production costs, going into the output of each commodity + average profit multiplied by these outlays)? The first two problems have provoked relatively less controversy than the third, probably because of their more ‘abstract’ character. They are, however, of the highest importance for the inner cohesion of Marxist economic theory. Marx’s treatment of them, moreover, shows his dialectical method at its most mature.

Briefly, with respect to the first, Marx argues that as value in the last analysis is a social not an individual category, those branches of industry which have an organic composition of capital below the social average objectively waste social labour from the point of view of capitalist society as a whole (i.e. from the point of view of ‘equality’ of commodity-owners).9 Therefore, the market does not return to their owners all the value effectively created during the process of production in these branches. Inversely, those branches of industry which have an above-average organic composition of capital, i.e. an above-average social productivity of labour, objectively economize socially necessary labour. Their owners are rewarded for this by the market, which attributes to them a higher proportion of all surplus-value produced than that which is directly produced by the wage-labourers they employ.

Various objections have been raised to this solution. Is productivity of labour comparable in different branches of output, inasmuch as these do not produce goods that are interchangeable? This difficulty can be resolved dynamically, i.e. by comparing the different rates of increase in productivity of labour in different branches of output over time. More generally, the specific organic composition of capital in each branch of production, which constantly changes as a result of these different changes in the productivity of labour, can be considered as a general index, a means of measurement, of social productivity of labour.10 In a capitalist market economy, with its constant revolutions in the techniques of production, its constant shifts in demand from one commodity to another, its constant flux of capital investment from one branch to another, this assumption is both theoretically tenable and empirically verifiable.

But is there not a basic contradiction between considering all labour effectively expended in the process of production of each branch of production as value-producing, and at the same time explaining the transfers of value (surplus-value) between different branches as a function of objective waste or economy of social labour?11 I do not believe so. What we have here, on the contrary, is a demonstration of the unique way in which social labour and private labour are combined and interrelated under capitalism, i.e. under generalized commodity production.

For Marx, the problem of value as an embodiment of abstract human labour is not a problem of measurement, of numéraire, but a problem of essence.12 Each community has at its disposal a given total labour capacity (a total number of producers effectively engaged in productive labour, multiplied by the socially accepted average of annual work-days and daily work-hours). This potential is an objective category, in a given country and for a given stretch of time (for purposes of simplification, we can take the work-year as the basic time-framework). From it flows the total value produced during a year (in so far as part of this labour potential has not been idle, for reasons independent of its will). Again, this is an objective social category: the total number of labour-hours effectively produced in the course of the process of production. The category of ‘socially necessary labour’, which treats some of these labour-hours as ‘wasted’ and hence not accounted for from a social point of view, only implies redistribution of value inside each branch of production, except in cases of monopoly.13

If we extend the same reasoning to the economy as a whole, nothing changes. All labour actually expended in the process of production has been value-producing. It cannot be made larger or smaller by anything which occurs outside the actual sphere of production. The problem of compensation on the market for labour expenditure is one of distribution, not one of production. Thus it is perfectly possible that actually expended private labour in a given branch, at the average rate of productivity of that branch, is socially necessary labour and has really produced value, while at the same time the owners of the commodities in which it is embodied do not receive full compensation on the market for all that embodied value, or receive a counter-value higher than the amount of value embodied in their commodities.

This dialectical unity-and-contradiction between, on the one hand, private labour effectively expended in production and effectively value-producing and, on the other hand, socially compensated value is mediated through the understanding that total value is equal to total prices of production (i.e. represents an equal sum of labour-hours, or labour-weeks, or labour-years: an equal total labour potential). What is modified on the market, i.e. what the Volume 3 notions of ‘objective waste’ and ‘objective economy’ of social labour represent when different branches of production are compared (in contrast to the notions of ‘waste’ and ‘economy’ of quantities of social labour inside each separate branch of industry, studied in Volume 1), is exclusively a problem of (re)distribution of value, not one of production of value.

The second question regarding equalization of the rate of profit between different branches of industry is how this operates in practice. In order to understand this, we should start from the assumption that this equalization is always a tendency, never a permanent reality. If we start from the actual realization of the total mass of surplus-value produced in each branch of production by the capitalists operating in that branch, a much higher rate of profit will occur in those branches of production which have a lower organic composition of capital and spend a larger proportion of capital outlays on wages than in those which have a higher organic composition of capital and spend a larger proportion of total capital outlays on equipment and raw materials. All things remaining equal (which means, above all, not assuming for the moment any changes in the distribution of total demand for different use-values produced by different branches of output), such an above-average rate of profit will attract additional capital in these branches. This will increase production (supply) above social demand, which will precipitate a decline in prices, which will precipitate a decline in the rate of profit. Inversely, in those branches of production where the average organic composition of capital is above-average, hence the ‘initial’ rate of profit below average, capital will be withdrawn; production will decline, till it falls below social demand; prices will rise; profits will rise, until they reach the socially average rate of profit.

In other words, it is the flux and reflux of capital between different branches of production, from those with lower rates of profit to those with higher rates of profit, which is the driving force behind equalization of the rate of profit. This flux and reflux of capital between different branches of production is indeed the main way in which capital accumulation (growth) occurs in actual life, i.e. as an uneven process, all branches never growing at exactly the same rhythm and over the same span of time.