Capital, Volume II
III. Later Economists [41]
Ricardo reproduces the theory of Adam Smith almost verbatim:
“It must be understood that all the productions of a country are consumed; but it makes the greatest difference imaginable whether they are consumed by those who reproduced, or by those who do not reproduce another value. When we say that revenue is saved, and added to capital, what we mean is, that the portion of revenue, so said to be added to the capital, is consumed by productive instead of unproductive labourers.“ ( Principles , p. 163.)
In fact Ricardo fully accepted the theory of Adam Smith concerning the resolution of the price of commodities into wages and surplus-value (or variable capital and surplus-value). The points of dispute with him are 1) the component parts of the surplus-value: he eliminates ground-rent as an essential element of it; 2) Ricardo splits the price of the commodity into these component parts. The magnitude of value is, then, the prius . The sum of component parts is assumed as a given magnitude, it is the starting point, while Adam Smith frequently acts to the contrary, against his own better judgement, by subsequently deducing the magnitude of value of the commodity through the sum of the component parts.
Ramsay makes the following remark against Ricardo:
“... He seems always to consider the whole produce as divided between wages and profits, forgetting the part necessary for replacing fixed capital.“ ( An Essay on the Distribution of Wealth , Edinburgh, 1836, p. 174.)
By fixed capital Ramsay means the same thing that I mean by constant capital:
“Fixed capital exists in a form in which, though assisting to raise the future commodity, it does not maintain labourers.“ ( Ibid ., p. 59.)
Adam Smith opposed the necessary conclusion of his resolution of the value of commodities, and therefore also of the value of the social annual product into wages and surplus-value and therefore into mere revenue — the conclusion that in this event the entire annual product might be consumed. It is never the original thinkers that draw the absurd conclusions. They leave that to the Says and MacCullochs.
Say, indeed, settles the matter easy enough. That which is an advance of capital for one, is or was a revenue and net product for another. The difference between the gross and the net product is purely subjective, and
“thus the total value of all products, has been distributed in society as revenue.“ (Say, Traitè d’Economie Politique , 1817, II, p. 64.) “The total value of every product is composed of the profits of the landowners, the capitalists, and those who ply industrial trades“ [wages figure here as profits des industrieux !] “who have contributed towards its production. This makes the revenue of society equal to the gross value produced , not equal to the net products of the soil, as was believed by the sect of the economists“ [the physiocrats]. (p. 63.)
Among others, Proudhon has appropriated this discovery of Say.
Storch, who likewise accepts Adam Smith’s doctrine in principle, finds however that Say’s practical application of it does not hold water.
“If it is admitted that the revenue of a nation is equal to its gross product, i.e., that no capital“ [it should say: no constant capital] “is to be deducted, then it must also be admitted that this nation may consume unproductively the entire value of its annual product without the least detriment to its future revenue.... The products which represent the“ [constant] “capital of a nation are not consumable.“ (Storch, Considérations sur la nature du revenu national , Paris, 1824, pp. 147, 150.)
However, Storch forgot to tell us how the existence of this constant portion of capital harmonises with the Smithian analysis of prices accepted by him, according to which the value of commodities contains only wages and surplus-value, but no part of any constant capital. He realises only through Say that this analysis of prices leads to absurd results, and his own last word on the subject is
“that it is impossible to resolve the necessary price into its simplest elements.“ ( Cours d’Économie Politique , Petersburg, 1815, II, p. 141.)
Sismondi, who occupies himself particularly with the relation of capital to revenue, and in actual fact makes the peculiar formulation of this relation the differentia specifica of his Nouveaux Principes , did not say one scientific word, did not contribute one iota to the clarification of the problem.
Barton, Ramsay, and Cherbuliez attempt to go beyond the formulation of Adam Smith. They founder because they pose the problem one-sidedly from the outset by failing to make clear the distinction between constant and variable capital-value and between fixed and circulating capital.
John Stuart Mill likewise reproduces, with his usual pomposity, the doctrine handed down by Adam Smith to his followers. As a result, the Smithian confusion of thought persists to this hour and his dogma is one of the orthodox articles of faith of Political Economy.
35. Beginning of Manuscript VIII. — F. E.
36. Kapital , Band I, 2. Ausgabe, S. 612, Note 32. [Eng. ed., Moscow, 1954, p. 591, Note 1.]
37. Some physiocrats had paved the way for him even here, especially Turgot. The latter uses the term capital for avances more frequently than Quesnay and the other physiocrats and identifies still more the avances , or capitaux , of the manufacturers with those of the farmers. For instance: “Like these (the entrepreneurs-manufacturers), they ( les fermiers , i.e., the capitalist farmers) must receive in addition to returning capitals, etc.“ (Turgot, Oeuvres , Daire edition, Paris, 1844, Vol. I, p. 40.)
38. In order that the reader may not misconstrue the meaning of the phrase “the price of the far greater part of commodities,“ the following shows how Adam Smith himself explains this term. For instance, no rent enters into the price of sea fish, only wages and profit, only wages enter into the price of Scotch pebbles. He says: “In some parts of Scotland a few poor people make a trade of gathering, along the sea-shore, those little variegated stones commonly known by the name of Scotch pebbles. The price which is paid to them by the stone-cutter is altogether the wages of their labour; neither rent nor profit makes any part of it.“
39. I reproduce this sentence verbatim from the manuscript, although it seems to contradict, in its present context, both what precedes and immediately follow. This apparent contradiction is resolved further down in No. 4: Capital and Revenue in Adam Smith. — F. E.
