Organic Composition of Capital

Abstract

The distinction between labour value transferred and labour value added is crucial to Marx’s theory of value. For the capitalist system as a whole, the abstract labour-time previously materialized in machinery and materials (c) merely reappears in the total product. The capital expended for the purchase of c is therefore constant-in-value. On the other hand, whereas the capital expended for the engagement of workers is determined by the labour value of their means of consumption (v), their actual employment results in a quantity of abstract labour-time (l) which is generally different from v. Thus capital expended for the purchase of labour-power is intrinsically variable-in-value. Indeed, the secret of capitalist production is contained precisely in this variability, since surplus value (s = 1 − v) only exists to the extent that l is greater than v. It follows from this that for any given total capital expended (c + v), its composition between c and v is of the utmost importance, because only v expands total capital value from c + v to c + l = v + s (Marx 1867, pp. 421, 571).