The Accumulation of Capital
by Rosa Luxemburg · English · Gutenberg #41405 · 1,098,245 chars · public domain (US)
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Title: The Accumulation of Capital
Author: Rosa Luxemburg
Author of introduction, etc.: Joan Robinson
Translator: Agnes Schwarzschild
Release date: November 19, 2012 [eBook #41405]
Most recently updated: October 23, 2024
Language: English
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*** START OF THE PROJECT GUTENBERG EBOOK THE ACCUMULATION OF CAPITAL ***
[Transcriber's notes:
Inconsistent hyphenation and use of umlauts retained.
Equations are surrounded by _ indicating that the variables are all
italicised. If there are non-italicised alphabetic characters in
the equation the variables are surrounded by _ separately.
[sqrt] has been used to represent square root (radical) sign.
A full list of errors that have been changed can be found at the end.]
RARE MASTERPIECES
OF PHILOSOPHY AND SCIENCE
EDITED BY DR. W. STARK
THE ACCUMULATION
OF CAPITAL
PUBLISHED ON THE LOUIS STERN MEMORIAL FUND
THE
ACCUMULATION
OF CAPITAL
by
ROSA LUXEMBURG
_translated from the German
by
AGNES SCHWARZSCHILD
(doctor iuris)_
_With an Introduction
by
JOAN ROBINSON_
NEW HAVEN
YALE UNIVERSITY PRESS
1951
THIS TRANSLATION FIRST PUBLISHED
IN THE UNITED STATES
BY YALE UNIVERSITY PRESS
NEW HAVEN CONNECTICUT
DESIGNED BY SEÁN JENNETT
AND PRINTED IN GREAT BRITAIN
BY BUTLER AND TANNER LTD
LONDON AND FROME
CONTENTS
TRANSLATOR'S NOTE _page_ 7
A NOTE ON ROSA LUXEMBURG 9
INTRODUCTION 13
SECTION ONE
THE PROBLEM OF REPRODUCTION
I. THE OBJECT OF OUR INVESTIGATION _page_ 31
II. QUESNAY'S AND ADAM SMITH'S ANALYSES OF
THE PROCESS OF REPRODUCTION 48
III. A CRITICISM OF SMITH'S ANALYSIS 64
IV. MARX'S SCHEME OF SIMPLE REPRODUCTION 76
V. THE CIRCULATION OF MONEY 93
VI. ENLARGED REPRODUCTION 107
VII. ANALYSIS OF MARX'S DIAGRAM OF ENLARGED
REPRODUCTION 120
VIII. MARX'S ATTEMPT TO RESOLVE THE DIFFICULTY 139
IX. THE DIFFICULTY VIEWED FROM THE ANGLE OF
THE PROCESS OF CIRCULATION 155
SECTION TWO
HISTORICAL EXPOSITION OF THE PROBLEM
FIRST ROUND
Sismondi-Malthus _v._ Say-Ricardo, MacCulloch
X. SISMONDI'S THEORY OF REPRODUCTION _page_ 173
XI. MACCULLOCH _v._ SISMONDI 191
XII. RICARDO _v._ SISMONDI 203
XIII. SAY _v._ SISMONDI 211
XIV. MALTHUS 219
SECOND ROUND
The Controversy between Rodbertus and von Kirchmann
XV. V. KIRCHMANN'S THEORY OF REPRODUCTION _page_ 227
XVI. RODBERTUS' CRITICISM OF THE CLASSICAL
SCHOOL 238
XVII. RODBERTUS' ANALYSIS OF REPRODUCTION 252
THIRD ROUND
Struve--Bulgakov--Tugan Baranovski v. Vorontsov--Nikolayon
XVIII. A NEW VERSION OF THE PROBLEM _page_ 271
XIX. VORONTSOV AND HIS 'SURPLUS' 276
XX. NIKOLAYON 284
XXI. STRUVE'S 'THIRD PERSONS' AND 'THREE
WORLD EMPIRES' 292
XXII. BULGAKOV AND HIS COMPLETION OF MARX'S
ANALYSIS 298
XXIII. TUGAN BARANOVSKI AND HIS 'LACK OF
PROPORTION' 311
XXIV. THE END OF RUSSIAN 'LEGALIST' MARXISM 324
SECTION THREE
THE HISTORICAL CONDITIONS
OF ACCUMULATION
XXV. CONTRADICTIONS WITHIN THE DIAGRAM OF
ENLARGED REPRODUCTION _page_ 329
XXVI. THE REPRODUCTION OF CAPITAL AND ITS
SOCIAL SETTING 348
XXVII. THE STRUGGLE AGAINST NATURAL ECONOMY 368
XXVIII. THE INTRODUCTION OF COMMODITY ECONOMY 386
XXIX. THE STRUGGLE AGAINST PEASANT ECONOMY 395
XXX. INTERNATIONAL LOANS 419
XXXI. PROTECTIVE TARIFFS AND ACCUMULATION 446
XXXII. MILITARISM AS A PROVINCE OF ACCUMULATION 454
INDEX 469
TRANSLATOR'S NOTE
This is an original translation not only of the main body of the work
but also of a number of quotations from foreign authors. Page references
thus usually indicate the original foreign sources.
In so far as possible, however, I have availed myself of existing
translations and have referred to the following standard works:
Karl Marx: _Capital_, vol. i (transl. by Moore-Aveling, London, 1920);
vol. ii (transl. by E. Untermann, Chicago, 1907); vol. iii (transl.
by E. Untermann, Chicago, 1909)
_The Poverty of Philosophy_ (translator's name not given, London,
1936).
Sismondi's introduction to the second edition of _Nouveaux Principes_ is
quoted from M. Mignet's translation of selected passages by Sismondi,
entitled _Political Economy and the Philosophy of Government_, London,
1847. No English translation exists of Marx's _Theorien über den
Mehrwert_.
Unfortunately, not all the West European texts, and none of the
Russian--except Engels' correspondence with Nikolayon--were accessible
to me, and I regret having been unable to trace some quotations and
check up on others. In such cases, the English version follows the
German text and will at least bring out the point the author wanted to
make.
To save the reader grappling with unfamiliar concepts, I have converted
foreign currencies and measures into their English equivalents, at the
following rates:
20 _marks_--25 _francs_--$5--£1 (gold standard); 1 _hectare_--(roughly)
2·5 acres; 1 _kilometre_--5/8 mile.
I am glad of this opportunity to express my gratitude to Dr. W. Stark
and Mrs. J. Robinson for the helpful criticism and appreciation with
which my work has met.
AGNES SCHWARZSCHILD
A NOTE ON ROSA LUXEMBURG
Rosa Luxemburg was born on 5 March 1870, at Zamosc, a little town of
Russian Poland, not far from the city of Lublin. She came from a fairly
well-to-do family of Jewish merchants, and soon showed the two
outstanding traits which were to characterise all her life and work: a
high degree of intelligence, and a burning thirst for social justice
which led her, while still a schoolgirl, into the revolutionary camp.
Partly to escape the Russian police, partly to complete her education,
she went to Zurich and studied there the sciences of law and economics.
Her doctoral dissertation dealt with the industrial development of
Poland and showed up the vital integration of Polish industry with the
wider economic system of metropolitan Russia. It was a work not only of
considerable promise, but already of solid and substantial achievement.
Her doctorate won, Rosa Luxemburg looked around for a promising field of
work and decided to go to Germany, whose working-class movement seemed
destined to play a leading part in the future history of international
socialism. She settled there in 1896, and two years later contracted a
formal marriage with a German subject which secured her against the
danger of forcible deportation to Russia. Now, at that moment the German
Social-Democratic Party was in the throes of a serious crisis. In 1899,
Eduard Bernstein published his well-known work _Die Voraussetzungen des
Sozialismus und die Aufgaben der Sozialdemokratie_, which urged the
party to drop its revolutionary jargon and to work henceforth for
tangible social reforms within the given economic set-up, instead of
trying to bring about its final and forcible overthrow. This 'reformism'
or 'revisionism' seemed to Rosa Luxemburg a base as well as a foolish
doctrine, and she published in the same year a pamphlet _Sozialreform
oder Revolution?_ which dealt with Bernstein's ideas in no uncertain
fashion. From this moment onward, she was and remained one of the
acknowledged leaders of the left wing within the German working-class
movement.