40. We ignore the fact that Adam Smith was here particularly unfortunate in the choice of his example. The value of the corn resolves itself into wages, profit, and rent only because the food consumed by the labouring cattle is depicted as wages of the labouring cattle, and the labouring cattle as wage-labourers, so that the wage-labourer on his part is also depicted as labouring cattle. (Added from the Manuscript II. — F. E. )
41. From here to the end of the chapter, a supplement from Manuscript II. — F. E.
Chapter 18 | Table of Contents | Chapter 20 part 1
Chapter 20: Simple Reproduction
Part 1
I. The Formulation of the Question
If we study the annual function of social capital — hence of the total capital of which the individual capitals form only fractional parts, whose movement is their individual movement and simultaneously integrating link in the movement of the total capital — and its results, i.e., if we study the commodity-product furnished by society during the year, then it must become apparent how the process of reproduction of the social capital takes place, what characteristics distinguish this process of reproduction from the process of reproduction of an individual capital, and what characteristics are common to both. The annual product includes those portions of the social product which replace capital, namely social reproduction, as well as those which go to the consumption-fund, those which are consumed by labourers and capitalists, hence both productive and individual consumption. It comprises also the reproduction (i.e., maintenance) of the capitalist class and the working-class, and thus the reproduction of the capitalist character of the entire process of production.
It is evidently the circulation formula
which we have to analyse, and consumption necessarily plays a role in it; for the point of departure, C' = C + c, the commodity-capital embraces both the constant and variable capital-value, and the surplus-value. Its movement therefore includes both individual and productive consumption. In the circuits M — C ... P... C'— M' and P ... C'— M'— C ... P, the movement of the capital is the starting and finishing point. And of course this includes consumption, for the commodity, the product, must be sold. When this has assumedly been done it is immaterial for the movement of the individual capital what becomes of the commodities subsequently. On the other hand in the movement of C' ... C' the conditions of social reproduction are discernible precisely from the fact that it must be shown what becomes of every portion of value of this total product, C'. In this case the total process of reproduction includes the process of consumption brought about by the circulation quite as much as the process of reproduction of the capital itself.
For our present purpose this process of reproduction must be studied from the point of view of the replacement of the value as well as the substance of the individual component parts of C'. We cannot rest content any longer, as we did in the analysis of the value of the product of the individual capital, with the assumption that the individual capitalist can first convert the component parts of his capital into money by the sale of his commodities, and then reconvert them into productive capital by renewed purchase of the elements of production in the commodity-market. Inasmuch as those elements of production are by nature material, they represent as much a constituent of the social capital as the individual finished product, which is exchanged for them and replaced by them. Contrariwise the movement of that portion of the social commodity-product which is consumed by the labourer in expending his wages, and by the capitalist in expending his surplus-value, not only forms an integral part of the movement of the total product but intermingles with the movements of the individual capitals, and therefore this process cannot be explained by merely assuming it.
The question that confronts us directly is this: How is the capital consumed in production replaced in value out of the annual product and how does the movement of this replacement intertwine with the consumption of the surplus-value by the capitalists and of the wages by the labourers? It is then first a matter of reproduction on a simple scale. It is furthermore assumed that products are exchanged at their values and also that there is no revolution in the values of the component parts of productive capital. The fact that prices diverge from values cannot, however, exert any influence on the movements of the social capital. On the whole, there is the same exchange of the same quantities of products, although the individual capitalists are involved in value-relations no longer proportional to their respective advances and to the quantities of surplus-value produced singly by every one of them. As for revolutions in value, they do not alter anything in the relations between the value-components of the total annual product, provided they are universally and evenly distributed. To the extent however that they are partially and unevenly distributed, they represent disturbances which, in the first place, can be understood as such only as far as they are regarded as divergences from unchanged value-relations, but in the second place, once there is proof of the law according to which one portion of the value of the annual product replaces constant, and another portion variable capital, a revolution either in the value of the constant or that of the variable capital would not alter anything in this law. It would change merely the relative magnitudes of the portions of value which function in the one or the other capacity, because other values would have taken the places of the original ones.
So long as we looked upon the production of value and the value of the product of capital individually, the bodily form of the commodities produced was wholly immaterial for the analysis, whether it was machines, for instance, corn, or looking glasses. It was always but a matter of illustration, and any branch of production could have served that purpose equally well. What we dealt with was the immediate process of production itself, which presents itself at every point as the process of some individual capital. So far as the reproduction of capital was concerned, it was sufficient to assume that that portion of the product in commodities which represents capital-value finds an opportunity in the sphere of circulation to reconvert itself into its elements of production and thus into its form of productive capital; just as it sufficed to assume that both the labourer and the capitalist find in the market those commodities on which they spend their wages and the surplus-value. This merely formal manner of presentation is no longer adequate in the study of the total social capital and of the value of its products. The reconversion of one portion of the value of the product into capital and the passing of another portion into the individual consumption of the capitalist as well as the working-class form a movement within the value of the product itself in which the result of the aggregate capital finds expression; and this movement is not only a replacement of value, but also a replacement in material and is therefore as much bound up with the relative proportions of the value-components of the total social product as with their use-value, their material shape. Simple reproduction, reproduction on the same scale, appears as an abstraction, inasmuch as on the one hand the absence of all accumulation or reproduction on an extended scale is a strange assumption in capitalist conditions, and on the other hand conditions of production do not remain exactly the same in different years (and this is assumed). The assumption is that a social capital of a given magnitude produces the same quantity of commodity-value this year as last, and supplies the same quantum of wants, although the forms of the commodities may change in the process of reproduction. However, as far as accumulation does take place, simple reproduction is always a part of it, and can therefore be studied by itself, and is an actual factor of accumulation. The value of the annual product may decrease, although the quantity of use-values may remain the same; or the value may remain the same although the quantity of the use-values may decrease; or the quantity of value and of the reproduced use-values may decrease simultaneously. All this amounts to reproduction taking place either under more favourable conditions than before or under more difficult ones, which may result in imperfect — defective — reproduction. All this can refer only to the quantitative aspect of the various elements of reproduction, not to the role which they play as reproducing capital or as a reproduced revenue in the entire process.
