value are wages, profit, and rent. As long as a man derives his income from his own resources, his income comes from his own labour, capital, or land.The part of the income obtained from labor is called wages; the part of the income obtained from the use of capital is called profit; the income obtained by lending capital to others is called interest or interest in money.Obviously, because of the borrowing, the borrower also has the opportunity to take risks to obtain profits, and naturally has to pay the lender interest as a reward. Interest This income is a derivative payment.As long as the borrower is not a prodigal who borrows to pay his debts, the interest he pays must come from the profit or other income obtained by borrowing money.Ground rent is the income derived entirely from the land, which is to be handed over to the landlord.Labor and capital, on the other hand, belong to the farmer.The land is to the farmer only an instrument by which the wages of labour, and the profits of capital, are obtained.In the final analysis, all tax revenues, wages, pensions and various annuities come from labor wages, capital profits or land rent. These three types of income are different.Usually, when they belong to different people, it is relatively easy to distinguish; however, when they belong to the same person, they are often confused. If a squire cultivates a part of his land, he is a landlord and a farmer, and after paying the cost of cultivation, he can obtain both rent and profit.And these gains are often referred to as profits by him in general.In this way, the concepts of rent and profit are confused.In British North America and the West Indies, most plantation owners used their land for farming.They often speak of the profit of the plantation, and not of the rent of the plantation. Generally, farmers rarely employ supervisors, and they can guide the daily work of the farm themselves.Typically, they do the plowing, raking, etc. themselves.Among the total income which they receive, therefore, is included both ground-rent, and agricultural stock with its ordinary profits, and their own wages as laborers and overseers.If the capital and ground-rent advanced by him are deducted from the total revenue, what remains is collectively called profit.And this profit obviously also includes wages.So at this time, wages and profits are confused. Take again the example of a manufacturer working independently.If he has enough capital to buy raw materials and live on, then when the goods are on the market, he can both receive wages as a worker and profit from the sales as a boss.These two proceeds of his are commonly called profits.At this time, wages and profits are also confused. There is a planter who, if he cultivates plants himself, has the triple status of landowner, farmer and laborer.The whole price of his produce therefore includes, besides the rent which he himself receives as a landlord, his profit as a farmer and the wages of a labourer.But under normal circumstances, he will regard all income as his own labor income.Wages are now again confused with both rent and profit. In civilized nations the exchange-value of the greater part of commodities consists of substantial profits and rents, and not of labour.Therefore, the quantity of labor required to produce and even transport the annual produce of all the labor of society is far less than the quantity of labor which can be purchased or commanded by these annual produce.Suppose that as much labor as the society can annually purchase is employed, the value of the produce of the succeeding year will be greater than that of the preceding.For, as the years have passed, the amount of labor has greatly increased.However, the people who consume the products of these years include most of the idlers in addition to the laborers themselves.This phenomenon is common in any country.The proportion in which the annual produce of a country is annually divided among these two classes of people determines its common or average value.