The events of the year 1905 gave Rosa Luxemburg a welcome opportunity
to demonstrate that revolution was to her more than a subject of purely
academic interest. As soon as the Russian masses began to move, she
hurried to Warsaw and threw herself into the fray. There followed a
short span of feverish activity, half a year's imprisonment, and,
finally, a return journey to Berlin. The experiences of the Warsaw
rising are reflected in a book entitled _Massenstreik, Partei und
Gewerkschaften_, which was published in 1906. It recommends the general
strike as the most effective weapon in the struggle of the proletariat
against the bourgeoisie.
The International Socialist Congress which met at Stuttgart in 1907
prepared and foreshadowed the sorry history of Rosa Luxemburg's later
life. On that occasion she drafted, together with Lenin, a resolution
which demanded that the workers of the world should make any future war
an opportunity for the destruction of the capitalist system. Unlike so
many others, she stuck to her resolution when, seven years later, the
time of testing came. The result was that she had to spend nearly the
whole of the first World War in jail, either under punishment or in
protective custody. But imprisonment did not mean inactivity. In 1916,
there appeared in Switzerland her book _Die Krise der Sozialdemokratie_,
which assailed the leaders of the German labour party for their
patriotic attitude and called the masses to revolutionary action. The
foundation of the Spartacus League in 1917, the germ cell out of which
the Communist Party of Germany was soon to develop, was vitally
connected with the dissemination of Rosa Luxemburg's aggressive
sentiments.
The collapse of the _Kaiserreich_ on 11 November 1918, gave Rosa
Luxemburg her freedom and an undreamt-of range of opportunities. The two
months that followed must have been more crowded and more colourful than
all her previous life taken together. But the end of her career was
imminent. The fatal Spartacus week, an abortive rising of the Berlin
workers, led on 15 January 1919, to her arrest by a government composed
of former party comrades. During her removal to prison she was attacked
and severely beaten by soldiers belonging to the extreme right, a
treatment which she did not survive. Her body was recovered days later
from a canal.
A type not unlike Trotsky, Rosa Luxemburg had her tender and
sentimental side, which comes to the surface in her correspondence,
especially in the _Briefe aus dem Gefaengnis_ printed in 1922. As a
thinker she showed considerable honesty and independence of mind. _The
Accumulation of Capital_, first published in 1913, which is undoubtedly
her finest achievement, reveals her as that rarest of all rare
phenomena--a Marxist critical of Karl Marx.
W. STARK
INTRODUCTION
Academic economists have recently returned from the elaboration of
static equilibrium to the classical search for a dynamic model of a
developing economy. Rosa Luxemburg, neglected by Marxist and academic
economists alike, offers a theory of the dynamic development of
capitalism which is of the greatest interest. The book is one of
considerable difficulty (apart from the vivid historical chapters), and
to those accustomed only to academic analysis the difficulty is rendered
well-nigh insurmountable by the Marxist terminology in which it is
expressed. The purpose of this preface is to provide a glossary of
terms, and to search for the main thread of the argument (leaving the
historical illustrations to speak for themselves) and set it out in
simpler language.
The result is no doubt too simple. The reader must sample for himself
the rich confusion in which the central core of analysis is imbedded,
and must judge for himself whether the core has been mishandled in the
process of digging it out.[1]
Our author takes her departure from the numerical examples for simple
reproduction (production with a constant stock of capital) and expanded
reproduction (production with capital accumulating) set out in volume ii
of Marx's _Capital_. As she points out,[2] Marx completed the model for
simple reproduction, but the models for accumulation were left at his
death in a chaos of notes, and they are not really fit to bear all the
weight she puts on them (Heaven help us if posterity is to pore over all
the backs of old envelopes on which economists have jotted down
numerical examples in working out a piece of analysis). To follow her
line of thought, however, it is necessary to examine her version of
Marx's models closely, to see on what assumptions they are based
(explicitly or unconsciously) and to search the assumptions for clues to
the succeeding analysis.
To begin at the beginning--gross national income (for a closed economy)
for, say, a year, is written _c + v + s_; that is, constant capital,
variable capital and surplus. Variable capital, _v_, is the annual wages
bill. Surplus, _s_, is annual rent, interest, and net profit, so that
_v + s_ represents net national income. (In this introduction surplus is
used interchangeably with rent, interest and net profit.) Constant
capital, _c_, represents at the same time the contribution which
materials and capital equipment make to annual output, and the cost of
maintaining the stock of physical capital in existence at the beginning
of the year. When all commodities are selling at normal prices, these
two quantities are equal (normal prices are tacitly assumed always to
rule,[3] an assumption which is useful for long-period problems, though
treacherous when we have to deal with slumps and crises). Gross receipts
equal to _c + v + s_ pass through the hands of the capitalists during
the year, of which they use an amount, _c_, to replace physical capital
used up during the year, so that _c_ represents costs of raw materials
and wear and tear and amortisation of plant. An amount, _v_, is paid to
workers and is consumed by them (saving by workers is regarded as
negligible[4]). The surplus, _s_, remains to the capitalists for their
own consumption and for net saving. The professional classes (civil
servants, priests, prostitutes, etc.) are treated as hangers-on of the
capitalists, and their incomes do not appear, as they are not regarded
as producing _value_.[5] Expenditure upon them tends to lessen the
saving of capitalists, and their own expenditure and saving are treated
as expenditure and saving out of surplus.
In the model set out in chapter vi there is no technical progress (this
is a drastic simplification made deliberately[6]) and the ratio of
capital to labour is constant (as the stock of capital increases
employment increases in proportion). Thus real output per worker
employed is constant (hours of work per year do not vary) and real wages
per man are constant. It follows that real surplus per man is also
constant. So long as these assumptions are retained Marxian _value_
presents no problem. _Value_ is the product of labour-time. _Value_
created per man-year is constant because hours of work are constant.
Real product per man year being constant, on the above assumptions, the
_value_ of a unit of product is constant. For convenience we may assume
money wages per man constant. Then, on these assumptions, both the
money price of a unit of output and the _value_ of a unit of money are
constant. This of course merely plasters over all the problems of
measurement connected with the use of index numbers, but provided that
the technique of production is unchanging, and normal prices are ruling,
those problems are not serious, and we can conduct the analysis in terms
of money values.[7] (Rosa Luxemburg regards it as a matter of
indifference whether we calculate in money or in _value_.[8])
The assumption of constant real wages presents a difficulty which we may
notice in passing. The operation of the capitalist system is presumed to
depress the level of wages down to the limit set by the minimum
subsistence of the worker and his family. But how large a family? It
would be an extraordinary fluke if the average size of family supported
by the given wage of a worker were such as to provide for a rate of
growth of population exactly adjusted to the rate of accumulation of
capital, and she certainly does not hold that this is the case.[9] There
is a reserve army of labour standing by, ready to take employment when
the capitalists offer it. While they are unemployed the workers have no
source of income, but are kept alive by sharing in the consumption of
the wages of friends and relations who are in work.[10] When an increase
in the stock of capital takes place, more workers begin to earn wages,
those formerly employed are relieved of the burden of supporting some
unemployed relations, and their own consumption rises. Thus either they
were living below the subsistence minimum before, or they are above it
now. We may cut this knot by simply postulating that real wages per man
are constant,[11] without asking why. The important point for the
analysis which we are examining is that when employment increases the
total consumption of the workers as a whole increases by the amount of
the wages received by the additional workers.[12]
We may now set out the model for simple reproduction--that is, annual
national income for an economy in which the stock of capital is kept
intact but not increased. All output is divided into two departments:
I, producing capital equipment and raw materials, (producers' goods),
and II, producing consumption goods. Then we have
I: _c_{1} + v_{1} + s_{1} = c_{1} + c_{2}_
II: _c_{2} + v_{2} + s_{2} = v_{1} + v_{2} + s_{1} + s_{2}_
Thus
_c_{2} = v_{1} + s_{1}_
This means that the net output of the producers' goods department is
equal to the replacement of capital in the consumers' goods department.