II. The Two Departments of Social Production
The total product, and therefore the total production, of society may be divided into two major departments:
I. Means of Production , commodities having a form in which they must, or at least may, pass into productive consumption.
II. Articles of Consumption , commodities having a form in which they pass into the individual consumption of the capitalist and the working-class.
All the various branches of production pertaining to each of these two departments form one single great branch of production, that of the means of production in the one case, and that of articles of consumption in the other. The aggregate capital employed in each of these two branches of production constitutes a separate large department of the social capital.
In each department the capital consists of two parts:
1) Variable Capital . This capital, so far as its value is concerned, is equal to the value of the social labour-power employed in this branch of production; in other words, it is equal to the sum of the wages paid for this labour-power. So far as its substance is concerned, it consists of the labour-power in action, i.e., of the living labour set in motion by this capital-value.
2) Constant Capital . This is the value of all the means of production employed for productive purposes in this branch. These, again, are divided into fixed capital , such as machines, instruments of labour, buildings, labouring animals, etc., and circulating constant capital, such as materials of production: raw and auxiliary materials, semi-finished products, etc.
The value of the total annual product created with the aid of this capital in each of the two departments consists of one portion which represents the constant capital c consumed in the process of production and only transferred to the product in accordance with its value, and of another portion added by the entire labour of the year. This latter portion is divided in turn into the replacement of the advanced variable capital v and the excess over and above it, which forms the surplus-value s. And just as the value of every individual commodity, that of the entire annual product of each department consists of c + v + s.
Portion c of the value, representing the constant capital consumed in production, does not coincide with the value of the constant capital employed in production. True, the materials of production are entirely consumed and their values completely transferred to the product. But only a portion of the employed fixed capital is wholly consumed and its value thus transferred to the product. Another part of the fixed capital, such as machines, buildings, etc., continues to exist and function the same as before, though depreciated to the extent of the annual wear and tear. This persistent portion of the fixed capital does not exist for us, when we consider the value of the product. It is a portion of the capital-value, which exists independently and alongside of this newly produced commodity-value. This was shown previously in the analysis of the value of the product of individual capital (Vol. I, Ch. VIII.). However, for the present we must leave aside the method of analysis employed there. We saw in the study of the value of the product of individual capital that the value of which the fixed capital was shorn through wear and tear is transferred to the product created during the time of wear, irrespective of whether or not any portion of this fixed capital is replaced in kind during this time out of the value thus transferred. At this point in the study of the total social product and of its value, however, we are compelled, at least for the present, to leave out of account that portion of value which is transferred from the fixed capital to the annual product by wear and tear, unless fixed capital is replaced in kind during the year. In one of the following sections of this chapter we shall discuss this point in particular.
We shall base our study of simple reproduction on the following scheme, in which c stands for constant capital, v for variable capital, and s for surplus-value, assuming the rate of surplus-value s/v to be 100 per cent. The figures may indicate millions of marks, francs, or pounds sterling.
I. Production of Means of Production: Capital. . . . . . . . . . . . . 4,000 c + 1,000 v = 5,000 Commodity-Product . . . 4,000 c + 1,000 v , + 1,000 s = 6,000,
existing in means of production.
II. Production of Articles of Consumption: Capital . . . . . . . . . . . 2,000 c + 500 v = 2,500 Commodity-Product . . 2,000 c + 500 v + 500 s = 3,000,
existing in articles of consumption.
Recapitulation: Total annual commodity-product: I. 4,000 c + 1,000 v + 1,000 s = 6,000 means of production II. 2,000 c + 500 v + 500 s = 3,000 articles of consumption.
Total value 9,000, exclusive of the fixed capital persisting in its natural form, according to our assumption.
If we were now to examine the transformations necessary on the basis of simple reproduction, where the entire surplus-value is unproductively consumed, and leave aside for the present the money-circulation that brings them about, we should obtain at the outset three great points of support.
1) The 500 v , representing wages of the labourers, and 500 s , representing surplus-value of the capitalists, in department II, must be spent for articles of consumption. But their value exists in articles of consumption worth 1,000, held by the capitalists of department II, which replace the advanced 500 v and represent the 500 s . Consequently the wages and surplus-value of department II are exchanged within this department for products of this same department. Thereby articles of consumption to the amount of (500 v + 500 s ) II = 1,000, drop out of the total product.
