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Engels was thinking like a capitalist: If you are the capitalist in this example, let's say you will need to borrow all the money to get this business going. Regardless of how many turnovers you make in one year, you will have to borrow 11,000-- This is the money necessary to buy the fixed capital (10,000, the machine) and a "turnover period" of labor (500) and constant capital (500). After the 1st turnover period has elapsed you are already making a profit (in this example), which puts enough money in the bank so that you can buy another turnover period with "cash" -- and also sit on the "profit" -- No more Credit, or capital needs to be advanced-- So the point of this chapter, I believe is to emphasize that the denominator is fixed, 11,000 is all you need to borrow to get running-- SO it's in the capitalist's best interest to have as many "turnover periods" in one year as possible and we all know how that is accomplished. -------------------- If you want to dig in more, here are some more of my notes from this chapter: -- In order to eventually set up FROP- Marx or Engles is pushing to show that the rate of profit (p') depends on BOTH: 1.The Rate of Surplus Value s' = s/v 2. The Value Composition of Capital v/(v+c) BUT-- The simplest calculation for annual p' is s/(c+v) , where s = yearly profit, and (c+v) = the initial outlay of fixed and circulating capital (above it's 11,000) s/(c+v) unfortunately does not convey the duality of BOTH the rate of surplus value and the Value composition, so by a mathematical equation, he takes the equation for yearly rate of profit p' = s/(c+v) And multiplies it by v/v, which = 1, so it does not change the equation. We now have p' = sv/v(c+v) But we know s/v = s', or the rate of surplus value (for the year). So we now have p' = s'v/(c+v) This elegantly show that the rate of profit (p') is equal to a multiplication of Both 1.The Rate of Surplus Value s' = s/v 2. The Value Composition of Capital v/(v+c) Because s' here = yearly surplus value divided by only 1 turnover period of variable capital, this emphasizes the need to turnover rapidly, quickly-- And the Value Composition of Capital of course shows how capitalists will obviously prefer to keep the variable capital down to a minimum and invest instead in constant capital (laying the groundwork for FROP) On Fri, Apr 13, 2012 at 2:13 PM, Ed George <edgeorge1...@gmail.com> wrote: > > So my question is: why is Engels calculating the annual rate of profit on > the basis of the total capital advanced, including that fixed capital value > unconsumed after the year’s production, and not on the basis of capital > value actually consumed in production? Am I missing something here? > > ________________________________________________ > Send list submissions to: Marxism@greenhouse.economics.utah.edu > Set your options at: > http://greenhouse.economics.utah.edu/mailman/options/marxism/theguavatree%40gmail.com -- http://guavapuree.wordpress.com ________________________________________________ Send list submissions to: Marxism@greenhouse.economics.utah.edu Set your options at: http://greenhouse.economics.utah.edu/mailman/options/marxism/archive%40mail-archive.com