The whole surplus, as well as the whole of wages, is currently consumed.
Before proceeding to the model for accumulation there is a difficulty
which must be discussed. In the above model the stock of capital exists,
so to speak, off stage. Rosa Luxemburg is perfectly well aware of the
relationship between annual wear and tear of capital, which is part of
_c_, and the stock of fixed capital,[13] but as soon as she (following
Marx) discusses accumulation she equates the addition to the stock of
capital made by saving out of surplus in one year to the wear and tear
of capital in the next year. To make sense of this we must assume that
all capital is consumed and made good once a year. She seems to slip
into this assumption inadvertently at first, though later it is made
explicit.[14] She also consciously postulates that _v_ represents the
amount of capital which is paid out in wages in advance of receipts from
sales of the commodities produced. (This, as she says, is the natural
assumption to make for agricultural production, where workers this year
are paid from the proceeds of last year's harvest.)[15] Thus _v_
represents at the same time the annual wages bill and the amount of
capital locked up in the wages fund, while _c_ represents both the
annual amortisation of capital and the total stock of capital (other
than the wages fund). This is a simplification which is tiresome rather
than helpful (it arises from Marx's ill-judged habit of writing _s/(c +
v)_ for the rate of profit on capital), but it is no more than a
simplification and does not invalidate the rest of the analysis.
Another awkward assumption, which causes serious trouble later, is
implicit in the argument. Savings out of the surplus accruing in each
department (producers' and consumers' goods) are always invested in
capital in the same department. There is no reason to imagine that one
capitalist is linked to others in his own department more than to those
in the other department, so the conception seems to be that each
capitalist invests his savings in his own business. There is no lending
by one capitalist to another and no capitalist ever shifts his sphere of
operations from one department to another. This is a severe assumption
to make even about the era before limited liability was introduced, and
becomes absurd afterwards. Moreover it is incompatible with the
postulate that the rate of profit on capital tends to equality
throughout the economy,[16] for the mechanism which equalises profits is
the flow of new investment, and the transfer of capital as amortisation
funds are re-invested, into more profitable lines of production and away
from less profitable lines.[17]
The assumption that there is no lending by one capitalist to another
puts limitation upon the model. Not only must the total rate of
investment be equal to the total of planned saving, but investment in
each department must be equal to saving in that department, and not only
must the rate of increase of capital lead to an increase of total output
compatible with total demand, but the increase in output of each
department, dictated by the increase in capital in that department, must
be divided between consumers' and producers' goods in proportions
compatible with the demand for each, dictated by the consumption and the
investment plans in each department.
There is no difficulty, however, in choosing numbers which satisfy the
requirements of the model. The numerical examples derived from Marx's
jottings are cumbersome and confusing, but a clear and simple model can
be constructed on the basis of the assumptions set out in chapter vii.
In each department, constant capital is four times variable capital.[18]
(Constant capital is the stock of raw materials which is turned over
once a year; variable capital is the wages bill, which is equal to the
capital represented by the wages fund.) Surplus is equal to variable
capital (net income is divided equally between wages and surplus) and
half of surplus is saved.[19] Savings are allotted between constant and
variable capital in such a way as to preserve the 4 to 1 ratio. Thus
four-fifths of savings represents a demand for producers' goods, and is
added to constant capital each year, and one-fifth represents a demand
for consumers' goods, and is added to the wages fund (variable capital).
These ratios dictate the relationship between Department I (producers'
goods) and Department II (consumers' goods).[20] It can easily be seen
that the basic assumptions require that the output of Department I must
stand in the ratio of 11 to 4 to the output of Department II.[21] We can
now construct a much simpler model than those provided in the text.
_c_ _v_ _s_ _Gross Output_
Department I 44 11 11 66
Department II 16 4 4 24
--
Total 90
In Department I, 5·5 units are saved (half of _s_) of which 4·4 are
invested in constant capital and 1·1 in variable capital. In Department
II 2 units are saved, 1·6 being added to constant and 0·4 to variable
capital. The 66 units of producers' goods provide 44 + 4·4 constant
capital for Department I and 16 + 1·6 constant capital for Department
II and the 24 units of consumers' goods provide 11 + 4 wages of labour
already employed, 5·5 + 2 for consumption out of surplus, and 1·1 + 0·4
addition to variable capital, which provide for an addition to
employment.
After the investment has been made, and the labour force increased in
proportion to the wages bill, we have
_c_ _v_ _s_ _Gross Output_
Department I 48·4 12·1 12·1 72·6
Department II 17·6 4·4 4·4 26·4
-----
Total 99
The two departments are now equipped to carry out another round of
investment at the prescribed rate, and the process of accumulation
continues. The ratios happen to have been chosen so that the total
labour force, and total gross output, increase by 10 per cent per
annum.[22]
But all this, as Rosa Luxemburg remarks, is just arithmetic.[23] The
only point of substance which she deduces from Marx's numerical examples
is that it is always Department I which takes the initiative. She
maintains that the capitalists in Department I decide how much
producers' goods to produce, and that Department II has to arrange its
affairs so as to absorb an amount of producers' goods which will fit in
with their plans.[24] On the face of it, this is obviously absurd. The
arithmetic is perfectly neutral between the two departments, and, as she
herself shows, will serve equally well for the imagined case of a
socialist society where investment is planned with a view to
consumption.[25]
But behind all this rigmarole lies the real problem which she is trying
to formulate. Where does the demand come from which keeps accumulation
going?
She is not concerned with the problem, nowadays so familiar, of the
balance between saving and investment. Marx himself was aware of that
problem, as is seen in his analysis of disequilibrium under conditions
of simple reproduction (zero net investment).[26] When new fixed capital
comes into existence, part of gross receipts are set aside in
amortisation funds without any actual outlay being made on renewals.
Then total demand falls short of equilibrium output, and the system runs
into a slump. Contrariwise, when a burst of renewals falls due, in
excess of the current rate of amortisation, a boom sets in. For
equilibrium it is necessary for the age composition of the stock of
capital to be such that current renewals just absorb current
amortisation funds. Similarly, when accumulation is taking place,
current investment must absorb current net saving.[27]
It is in connection with the problem of effective demand, in this sense,
that Marx brings gold-mining into the analysis. When real output expands
at constant money prices, the increasing total of money value of output
requires an increase in the stock of money in circulation (unless the
velocity of circulation rises appropriately). The capitalists therefore
have to devote part of their savings to increasing their holdings of
cash (for there is no borrowing). This causes a deficiency of effective
demand. But the increase in the quantity of money in circulation comes
from newly mined gold, and the expenditure of the gold mining industry
upon the other departments just makes up the deficiency in demand.[28]
Rosa Luxemburg garbles this argument considerably, and brushes it away
as beside the point. And it _is_ beside the point that she is concerned
with. She does not admit the savings and investment problem, for she
takes it for granted that each individual act of saving out of surplus
is accompanied by a corresponding amount of real investment, and that
every piece of investment is financed by saving out of surplus of the
same capitalist who makes it.[29] What she appears to be concerned with
is rather the inducement to invest. What motive have the capitalists for
enlarging their stock of real capital?[30] How do they know that there
will be demand for the increased output of goods which the new capital
will produce, so that they can 'capitalise' their surplus in a
profitable form? (On the purely analytical plane her affinity seems to
be with Hobson rather than Keynes.)
Needless to say, our author does not formulate the problem of the
inducement to invest in modern terminology, and the ambiguities and
contradictions in her exposition have left ample scope for her critics
to represent her theory as irredeemable nonsense.[31] But the most
natural way to read it is also the clearest. Investment can take place
in an ever-accumulating stock of capital only if the capitalists are
assured of an ever-expanding market for the goods which the capital will
produce. On this reading, the statement of the problem leads
straightforwardly to the solution propounded in the third Section of
this book.