2) The 1,000 v plus 1,000 s of department I must likewise be spent for articles of consumption; in other words, for products of department II. Hence they must be exchanged for the remainder of this product equal to the constant capital part, 2,000 c . Department II receives in return an equal quantity of means of production, the product of I, in which the value of 1,000 v + 1,000 s of I is incorporated. Thereby 2,000 II c and (1,000 v +1,000 s ) I drop out of the calculation.
3) There still remain 4,000 I c . These consist of means of production which can be used only in department I to replace its consumed constant capital, and are therefore disposed of by mutual exchange between the individual capitalists of I, just as the (500 v + 500 s ) II by an exchange between the labourers and capitalists, or between the individual capitalists of II.
Let this serve for the moment to facilitate the understanding of what follows.
III. Exchange between the Two Departments I (v + s) versus II c
We begin with the great exchange between the two classes. (1,000 v + 1,000 s ) I — these values consisting, in the hands of their producers, of means of production in their natural form, are exchanged for 2,000 II c , for values consisting of articles of consumption in their bodily form. The capitalist class of II thereby reconverts its constant capital of 2,000 from the form of articles of consumption into that of means of production of articles of consumption, into a form in which it can once more function as a factor of the labour-process and for purposes of self-expansion of value as constant capital-value. On the other hand the equivalent of the labour-power of I (1,000 v ) and the surplus-value of the capitalists of I (1,000 s ) are realised thereby in articles of consumption; both of them are converted from their bodily form of means of production into a bodily form in which they can be consumed as revenue.
Now, this mutual exchange is accomplished by means of a circulation of money, which promotes it just as much as it renders its understanding difficult, but which is of decisive importance because the variable portion of capital must ever resume the form of money, as money-capital converting itself from the form of money into labour-power. The variable capital must be advanced in the form of money in all branches of production carried on at the entire periphery of society simultaneously alongside each other, regardless of whether they belong to category I or II. The capitalist buys the labour-power before it enters into the process of production, but pays for it only at stipulated times, after it has been expended in the production of use-values. He owns, together with the remainder of the value of the product, also that portion of it which is only an equivalent for the money expended in the payment of labour-power, that portion of the value of the product which represents variable capital. In this portion of value the labourer has already supplied the capitalist with the equivalent of his wages. But it is the reconversion of commodities into money, their sale, which restores to the capitalist his variable capital in the form of money-capital, which he may advance once more for the purchase of labour-power.
In department I, then, the aggregate capitalist has paid £1,000 (I say £ solely to indicate that it is value in the form of money ), equal to 1,000 v , to the labourers for the value of product I already existing as the v-portion, i.e., of the means of production created by them. With these £1,000 the labourers buy articles of consumption of the same value from capitalists II, thereby converting one half of the constant capital II into money; capitalists II, in their turn, buy with these £1,000 means of production, valued at 1,000, from capitalists I; thereby, as far as the latter are concerned, the variable capital-value equal to 1,000 v , which, being part of their product, existed in the bodily form of means of production, is thus reconverted into money and can now function anew in the hands of capitalists I as money-capital, which is transformed into labour-power, hence into the most essential element of productive capital. In this way their variable capital flows back to them in the form of money, as a result of the realisation of some of their commodity-capital.
As for the money required to exchange the s-portion of commodity-capital I for the second half of constant capital II, it may be advanced in various ways. In reality this circulation embraces innumerable separate purchases and sales by the individual capitalists of both categories, the money coming in any event from these capitalists, since we have already accounted for the money put into circulation by the labourers. A capitalist of category II can buy, with the money-capital he has besides his productive capital, means of production from capitalists of category I, and, vice versa, a capitalist of category I can buy, with money-funds assigned for personal and not for capital expenditure, articles of consumption from capitalists of category II. A certain supply of money, to be used either for the advancement of capital or for the expenditure of revenue must under all circumstances be assumed to exist beside the productive capital in the hands of the capitalists, as we have shown above in parts I and II. Let us assume — the proportion is wholly immaterial for our purpose — that one half of the money is advanced by capitalists II in the purchase of means of production for the replacement of their constant capital, while the other half is spent by capitalists I for articles of consumption. In that case department II advances £500 for the purchase of means of production from department I, thereby replacing (inclusive of the above £1,000 coming from the labourers of department I) three-quarters of its constant capital in kind, with the £500 so obtained department I buys articles of consumption from II, thereby completing for one half of the s-portion of its commodity-capital the circulation c — m — c, and thus realising its product in the consumption-fund. By means of this second process the £500 return to the hands of II as money-capital existing beside its productive capital. On the other hand I expends money to the amount of £500 for the purchase of II’s articles of consumption in anticipation of the sale of that half of the s-portion of its commodity-capital which is still lying in store as product. With the same £500 II buys from I means of production, thereby replacing in kind its entire constant capital (1,000 + 500 + 500 = 2,000) while I realises its entire surplus-value in articles of consumption. On the whole, the entire exchange of commodities in the amount of £4,000 would be effected with a money-circulation of £2,000 which amount is attained only because the entire annual product is described as exchanged in bulk, in a few large lots. The important point here is that II has not only reconverted its constant capital reproduced in the form of articles of consumption, into the form of means of production, but has besides recovered the £500 which it had advanced to the circulation for the purchase of means of production; and that, similarly, I again possesses not only its variable capital, which it had reproduced in the form of means of production, in money-form, as money-capital once more directly convertible into labour-power, but also the £500 expended in the purchase of articles of consumption in anticipation of the sale of the s-portion of its capital. These £500 flow back to it not because of the expenditure incurred, but because of the subsequent sale of a part of its commodity-product incorporating one half of its surplus-value.