Marx has his own answer to the problem of inducement to invest, which
she refers to in the first chapter.[32] The pressure of competition
forces each individual capitalist to increase his capital in order to
take advantage of economies of large-scale production, for if he does
not his rivals will, and he will be undersold. Rosa Luxemburg does not
discuss whether this mechanism provides an adequate drive to keep
accumulation going, but looks for some prospective demand outside the
circle of production. Here the numerical examples, as she shows, fail to
help. And this is in the nature of the case, for (in modern jargon) the
examples deal with _ex post_ quantities, while she is looking for _ex
ante_ prospects of increased demand for commodities. If accumulation
does take place, demand will absorb output, as the model shows, but what
is it that makes accumulation take place?
In Section II our author sets out to find what answers have been given
to her problem. The analysis she has in mind is now broader than the
strict confines of the arithmetical model. Technical progress is going
on, and the output of an hour's labour rises as time goes by. (The
concept of _value_ now becomes treacherous, for the _value_ of
commodities is continuously falling.) Real wages tend to be constant in
terms of commodities, thus the _value_ of labour power is falling, and
the share of surplus in net income is rising (_s/v_, the rate of
exploitation, is rising). The amount of saving in real terms is
therefore rising (she suggests later that the proportion of surplus
saved rises with surplus, in which case real savings increase all the
more[33]). The problem is thus more formidable than appears in the
model, for the equilibrium rate of accumulation of capital, in real
terms, is greater than in the model, where the rate of exploitation is
constant. At the same time the proportion of constant to variable
capital is rising. She regards this not as something which is likely to
happen for technical reasons, but as being necessarily bound up with the
very nature of technical progress. As productivity increases, the amount
of producers' goods handled per man-hour of labour increases; therefore,
she says, the proportion of _c_ to _v_ must increase.[34] This is an
error. It arises from thinking of constant capital in terms of goods,
and contrasting it with variable capital in terms of _value_, that is,
hours of labour. She forgets Marx's warning that, as progress takes
place, the _value_ of the commodities making up constant capital also
falls.[35] It is perfectly possible for productivity to increase without
any increase in the _value_ of capital per man employed. This would
occur if improvements in the productivity of labour in making producers'
goods kept pace with the productivity of labour in using producers'
goods to make consumers' goods (capital-saving inventions balance
labour-saving inventions, so that technical progress is 'neutral').
However, we can easily get out of this difficulty by postulating that as
a matter of fact technical progress is mainly labour-saving, or, a
better term, capital-using, so that capital per man employed is rising
through time.
Rosa Luxemburg treats the authors whom she examines in Section II with a
good deal of sarcasm, and dismisses them all as useless. To some of the
points raised her answers seem scarcely adequate. For instance,
Rodbertus sees the source of all the troubles of capitalism in the
falling proportion of wages in national income.[36] He can be
interpreted to refer to the proportion of wages in gross income. In that
case, she is right (on the assumption of capital-using inventions) in
arguing that a fall in the proportion of wages is bound up with
technical progress, and that the proportion could be held constant only
by stopping progress. He can also be taken to refer to the share of
wages in net output, and this is the more natural reading. On this
reading she argues that the fall in share of wages (or rise in rate of
exploitation) is necessary to prevent a fall in the rate of profit on
capital[37] (as capital per man employed rises, profit per man employed
must rise if profit per unit of capital is constant). But she does not
follow up the argument and inquire what rise in the rate of exploitation
is necessary to keep capitalism going (actually, the statisticians tell
us, the share of wages in net income has been fairly constant in modern
industrial economies[38]). It is obvious that the less the rate of
exploitation rises, the smaller is the rise in the rate of saving which
the system has to digest, while the rise in real consumption by workers,
which takes place when the rate of exploitation rises more slowly than
productivity in the consumption good industries, creates an outlet for
investment in productive capacity in those industries. The horrors of
capitalism, and the difficulties which it creates for itself, are both
exaggerated by the assumption of constant real-wage rates and, although
it would be impossible to defend Rodbertus' position that a constant
rate of exploitation is all that is needed to put everything right, he
certainly makes a contribution to the argument which ought to be taken
into account.
Tugan-Baranovski also seems to be treated too lightly. His conception is
that the rising proportion of constant capital in both departments
(machines to make machines as well as machines to make consumers' goods)
provides an outlet for accumulation, and that competition is the driving
force which keeps capitalists accumulating. Rosa Luxemburg is no doubt
correct in saying that his argument does not carry the analysis beyond
the stage at which Marx left it,[39] but he certainly elaborates a point
which she seems perversely to overlook. Her real objection to
Tugan-Baranovski is that he shows how, in certain conditions, capitalist
accumulation might be self-perpetuating, while she wishes to establish
that the coming disintegration of the capitalist system is not merely
probable on the evidence, but is a logical necessity.[40]
The authors such as Sismondi, Malthus and Vorontsov, who are groping
after the problem of equilibrium between saving and investment, are
treated with even less sympathy (though she has a kindly feeling for
Sismondi, to whom she considers that Marx gave too little
recognition[41]) for she is either oblivious that there is such a
problem, or regards it as trivial.[42] We leave the discussion, at the
end of Section II, at the same point where we entered it, with the clue
to the inducement to invest still to find.
Section III is broader, more vigorous and in general more rewarding than
the two preceding parts. It opens with a return to Marx's model for a
capitalist system with accumulation going on. Our author then sets out a
fresh model allowing for technical progress. The rate of exploitation
(the ratio of surplus to wages) is rising, for real wages remain
constant while output per man increases. In the model the proportion of
surplus saved is assumed constant for simplicity, though in reality, she
holds, it would tend to rise with the real income of the
capitalists.[43] The ratio of constant to variable capital is rising for
technical reasons. (The convention by which the annual wear and tear of
capital is identified with the stock of capital now becomes a great
impediment to clear thinking.) The arithmetical model shows the system
running into an _impasse_ because the output of Department I falls short
of the requirements of constant capital in the two departments taken
together, while the output of Department II exceeds consumption.[44] The
method of argument is by no means rigorous. Nothing follows from the
fact that one particular numerical example fails to give a solution, and
the example is troublesome to interpret as it is necessary to
distinguish between discrepancies due to rounding off the figures from
those which are intended to illustrate a point of principle.[45] But
there is no need to paddle in the arithmetic to find where the
difficulty lies. The model is over-determined because of the rule that
the increment of capital within each department at the end of a year
must equal the saving made within the same department during the year.
If capitalists from Department II were permitted to lend part of their
savings to Department I to be invested in its capital, a breakdown would
no longer be inevitable. Suppose that total real wages are constant and
that real consumption by capitalists increases slowly, so that the real
output of Department II rises at a slower rate than productivity, then
the amount of labour employed in it is shrinking. The ratio of capital
to labour however is rising as a consequence of capital-using technical
progress. The output of Department I, and its productive capacity, is
growing through time. Capital invested in Department I is accumulating
faster than the saving of the capitalists in Department I, and
capitalists of Department II, who have no profitable outlet in their own
industries for their savings, acquire titles to part of the capital in
Department I by supplying the difference between investment in
Department I and its own saving.[46] For any increase in the stock of
capital of both departments taken together, required by technical
progress and demand conditions, there is an appropriate amount of
saving, and so long as the total accumulation required and total saving
fit, there is no breakdown.
But here we find the clue to the real contradiction. These quantities
might conceivably fit, but there is no guarantee that they will. If the
ratio of saving which the capitalists (taken together) choose to make
exceeds the rate of accumulation dictated by technical progress, the
excess savings can only be 'capitalised' if there is an outlet for
investment outside the system. (The opposite case of deficient savings
is also possible. Progress would then be slowed down below the
technically possible maximum; but this case is not contemplated by our
author, and it would be irrelevant to elaborate upon it.)
Once more we can substitute for a supposed logical necessity a
plausible hypothesis about the nature of the real case, and so rescue
the succeeding argument. If in reality the distribution of income
between workers and capitalists, and the propensity to save of
capitalists, are such as to require a rate of accumulation which exceeds
the rate of increase in the stock of capital appropriate to technical
conditions, then there is a chronic excess of the potential supply of
real capital over the demand for it and the system must fall into
chronic depression. (This is the 'stagnation thesis' thrown out by
Keynes and elaborated by modern American economists, notably Alvin
Hansen). How then is it that capitalist expansion had not yet (in 1912)
shown any sign of slackening?
In chapter xxvi Rosa Luxemburg advances her central thesis--that it is
the invasion of primitive economies by capitalism which keeps the system
alive. There follows a scorching account of the manner in which the
capitalist system, by trade, conquest and theft, swallowed up the
pre-capitalist economies,--some reduced to colonies of capitalist
nations, some remaining nominally independent--and fed itself upon their
ruins. The thread of analysis running through the historical
illustrations is not easy to pick up, but the main argument seems to be
as follows: As soon as a primitive closed economy has been broken into,
by force or guile, cheap mass-produced consumption goods displace the
old hand production of the family or village communities, so that a
market is provided for ever-increasing outputs from the industries of
Department II in the old centres of capitalism, without the standard of
life of the workers who consume these commodities being raised.[47] The
ever-growing capacity of the export industries requires the products of
Department I, thus maintaining investment at home. At the same time
great capital works, such as railways, are undertaken in the new
territories.[48] This investment is matched partly by savings from
surplus extracted on the spot, but mainly by loans from the old
capitalist countries. There is no difficulty here in accounting for the
inducement to invest, for the new territories yield commodities
unobtainable at home.[49] We might set out the essence of the argument
as follows: Cloth from Lancashire pays for labour in America, which is
used to produce wheat and cotton. These provide wages and raw materials
to the Lancashire mills, while the profits acquired both on the
plantations and in the mills are invested in steel rails and rolling
stock, which open up fresh territories, so that the whole process is
continuously expanding. Moreover, apart from profits earned on capital
actually invested in the new territories, great capital gains are made
simply by acquiring possession of land and other natural resources.[50]
Labour to work the resources may be provided by the local dispossessed
peasantry or by immigration from the centres of capitalism.[51]
Investment in equipment for it to use is more profitable than in that
operated by home labour, partly because the wretched condition of the
colonial workers makes the rate of exploitation higher,[52] but mainly
just because they are on the spot, and can turn the natural resources
seized by the capitalists into means of production. No amount of
investment in equipment for British labour would produce soil bearing
cotton, rubber or copper. Thus investment is deflected abroad[53] and
the promise of profit represented by the natural resources calls into
existence, by fair means or foul, the labour and capital to make it come
true. The process of building up this capital provides an outlet for the
old industries and rescues them from the contradictions inherent in
deficiency of demand.
The analysis of militarism in the last chapter over-reaches itself by
trying to prove too much. The argument is that armaments are built up
out of taxes which fall entirely on wages.[54] This can be regarded as a
kind of 'forced saving' imposed on the workers. These savings are extra
to the saving out of surplus. They are invested in armaments, and that
ends the story. On this basis the armaments, in themselves, cannot be
held to provide an outlet for the investment of surplus (though the use
of the armaments, as in the Opium War,[55] to break up primitive
economies is a necessary condition for the colonial investment already
described) and capital equipment to produce armaments is merely
substituted for capital formerly producing consumers' goods. The
analysis which best fits Rosa Luxemburg's own argument, and the facts,
is that armaments provide an outlet for the investment of surplus (over
and above any contribution there may be from forced saving out of
wages), which, unlike other kinds of investment, creates no further
problem by increasing productive capacity (not to mention the huge new
investment opportunities created by reconstruction after the capitalist
nations have turned their weapons against each other).
All this is perhaps too neat an account of what our author is saying.
The argument streams along bearing a welter of historical examples in
its flood, and ideas emerge and disappear again bewilderingly. But
something like the above seems to be intended. And something like it is
now widely accepted as being true. Rosa Luxemburg, as we have seen,
neglects the rise in real wages which takes place as capitalism
develops, and denies the internal inducement to invest provided by
technical progress, two factors which help to rescue capitalism from the
difficulties which it creates for itself. She is left with only one
influence (economic imperialism) to account for continuous capital
accumulation, so that her analysis is incomplete. All the same, few
would deny that the extension of capitalism into new territories was the
mainspring of what an academic economist has called the 'vast secular
boom' of the last two hundred years,[56] and many academic economists
account for the uneasy condition of capitalism in the twentieth century
largely by the 'closing of the frontier' all over the world.[57] But the
academic economists are being wise after the event. For all its
confusions and exaggerations, this book shows more prescience than any
orthodox contemporary could claim.
JOAN ROBINSON
_Cambridge._
FOOTNOTES:
[1] For a totally different interpretation see Sweezy; _The Theory of
Capitalist Development_, chap. xi, Section 9.
[2] See p. 166.
[3] Cf. the quotation from _Capital_, vol. iii, p. 331.
[4] See p. 132.
[5] See p. 135.
[6] See p. 130.
[7] Exchanges between industries, however, must take place at 'prices of
production' not at _values_. See below, p. 15, note.
[8] See p. 113.
[9] See p. 361.
[10] See p. 134.
[11] Later it is assumed that real wages can be depressed by taxation
(p. 455).
[12] See p. 116.
[13] See p. 85.
[14] See p. 355.
[15] See p. 76, note 355.
[16] See p. 79.
[17] In the numerical example quoted in chap. vi. (p. 117) the rate of
profit is much higher in Department II than in I. Marx has made the rate
of exploitation equal in the two departments, and the ratio of constant
to variable capital higher in Department I. This is evidently an
oversight. The two departments must trade with each other at market
prices, not in terms of _value_. Therefore _s_{1}_ must represent the
profits accruing to Department I, not a proportion (half in the example)
of the _value_ generated in Department I. _s_{1}/v_{1}_ should exceed
_s_{2}/v_{2}_ to an extent corresponding to the higher organic
composition of capital in Department I. The point is interesting, as it
shows that when off guard Marx forgot that he could make prices
proportional to _values_ only when the organic composition of capital is
the same in all industries.
[18] See p. 129.
[19] See p. 130.
[20] Since, in this model, the organic composition of capital is the
same in the two departments, prices correspond to _values_.
[21] Of total gross output, 2/3 is replacement of constant capital;
surplus is 1/6 of gross output, and of surplus half is saved; thus
savings are 1/12 of gross output; of saving 4/5 is added to constant
capital; thus 1/15 of gross output is added to constant capital. The
output of Department I is therefore 2/3 + 1/15 or 11/15 of total gross
output. Similarly, the output of Department II is 4/15 of total gross
output.
[22] This model bears a strong family resemblance to Mr. Harrod's
'Warranted rate of growth'. _Towards a Dynamic Economics_, lecture III.
[23] See p. 119.
[24] See p. 125.
[25] See p. 128.
[26] See p. 91.
[27] See p. 115.
[28] See p. 102. The phrase '_zahlungsfähige nachfrage_', translated
'effective demand', is not the effective demand of Keynes (roughly,
current expenditure) but appears often to mean demand for new capital,
or, perhaps, prospective future demand for goods to be produced by new
capital.
[29] This assumption is made explicit later (p. 342).
[30] See pp. 131 et seq.
[31] See Sweezy, loc. cit.
[32] See p. 40.
[33] See p. 303.
[34] See p. 258.
[35] This point is, however, later admitted (p. 337).
[36] See p. 252.
[37] See p. 259. Marx himself failed to get this point clear. Cf. my
_Essay on Marxian Economics_, chap. v.
[38] Cf. Kalecki, _Essays in the Theory of Economic Fluctuations_, pp.
14 et seq.
[39] See p. 323.
[40] See p. 314. Marx did not find himself in this dilemma because he
held that there is a fundamental 'contradiction' in capitalism which
shows itself in a strong tendency for the rate of profit on capital to
fall as technical progress takes place. But Rosa Luxemburg sees that the
tendency to a falling rate of profit is automatically checked and may
even be reversed if real-wage rates are constant (p. 338).
[41] See p. 217, note.
[42] One passage suggests that she sees the problem, but thinks it
irrelevant to the real issue (p. 342).
[43] See p. 338.
[44] See p. 337.
[45] In this model the rate of exploitation is different in the two
departments. This means that the numbers represent money value, not
_value_.