In both cases it is not only that the constant capital of II is reconverted from the form of a product into the bodily form of means of production, in which alone it can function as capital; and likewise it is not only that the variable portion of the capital of I is converted into its money-form, and the surplus-value portion of the means of production of I into its consumable form, the form in which it can be used as revenue. It is also that the £500 of money-capital, advanced by II in the purchase of means of production prior to selling the corresponding compensating portion of the value of its constant capital – existing in the form of means of consumption – flow back to II; and furthermore back to I flow the £500 which were expended anticipando by it for the purchase of articles of consumption. If the money advanced by II at the expense of the constant portion of its commodity-product, and by I at the expense of the surplus-value portion of its commodity-product, flows back to them, this is solely because the one class of capitalists throws £500 into circulation over and above the constant capital existing in the form of commodities in II, and the other class a like amount over and above the surplus-value existing in the form of commodities in I. In the last analysis the two departments have mutually paid one another in full by the exchange of equivalents in the shape of their respective commodities. The money thrown into circulation by them in excess of the values of their commodities, as a means of effecting the exchange of these commodities, returns to each one of them out of the circulation in proportion to the quota which each of the two had thrown into circulation. Neither has grown a farthing richer thereby. II possessed a constant capital of 2,000 in the form of articles of consumption plus 500 in money; now it possesses 2,000 in means of production plus 500 in money, the same as before; in the same way I possesses, as before, a surplus-value of 1,000 (consisting of commodities, means of production, now converted into a consumption-fund) plus 500 in money. The general conclusion is this: Of the money which the industrial capitalists throw into circulation to accomplish their own commodity circulation, whether at the expense of the constant part of the commodity-value or at the expense of the surplus-value existing in the commodities to the extent that it is laid out as revenue, as much returns into the hands of the respective capitalists as was advanced by them for the money-circulation.
As for the reconversion of the variable capital of class I into the form of money, this capital, after the capitalists of I invested it in wages, exists for them first in the form of commodities in which the labourers delivered it to them. They paid this capital in the form of money to these labourers as the price of their labour-power. To this extent the capitalists have paid for that constituent part of the value of their commodity-product which is equal to the variable capital expended in the form of money. They are, for this reason, the owners of this portion of the commodity-product as well. But that part of the working-class which is employed by them does not buy the means of production created by it; these labourers buy articles of consumption produced by II. Hence the variable capital advanced by the capitalists of I in the payment of labour-power does not return to them directly. It passes by means of purchases made by the labourers into the hands of the capitalist producers of the commodities necessary for and within the reach of working folks; in other words, it passes into the hands of capitalists II. And not until these expend the money in the purchase of means of production does it return by this circuitous route into the hands of capitalists I. It follows that, on the basis of simple reproduction, the sum of the values of v + s of the commodity-capital of I (and therefore a corresponding proportional part of the total commodity-product of I) must be equal to the constant capital II c , which is likewise taken as a proportional part of the total commodity-product of department II; or I (v + s) = II c .
IV. Exchange within Department II. Necessities of Life and Articles of Luxury
Of the value of the commodity-product of department II there still remain to be studied the constituents v plus s. This analysis has nothing to do with the most important question which occupies our attention here, namely to what extent the division of the value of every individual capitalist commodity-product into c + v + s — even if brought about by different forms of appearance — applies also to the value of the total annual product. This question finds its answers on the one hand in the exchange of I (v + s) for II c , and on the other hand in the investigation, to be made later, of the reproduction of I in the annual product of I. Since II (v + s) exists in the bodily form of articles of consumption; since the variable capital advanced to the labourers in payment of their labour-power must generally speaking be spent by them for articles of consumption; and since the s-portion of the value of commodities, on the assumption of simple reproduction, is practically spent as revenue for articles of consumption, it is prima facie evident that the labourers II buy back, with the wages received from the capitalists II, a portion of their own product, corresponding to the amount of the money-value received as wages. Thereby the capitalist class II reconverts the money-capital advanced by it in the payment of labour-power into the form of money. It is quite the same as if it had paid the labourers in mere value tokens. As soon as the labourers would realise these value tokens by the purchase of a part of the commodities produced by them but belonging to the capitalists, these tokens would return into the hands of the capitalists. Only, these tokens do not merely represent value but possess it, in golden or silver embodiment. We shall analyse in greater detail later on this sort of reflux of variable capital advanced in the form of money by means of a process in which the working-class appears as the purchaser and the capitalist class as the seller. Here however a different point is at issue, which must be discussed in connection with this return of the variable capital to its point of departure.
Category II of the annual production of commodities consists of a great variety of branches of production, which may, however, be divided into two great sub-divisions by their products.
a) Articles of consumption, which enter into the consumption of the working-class, and, to the extent that they are necessities of life — even if frequently different in quality and value from those of the labourers — also form a portion of the consumption of the capitalist class. For our purposes we may call this entire sub-division consumer necessities , regardless of whether such a product as tobacco is really a consumer necessity from the physiological point of view. It suffices that it is habitually such.
b) Articles of luxury , which enter into the consumption of only the capitalist class and can therefore be exchanged only for spent surplus-value, which never falls to the share of the labourer.
As far as the first category is concerned it is obvious that the variable capital advanced in the production of the commodities belonging in it must flow back in money-form directly to that portion of the capitalist class II (i.e., the capitalists IIa) who have produced these necessities of life. They sell them to their own labourers to the amount of the variable capital paid to them in wages. This reflux is direct so far as this entire sub-division a of capitalist class II is concerned, no matter how numerous the transactions may be between the capitalists of the various pertinent branches of industry, by means of which the returning variable capital is distributed pro rata . These are processes of circulation, whose means of circulation are supplied directly by the money expended by the labourers. It is different, however, with sub-division IIb. The entire portion of the value produced in this sub-division, IIb (v + s) , exists in the bodily form of articles of luxury, i.e., articles which the labouring class can buy no more than it can buy commodity-value I existing in the form of means of production, notwithstanding the fact that both the articles of luxury and the means of production are the products of these labourers.
Hence the reflux by which the variable capital advanced in this subdivision returns to the capitalist producers in its money-form cannot be direct but must be mediated, as in the case of I v .
Let us assume for instance that v = 500 and s = 500, as they did in the case of the entire class II; but that the variable capital and the corresponding surplus-value are distributed as follows:
Sub-division a, Necessities of Life: v = 400; s = 400; hence a quantity of commodities in consumer necessities of the value of 400 v + 400 s = 800, or IIa (400 v + 400 s ).
Sub-division b, Articles of Luxury: of the value of 100 v + 100 a = 200, or IIb (100 v + 100 s ).
The labourers of IIb have received 100 in money as payment for their labour-power, or say £100. With this money they buy articles of consumption from capitalists IIa to the same amount. This class of capitalists buys with the same money £100 worth of the IIb commodities, and in this way the variable capital of capitalists IIb flows back to them in the form of money.
In IIa there are available once more 400 v in money, in the hands of the capitalists, obtained by exchange with their own labourers. Besides, a fourth of the part of the product representing surplus-value has been transferred to the labourers of IIb, and in exchange IIb (100 v ) have been received in the form of articles of luxury.
Now, assuming that the capitalists of IIa and IIb divide the expenditure of their revenue in the same proportion between necessities of life and luxuries — three-fifths for necessities for instance and two-fifths for luxuries — the capitalists of sub-class IIa will spend three-fifths of their revenue from surplus-value, amounting to 400 s , or 240, for their own products, necessities of life, and two-fifths, or 160, for articles of luxury. The capitalists of sub-class IIb will divide their surplus-value of 100 s in the same way: three-fifths, or 60, for necessities, and two-fifths, or 40, for articles of luxury, the latter being produced and exchanged in their own sub-class.
The 160 in articles of luxury received by (IIa) s pass into the hands of the IIa capitalists in the following manner: As we have seen, 100 of the (IIa) 400 s were exchanged in the form of necessities of life for an equal amount of (IIb) v , which exists as articles of luxury, and another 60, consisting of necessities of life, for (IIb) 60 s , consisting of luxuries. The total calculation then stands as follows:
IIa: 400 v + 400 s ; IIb: 100 v + 100 s
1) 400 v (a) are consumed by the labourers of IIa, a part of whose product (necessities of life) they form. The labourers buy them from the capitalist producers of their own sub-division. These capitalists thereby recover £400 in money, which is the value of their variable capital of 400 paid by them to these same labourers as wages. They can now once more buy labour-power with it.
2) A part of the 400 s (a), equal to the 100 v (b), one-fourth of the surplus-value (a), is realised in luxuries in the following way: The labourers (b) received from the capitalists of their sub-division (b) £100 in wages. With this amount they buy one-fourth of the surplus-value (a), i.e., commodities consisting of necessities of life. With this money the capitalists of (a) buy articles of luxury to the same amount, which equals 100 v (b), or one half of the entire output of luxuries. In this way the b capitalists get back their variable capital in the form of money and are enabled to resume reproduction by again purchasing labour-power, since the entire constant capital of the whole category II has already been replaced by the exchange of I (v + s) for II c . The labour-power of the luxury workers is therefore saleable anew only because the part of their own product created as an equivalent for their wages is drawn by capitalists IIa into their consumption-fund, is turned into money. (The same applies to the sale of the labour-power of I, since the II for which I (v + s) is exchanged, consists of both articles of luxury and necessities of life, and that which is renewed by means of I (v + s) constitutes the means of production of both luxuries and necessities.)
3) We now come to the exchange between a and b, which is merely exchange between the capitalists of the two sub-divisions. So far we have disposed of the variable capital (400 v ) and part of the surplus-value (100 s ) in a, and the variable capital (100 v ) in b. We have furthermore assumed that the average proportion of the expenditure of the capitalist revenue was in both classes two-fifths for luxuries and three-fifths for necessities. Apart from the 100 already expended for luxuries, the entire subdivision a still has to be allotted 60 for luxuries, and b has proportionately to be allotted 40.
(IIa) s is then divided into 240 for necessities and 160 for luxuries, or 240 + 160 = 400, (IIa).
(IIb) s is divided into 60 for necessities and 40 for luxuries; 60 + 40 = 100, (IIb). The last 40 are consumed by this class out of its own product (two-fifths of its surplus-value); the 60 in necessities are obtained by this class through the exchange of 60 of its surplus-value for 60, (a).