[46] Rosa Luxemburg seems to regard this process as impossible, but for
what reason is by no means clear (p. 341).
[47] See p. 352.
[48] See p. 352.
[49] See p. 358.
[50] See p. 370.
[51] See p. 428.
[52] See p. 435.
[53] See p. 421.
[54] See p. 455.
[55] See p. 387.
[56] Hicks, _Value and Capital_, p. 302, note. Mr. Hicks himself,
however, regards the increase in population as the mainspring.
[57] Cf. _A Survey of Contemporary Economics_ (ed. Ellis), p. 63.
_SECTION ONE_
THE PROBLEM
OF REPRODUCTION
_CHAPTER I_
THE OBJECT OF OUR INVESTIGATION
Karl Marx made a contribution of lasting service to the theory of
economics when he drew attention to the problem of the reproduction of
the entire social capital. It is significant that in the history of
economics we find only two attempts at an exact exposition of this
problem: one by Quesnay, the father of the Physiocrats, at its very
inception; and in its final stage this attempt by Marx. In the interim,
the problem was ever with bourgeois economics. Yet bourgeois economists
have never been fully aware of this problem in its pure aspects,
detached from related and intersecting minor problems; they have never
been able to formulate it precisely, let alone solve it. Seeing that the
problem is of paramount importance, their attempts may all the same help
us to some understanding of the trend of scientific economics.
What is it precisely that constitutes this problem of the reproduction
of total capital? The literal meaning of the word 'reproduction' is
repetition, renewal of the process of production. At first sight it may
be difficult to see in what respect the idea of reproduction differs
from that of repetition which we can all understand--why such a new and
unfamiliar term should be required. But in the sort of repetition which
we shall consider, in the continual recurrence of the process of
production, there are certain distinctive features. First, the regular
repetition of reproduction is the general _sine qua non_ of regular
consumption which in its turn has been the precondition of human
civilisation in every one of its historical forms. The concept of
reproduction, viewed in this way, reflects an aspect of the history of
civilisation. Production can never be resumed, there can be no
reproduction, unless certain prerequisites such as tools, raw materials
and labour have been established during the preceding period of
production. However, at the most primitive level of man's civilisation,
at the initial stage of man's power over nature; this possibility to
re-engage in production depended more or less on chance. So long as
hunting and fishing were the main foundations of social existence,
frequent periods of general starvation interrupted the regular
repetition of production. Some primitive peoples recognised at a very
early stage that for reproduction as a regularly recurring process
certain measures were essential; these they incorporated into ceremonies
of a religious nature; and in this way they accepted such measures as
traditional social commitments. Thus, as the thorough researches of
Spencer and Gillen have taught us, the totem cult of the Australian
negroes is fundamentally nothing but certain measures taken by social
groups for the purpose of securing and preserving their animal and
vegetable foodstuffs; these precautions had been taken year by year
since time immemorial and thus they became fossilised into religious
ceremonials. Yet the circle of consumption and production which forms
the essence of reproduction became possible only with the invention of
tillage with the hoe, with the taming of domestic animals, and with
cattle-raising for the purpose of consumption. Reproduction is something
more than mere repetition in so far as it presupposes a certain level of
society's supremacy over nature, or, in economic terms, a certain
standard of labour productivity.
On the other hand, at all stages of social development, the process of
production is based on the continuation of two different, though closely
connected factors, the technical and social conditions--on the precise
relationship between man and nature and that between men and men.
Reproduction depends to the same degree on both these conditions. We
have just seen how reproduction is bound up with the conditions of human
working techniques, how far it is indeed solely the result of a certain
level of labour productivity; but the social forms of production
prevailing in each case are no less decisive. In a primitive communist
agrarian community, reproduction as well as the whole plan of economic
life is determined by the community of all workers and their democratic
organs. The decision to re-engage in labour--the organisation of
labour--the provision of raw materials, tools, and man-power as the
essential preliminaries of labour--the arrangement of reproduction and
the determination of its volume are all results of a planned
co-operation in which everybody within the boundaries of the community
takes his part. In an economic system based on slave labour or _corvée_,
reproduction is enforced and regulated in all details by personal
relations of domination. Here the volume of reproduction is determined
by the right of disposal held by the ruling _élites_ over smaller or
larger circles of other people's labour. In a society producing by
capitalist methods, reproduction assumes a peculiar form, as a mere
glance at certain striking phenomena will show us. In every other
society known to history, reproduction recurs in a regular sequence as
far as its preconditions, the existing means of production and labour
power, make this possible. As a rule, only external influences such as a
devastating war or a great pestilence, depopulating vast areas of former
cultural life, and consequently destroying masses of labour power and of
accumulated means of production, can result in a complete interruption
of reproduction or in its contraction to any considerable extent for
longer or shorter periods. A despotic organisation of the plan of
production may on occasion lead to similar phenomena. When in ancient
Egypt Pharaoh's will chained thousands of fellaheen for decades to the
building of the pyramids; when in modern Egypt Ismail Pasha ordered
20,000 fellaheen to forced labour on the Suez Canal; or when, about two
hundred years before Christ, the Emperor Shi Hoang Ti, founder of the
Chin dynasty, allowed 400,000 people to perish of hunger and exhaustion
and thus sacrificed a whole generation to his purpose of consolidating
the Great Wall at China's northern frontier, the result was always that
vast stretches of arable land were left fallow and that regular economic
life was interrupted for long periods. In all these cases the causes of
these interruptions of reproduction obviously lay in the one-sided
determination of the plan of reproduction by those in power.
Societies which produce according to capitalist methods present a
different picture. We observe that in certain periods all the
ingredients of reproduction may be available, both labour and means of
production, and yet some vital needs of society for consumer goods may
be left unfulfilled. We find that in spite of these resources
reproduction may in part be completely suspended and in part curtailed.
Here it is no despotic interference with the economic plan that is
responsible for the difficulties in the process of production. Quite
apart from all technical conditions, reproduction here depends on purely
social considerations: only those goods are produced which can with
certainty be expected to sell, and not merely to sell, but to sell at
the customary profit. Thus profit becomes an end in itself, the decisive
factor which determines not only production but also reproduction. Not
only does it decide in each case what work is to be undertaken, how it
is to be carried out, and how the products are to be distributed; what
is more, profit decides, also, at the end of every working period,
whether the labour process is to be resumed, and, if so, to what extent
and in what direction it should be made to operate.[58]
In capitalist society, therefore, the process of reproduction as a
whole, constitutes a peculiar and most complicated problem, in
consequence of these purely historical and social factors. There is, as
we shall see, an external characteristic which shows clearly this
specific historical peculiarity of the capitalist process of
reproduction. Comprising not only production but also circulation (the
process of exchange), it unites these two elements. Capitalist
production is primarily production by innumerable private producers
without any planned regulation. The only social link between these
producers is the act of exchange. In taking account of social
requirements reproduction has no clue to go on other than the
experiences of the preceding labour period. These experiences, however,
remain the private experiences of individual producers and are not
integrated into a comprehensive and social form. Moreover, they do not
always refer positively and directly to the needs of society. They are
often rather indirect and negative, for it is only on the basis of price
fluctuations that they indicate whether the aggregate of produced
commodities falls short of the effective demand or exceeds it. Yet the
individual private producers make recurrent use of these experiences of
the preceding labour period when they re-engage in reproduction, so that
glut or shortage are bound to occur again in the following period.
Individual branches of production may develop independently, so that
there may be a surplus in one branch and a deficiency in another. But as
nearly all individual branches of production are interdependent
technically, glut or shortage in some of the larger branches of
production lead to the same phenomenon in most of the others. Thus the
general supply of products may alternate periodically between shortage
and surplus relative to the social demand.
Herein lies the peculiar character of reproduction in a capitalist
society, which differs from all other known forms of production. In the
first place, every branch of production develops independently within
certain limits, in a way that leads to periodical interruptions of
production of shorter or longer duration. Secondly, the individual
branches of reproduction show deviations from social requirements
amounting to all-round disparity and thus resulting in a general
interruption of reproduction. These features of capitalist reproduction
are quite characteristic. In all other economic systems, reproduction
runs its uninterrupted and regular course, apart from external
disturbance by violence. Capitalist reproduction, however, to quote
Sismondi's well-known dictum, can only be represented as a continuous
sequence of individual spirals. Every such spiral starts with small
loops which become increasingly larger and eventually very large indeed.