We have, then, for the entire capitalist class II the following (v plus s in sub-division [a] consisting of necessities, in [b] of luxuries): IIa (400 v + 400 s ) + IIb (100 v + 100 s ) = 1,000; by this movement there is thus realised: 500 v (a + b) [realised in 400 v (a) and 100 s (a)] + 500 s (a + b) [realised in 300 s (a) + 100 v (b) + 100 s (b)] =1,000. For a and b, each considered by itself, we obtain the following realisation:
If, for the sake of simplicity, we assume the same proportion between the variable and constant capital (which, by the way, is not at all necessary), we obtain for 400 v (a) a constant capital of 1,600, and for 100 v (b) a constant capital of 400. We then have the following two subdivisions, a and b, in II:
IIa) 1,600 c + 400 v + 400 s = 2,400 IIb) 400 c + 100 v + 100 s = 600
adding up to
2,000 c + 500 v + 500 s = 3,000
Accordingly, 1,600 of the 2,000 II c in articles of consumption, which are exchanged for 2,000 I (v + s) , are exchanged for means of production of necessities of life and 400 for means of production of luxuries.
The 2,000 I (v + s) would therefore break up into (800 v + 800 s ) I for a, equal to 1,600 means of production of necessities of life, and (200 v + 200 s ) I for b, equal to 400 means of production of luxuries.
A considerable part of the instruments of labour as such, as well as of the raw and auxiliary materials, etc., is the same for both departments. But so far as the exchange of the various portions of value of the total product I (v + s) is concerned, such a division would be wholly immaterial. Both the above 800 v of I and the 200 v of I are realised because the wages are spent for articles of consumption 1,000 II c ; hence the money-capital advanced for this purpose is distributed evenly on its return among the capitalist producers of I, their advanced variable capital is replaced pro rata in money. On the other hand, so far as the realisation of the 1,000 I s is concerned, the capitalists will here likewise draw uniformly (in proportion to the magnitude of their s) 600 IIa and 400 IIb in means of consumption out of the entire second half of II c , equal to 1,000; consequently those who replace the constant capital of IIa will draw.
480 (three-fifths) out of 600 c (IIa) and 320 (two-fifths) out of 400 c (IIb), a total of 800; those who replace the constant capital of IIb will draw.
120 (three-fifths) out of 600 c (IIa) and 80 (two-fifths) out of 400 c (IIb), which equals 200. Grand total, 1,000.
What is arbitrary here is the ratio of the variable to the constant capital of both I and II and so is the identity of this ratio for I and II and their sub-divisions. As for this identity, it has been assumed here merely for the sake of simplification, and it would not alter in any way the conditions of the problem and its solution if we were to assume different proportions. However, the necessary result of all this, on the assumption of simple reproduction, is the following.
1) That the new value created by the labour of one year (divisible into v + s) in the bodily form of means of production is equal to the value of the constant capital c contained in the value of the product created by the other part of the annual labour and reproduced in the form of articles of consumption. If it were smaller than II c , it would be impossible for II to replace its constant capital entirely; if it were greater, a surplus would remain unused. In either case, the assumption of simple reproduction would be violated.
2) That in the case of annual product which is reproduced in the form of articles of consumption, the variable capital v advanced in the form of money can be realised by its recipients, inasmuch as they are labourers producing luxuries, only in that portion of the necessities of life which embodies for their capitalist producers prima facie their surplus-value; hence that v, laid out in the production of luxuries, is equal in value to a corresponding portion of s produced in the form of necessities of life, and hence must be smaller than the whole of this s, namely (IIa) s , and that the variable capital advanced by the capitalist producers of luxuries returns to them in the form of money only by means of the realisation of that v in this portion of s. This phenomenon is quite analogous to the realisation of I (v + s) in II c , except that in the second case (IIb) v realizes itself in a part of (IIa) s of the same value. These proportions remain qualitatively determinant in every distribution of the total annual product, since it actually enters into the process of the annual reproduction brought about by circulation. I (v + s) can be realised only in II c , just as II c can only be renewed in function as a component part of productive capital by means of this realisation; in the same way, (IIb) v can be realised only in a portion of (IIa) s and (IIb) v can only thus be reconverted into the form of money-capital. It goes without saying that this applies only to the extent that it all is really a result of the process of reproduction itself, i.e., to the extent that the capitalists of IIb, for instance, do not obtain money-capital for v on credit from others. Quantitatively however the exchanges of the various portions of the annual product can take place in the proportions indicated above only so long as the scale and value-relations in production remain stationary and so long as these strict relations are not altered by foreign commerce.