Then they contract, and a new spiral starts again with small loops,
repeating the figure up to the point of interruption. This periodical
fluctuation between the largest volume of reproduction and its
contraction to partial suspension, this cycle of slump, boom, and
crisis, as it has been called, is the most striking peculiarity of
capitalist reproduction.
It is very important, however, to establish quite firmly and from the
very outset that this cyclical movement of boom, slump, and crisis, does
not represent the whole problem of capitalist reproduction, although it
is an essential element of it. Periodical cycles and crises are specific
phases of reproduction in a capitalist system of economy, but not the
whole of this process. In order to demonstrate the pure implications of
capitalist reproduction we must rather consider it quite apart from the
periodical cycles and crises. Strange as this may appear, the method is
quite rational; it is indeed the only method of inquiry that is
scientifically tenable. In order to demonstrate and to solve the problem
of pure value we must leave price fluctuations out of consideration. The
approach of vulgar economics always attempts to solve the problem of
value by reference to fluctuations in demand and supply. Classical
economists, from Adam Smith to Karl Marx, attack the problem in the
opposite way, pointing out that fluctuations in the mutual relation
between demand and supply can explain only disparities between price and
value, not value itself. In order to find the value of a commodity, we
must start by assuming that demand and supply are in a state of
equilibrium, that the price of a commodity and its value closely
correspond to one another. Thus the scientific problem of value begins
at the very point where the effect of demand and supply ceases to
operate.
In consequence of periodical cycles and crises capitalist reproduction
fluctuates as a rule around the level of the effective total demand of
society, sometimes rising above and sometimes falling below this level,
contracting occasionally even to the point of almost complete
interruption of reproduction. However, if we consider a longer period, a
whole cycle with its alternating phases of prosperity and depression, of
boom and slump, that is if we consider reproduction at its highest and
lowest volume, including the stage of suspension, we can set off boom
against slump and work out an average, a mean volume of reproduction for
the whole cycle. This average is not only a theoretical figment of
thought, it is also a real objective fact. For in spite of the sharp
rises and falls in the course of a cycle, in spite of crises, the needs
of society are always satisfied more or less, reproduction continues on
its complicated course, and productive capacities develop progressively.
How can this take place, leaving cycles and crises out of consideration?
Here the real question begins. The attempt to solve the problem of
reproduction in terms of the periodical character of crises is
fundamentally a device of vulgar economics, just like the attempt to
solve the problem of value in terms of fluctuations in demand and
supply. Nevertheless, we shall see in the course of our observations
that as soon as economic theory gets an inkling of the problem of
reproduction, as soon as it has at least started guessing at the
problem, it reveals a persistent tendency suddenly to transform the
problem of reproduction into the problem of crises, thus barring its own
way to the solution of the question. When we speak of capitalist
reproduction in the following exposition, we shall always understand by
this term a mean volume of productivity which is an average taken over
the various phases of a cycle.
Now, the total of capitalist reproduction is created by an unlimited and
constantly changing number of private producers. They produce
independently of one another; apart from the observation of price
fluctuations there is no social control--no social link exists between
the individual producers other than the exchange of commodities. The
question arises how these innumerable disconnected operations can lead
to the actual total of production. This general aspect of our problem
indeed strikes us immediately as one of prime importance. But if we put
it this way, we overlook the fact that such private producers are not
simply producers of commodities but are essentially capitalist
producers, that the total production of society is not simply production
for the sake of satisfying social requirements, and equally not merely
production of commodities, but essentially capitalist production.
Let us examine our problem anew in the light of this fact. A producer
who produces not only commodities but capital must above all create
surplus value. The capitalist producer's final goal, his main incentive,
is the production of surplus value. The proceeds from the commodities he
has manufactured must not only recompense him for all his outlay, but in
addition they must yield him a value which does not correspond with any
expense on his part, and is pure gain. If we consider the process of
production from the point of view of the creation of surplus value, we
see that the capital advanced by the capitalist is divided into two
parts: the first part represents his expenses on means of production
such as premises, raw material, partly finished goods and machinery. The
second part is spent on wages. This holds good, even if the capitalist
producer does not know it himself, and in spite of the pious stuff about
fixed and circulating capital with which he may delude himself and the
world. Marx called this first part constant capital. Its value is not
changed by its utilisation in the labour process--it is transferred _in
toto_ to the finished product. The second part Marx calls the variable
capital. This gives rise to an additional value, which materialises when
the results of unpaid labour are appropriated. The various components
which make up the value of every commodity produced by capitalist
methods may be expressed by the formula: _c + v + s_. In this formula
_c_ stands for the value of the constant capital laid out in inanimate
means of production and transferred to the commodity, _v_ stands for the
value of the variable capital advanced in form of wages, and _s_ stands
for the surplus value, the additional value of the unpaid part of wage
labour. Every type of goods shows these three components of value,
whether we consider an individual commodity or the aggregate of
commodities as a whole, whether we consider cotton textiles or ballet
performances, cast-iron tubes or liberal newspapers. Thus for the
capitalist producer the manufacture of commodities is not an end in
itself, it is only a means to the appropriation of surplus value. This
surplus value, however, can be of no use to the capitalist so long as it
remains hidden in the commodity form of the product. Once the commodity
has been produced, it must be realised, it must be converted into a form
of pure value; that is, into money. All capital expenses incorporated in
the commodity must shed their commodity-form and revert to the
capitalist as money to make this conversion possible so that he can
appropriate the surplus value in cash. The purpose of production is
fulfilled only when this conversion has been successful, only when the
aggregate of commodities has been sold according to its value. The
proceeds of this sale of commodities, the money that has been received
for them, contains the same components of value as the former aggregate
of commodities and can be expressed by the same formula _c + v + s_.
Part _c_ recompenses the capitalist for his advances on means of
production that have been used up, part _v_ recompenses him for his
advances on wages, and the last part, _s_, represents the expected
surplus, the capitalist's clear profit in cash.[59]
This conversion of capital from its original form, from the starting
point of all capitalist production, into means of production, dead and
living, such as raw materials, instruments, and labour; its further
conversion into commodities by a living labour process; and its final
reconversion into money, a greater amount of money indeed than at the
initial stage--this transformation of capital is, however, required for
more than the production and appropriation of surplus value. The aim and
incentive of capitalist production is not a surplus value pure and
simple, to be appropriated in any desired quantity, but a surplus value
ever growing into larger quantities, surplus value _ad infinitum_. But
to achieve this aim, the same magic means must be used over and over
again, the means of capitalist production--the ever repeated
appropriation of the proceeds of unpaid wage labour in the process of
commodity manufacture, and the subsequent realisation of the commodities
so produced.
Thus quite a new incentive is given to constantly renewed production, to
the process of reproduction as a regular phenomenon in capitalist
society, an incentive unknown to any other system of production. In
every other economic system known to history, reproduction is determined
by the unceasing need of society for consumer goods, whether they are
the needs of all the workers determined in a democratic manner as in an
agrarian and communist market community, or the despotically determined
needs of an antagonistic class society, as in an economy of slave labour
or _corvée_ and the like. But in a capitalist system of production, it
is not consideration of social needs which actuates the individual
private producer who alone matters in this connection. His production is
determined entirely by the effective demand, and even this is to him a
mere means for the realisation of surplus value which for him is
indispensable. Appropriation of surplus value is his real incentive, and
production of consumer goods for the satisfaction of the effective
demand is only a detour when we look to the real motive, that of
appropriation of surplus value, although for the individual capitalist
it is also a rule of necessity. This motive, to appropriate surplus
value, also urges him to re-engage in reproduction over and over again.
It is the production of surplus value which turns reproduction of social
necessities into a _perpetuum mobile_. Reproduction, for its part, can
obviously be only resumed when the products of the previous period, the
commodities, have been realised; that is, converted into money; for
capital in the form of money, in the form of pure value, must always be
the starting point of reproduction in a capitalist system. The first
condition of reproduction for the capitalist producer is thus seen to be
a successful realisation of the commodities produced during the
preceding period of production.