Now, if we were to say after the manner of Adam Smith that I (v + s) resolve themselves into II c , and II c resolves itself into I (v + s) , or, as he used to say more frequently and still more absurdly, I (v + s) constitute component parts of the price (or “value in exchange,“ as he has it) of II and II constitutes the entire component part of the value of I (v + s) , then one could and should likewise say that (IIb) v resolves itself into (IIa) s , or (IIa) s into (IIb) v , or (IIb) v forms a component part of the surplus-value of IIa, and, vice versa, the surplus-value thus resolves itself into wages, or into variable capital, and the variable capital forms a “component part“ of the surplus-value. This absurdity is indeed found in Adam Smith, since with him wages are determined by the value of the necessities of life, and these commodity-values in their turn by the value of the wages (variable capital) and surplus-value contained in them. He is so absorbed in the fractional parts into which the value-product of one working-day is divided on the basis of capitalism — namely into v plus s — that he quite forgets that it is immaterial in simple commodity exchange whether the equivalents existing in various bodily forms consist of paid or unpaid labour, since their production costs in either case the same amount of labour; and that it is also immaterial whether the commodity of A is a means of production and that of B an article of consumption and whether one commodity has to serve as a component part of capital after its sale while another passes into the consumption-fund and, secundum Adam, is consumed as revenue. The use to which the individual buyer puts his commodity does not come within the scope of commodity-exchange, the sphere of circulation, and does not affect the value of the commodity. This is in no wise altered by the fact that in the analysis of the circulation of the total annual social product, the definite use for which it is intended, the factor of consumption of the various component parts of that product, must be taken into consideration.
In the exchange established above of (IIb) v for a portion of (IIa) s of the same value, and in the further exchanges between (IIa), and (IIb), it is by no means assumed that either the individual capitalists of IIa and IIb or their respective totalities divide their surplus-value in the same proportion between necessary articles of consumption and articles of luxury. The one may spend more on this consumption, the other more on that. On the basis of simple reproduction it is merely assumed that a sum of values equal to the entire surplus-value is realised in the consumption-fund. The limits are thus given. Within each department the one may spend more in a, the other in b. But this may compensate itself mutually, so that the capitalist groups of a and b, taken as a whole, each participate in the same proportion in both. The value-relations — the proportional shares of the two kinds of producers, a and b in the total value of product II — consequently also a definite quantitative relation between the branches of production supplying those products — are however necessarily given in each concrete case; only the proportion chosen as an illustration is a hypothetical one. It would not alter the qualitative aspects if another illustration were selected; only the quantitative determinations would be altered. But if on account of any circumstances there arises an actual change in the relative magnitude of a and b, the conditions of simple reproduction would also change accordingly.
Since (IIb) v is realised in an equivalent part of (IIa) s , it follows that in proportion as the luxury part of the annual product grows, as therefore an increasing share of the labour-power is absorbed in the production of luxuries, the reconversion of the variable capital advanced in (IIb) v into money-capital functioning anew as the money-form of the variable capital, and thereby the existence and reproduction of the part of the working-class employed in IIb — the supply to them of consumer necessities — depends upon the prodigality of the capitalist class, upon the exchange of a considerable portion of their surplus-value for articles of luxury.
Every crisis at once lessens the consumption of luxuries. It retards, delays the reconversion of (IIb) v into money-capital, permitting it only partially and thus throwing a certain number of the labourers employed in the production of luxuries out of work, while on the other hand it thus clogs the sale of consumer necessities and reduces it. And this without mentioning the unproductive labourers who are dismissed at the same time, labourers who receive for their services a portion of the capitalists’ luxury expense fund (these labourers are themselves pro tanto luxuries), and who take part to a very considerable extent in the consumption of the necessities of life, etc. The reverse takes place in periods of prosperity, particularly during the times of bogus prosperity, in which the relative value of money, expressed in commodities, decreases also for other reasons (without any actual revolution in values), so that the prices of commodities rise independently of their own values. It is not alone the consumption of necessities of life which increases. The working-class (now actively reinforced by its entire reserve army) also enjoys momentarily articles of luxury ordinarily beyond its reach, and those articles which at other times constitute for the greater part consumer “necessities“ only for the capitalist class. This on its part calls forth a rise in prices.
It is sheer tautology to say that crises are caused by the scarcity of effective consumption, or of effective consumers. The capitalist system does not know any other modes of consumption than effective ones, except that of sub forma pauperis or of the swindler. That commodities are unsaleable means only that no effective purchasers have been found for them, i.e., consumers (since commodities are bought in the final analysis for productive or individual consumption). But if one were to attempt to give this tautology the semblance of a profounder justification by saying that the working-class receives too small a portion of its own product and the evil would be remedied as soon as it receives a larger share of it and its wages increase in consequence, one could only remark that crises are always prepared by precisely a period in which wages rise generally and the working-class actually gets a larger share of that part of the annual product which is intended for consumption. From the point of view of these advocates of sound and “simple“ (!) common sense, such a period should rather remove the crisis. It appears, then, that capitalist production comprises conditions independent of good or bad will, conditions which permit the working-class to enjoy that relative prosperity only momentarily, and at that always only as the harbinger of a coming crisis. [ Ad notam for possible followers of the Rodbertian theory of crises.—F.E.]
We saw a while ago that the proportion between the production of consumer necessities and that of luxuries requires the division of II (v + s) between IIa and IIb, and thus of II c between (IIa) c and (IIb) c . Hence this division affects the character and the quantitative relations of production to their very roots, and is an essential determining factor of its general structure.
Simple reproduction is essentially directed toward consumption as an end, although the grabbing of surplus-value appears as the compelling motive of the individual capitalists; but surplus-value, whatever its relative magnitude may be, is after all supposed to serve here only for the individual consumption of the capitalist.
As simple reproduction is a part, and the most important one at that, of all annual reproduction on an extended scale, this motive remains as an accompaniment of and contrast to the self-enrichment motive as such. In reality the matter is more complicated, because partners in the loot — the surplus-value of the capitalist — figure as consumers independent of him.