Now we come to a second important point. Under a system of private
economy, it is the individual producer who determines the volume of
reproduction at his discretion. His main incentive is appropriation of
surplus value, indeed an appropriation increasing as rapidly as
possible. An accelerated appropriation of surplus value, however,
necessitates an increased production of capital to generate this surplus
value. Here a large-scale enterprise enjoys advantages over a small one
in every respect. In fine, the capitalist method of production furnishes
not only a permanent incentive to reproduction in general, but also a
motive for its expansion, for reproduction on an ever larger scale.
Nor is that all. Capitalist methods of production do more than awaken in
the capitalist this thirst for surplus value whereby he is impelled to
ceaseless expansion of reproduction. Expansion becomes in truth a
coercive law, an economic condition of existence for the individual
capitalist. Under the rule of competition, cheapness of commodities is
the most important weapon of the individual capitalist in his struggle
for a place in the market. Now all methods of reducing the cost of
commodity production permanently amount in the end to an expansion of
production; excepting those only which aim at a specific increase of the
rate of surplus value by measures such as wage-cutting or lengthening
the hours of work. As for these latter devices, they are as such likely
to encounter many obstacles. In this respect, a large enterprise
invariably enjoys advantages of every kind over a small or medium
concern. They may range from a saving in premises or instruments, in the
application of more efficient means of production, in extensive
replacement of manual labour by machinery, down to a speedy exploitation
of a favourable turn of the market so as to acquire raw materials
cheaply. Within very wide limits, these advantages increase in direct
proportion to the expansion of the enterprise. Thus, as soon as a few
capitalist enterprises have been enlarged, competition itself forces all
others to expand likewise. Expansion becomes a condition of existence. A
growing tendency towards reproduction at a progressively increasing
scale thus ensues, which spreads automatically like a tidal wave over
ever larger surfaces of reproduction.
Expanding reproduction is not a new discovery of capital. On the
contrary, it had been the rule since time immemorial in every form of
society that displayed economic and cultural progress. It is true, of
course, that simple reproduction as a mere continuous repetition of the
process of production on the same scale as before can be observed over
long periods of social history. In the ancient agrarian and communist
village communities, for instance, increase in population did not lead
to a gradual expansion of production, but rather to the new generation
being expelled and the subsequent founding of equally small and
self-sufficient colonies. The old small handicraft units of India and
China provide similar instances of a traditional repetition of
production in the same forms and on the same scale, handed down from
generation to generation. But simple reproduction is in all these cases
the source and unmistakable sign of a general economic and cultural
stagnation. No important forward step in production, no memorial of
civilisation, such as the great waterworks of the East, the pyramids of
Egypt, the military roads of Rome, the Arts and Sciences of Greece, or
the development of craftsmanship and towns in the Middle Ages would have
been possible without expanding reproduction; for the basis and also the
social incentive for a decisive advancement of civilisation lies solely
in the gradual expansion of production beyond immediate requirements,
and in a continual growth of the population itself as well as of its
demands.
Exchange in particular, which brought about a class society, and its
historical development into the capitalist form of economy, would have
been unthinkable without expanding reproduction. In a capitalist
society, moreover, expanding reproduction acquires certain
characteristics. As we have already mentioned, it becomes right away a
coercive law to the individual capitalist. Capitalist methods of
production do not exclude simple or even retrogressive reproduction;
indeed, this is responsible for the periodical phenomenon of crises
following phases, likewise periodical, of overstrained expansion of
reproduction in times of boom. But ignoring periodical fluctuations, the
general trend of reproduction is ever towards expansion. For the
individual capitalist, failure to keep abreast of this expansion means
quitting the competitive struggle, economic death.
Moreover, there are certain other aspects to be considered. The concept
of expanding reproduction applies only to the quantity of products, to
the aggregate of manufactured objects. So long as production rests
solely or mainly upon a natural economy, consumption determines the
extent and character of the individual labour process, as well as that
of reproduction in general, as an end in itself: this applies to the
agrarian and communist village communities of India, to the Roman
_villa_ with its economy of slave labour, and to the medieval feudal
farm based on _corvée_. But the picture is different in a capitalist
economic system. Capitalist production is not production for the purpose
of consumption, it is production for the purpose of creating value. The
whole process of production as well as of reproduction is ruled by value
relationships. Capitalist production is not the production of consumer
goods, nor is it merely the production of commodities: it is
pre-eminently the production of surplus value. Expanding reproduction,
from a capitalist point of view, is expanding production of surplus
value, though it takes place in the forms of commodity production and is
thus in the last instance the production of consumer goods. Changes in
the productivity of labour during the course of reproduction cause
continual discrepancies between these two aspects. If productivity
increases, the same amount of capital and surplus value may represent a
progressively larger amount of consumer goods. Expanding production,
understood as the creation of a greater amount of surplus value, need
not therefore necessarily imply expanding reproduction in the capitalist
meaning of the term. Conversely, capital may, within limits, yield a
greater surplus value in consequence of a higher degree of exploitation
such as is brought about by wage-cutting and the like, without actually
producing a greater amount of goods. But in both cases the surplus value
has a twofold aspect: it is a quantity of value as well as an aggregate
of material products, and from a capitalist point of view, its elements
in both instances are thus the same.
As a rule, an increased production of surplus value results from an
increase of capital brought about by addition of part of the
appropriated surplus value to the original capital, no matter whether
this capitalist surplus value is used for the expansion of an old
enterprise or for founding a new one, an independent offshoot.
Capitalist expanding reproduction thus acquires the specific
characteristics of an increase in capital by means of a progressive
capitalisation of surplus value, or, as Marx has put it, by the
accumulation of capital.
The general formula for enlarged reproduction under the rule of capital
thus runs as follows: _c + v + s/x + s´_. Here _s/x_ stands for the
capitalised part of the surplus value appropriated in an earlier period
of production; _s´_ stands for the new surplus value created by the
increased capital. Part of this new surplus value is capitalised again,
and expanding reproduction is thus, from the capitalist point of view, a
constantly flowing process of alternate appropriation and capitalisation
of surplus value.
So far, however, we have only arrived at a general and abstract formula
for reproduction. Let us now consider more closely the concrete
conditions which are necessary to apply this formula.
The surplus value which has been appropriated, after it has successfully
cast off its commodity-form in the market, appears as a given amount of
money. This money-form is the form of its absolute value, the beginning
of its career as capital. But as it is impossible to create surplus
value with money, it cannot, in this form, advance beyond the threshold
of its career. Capital must assume commodity-form, so that the
particular portion of it which is earmarked for accumulation can be
capitalised. For only in this form can it become productive capital;
that is, capital begetting new surplus value. Therefore, like the
original capital, it must again be divided into two parts; a constant
part, comprising the inanimate means of production, and a variable part,
the wages. Only then will our formula _c + v + s_ apply to it in the
same way as it applied to the old capital.
But the good intent of the capitalist to accumulate, his thrift and
abstinence which make him use the greater part of his surplus value for
production instead of squandering it on personal luxuries, is not
sufficient for this purpose. On the contrary, it is essential that he
should find on the commodity market the concrete forms which he intends
to give his new surplus value. In the first place, he must secure the
material means of production such as raw materials, machines etc.
required for the branch of production he has chosen and planned, so that
the particular part of the surplus value which corresponds to his
constant capital may assume a productive form. Secondly, the other,
variable part of his surplus value must also be convertible, and two
essentials are necessary for this conversion: of first importance, the
labour market must offer a sufficient quantity of additional labour, and
secondly, as the workers cannot live on money alone, the commodity
market, too, must offer an additional amount of provisions, which the
workers newly to be employed may exchange against the variable part of
the surplus value they will get from the capitalist.
All these prerequisites found, the capitalist can set his capitalised
surplus value to work and make it, as operating capital, beget new
surplus value. But still his task is not completely done. Both the new
capital and the surplus value produced still exist for the time being in
the shape of an additional quantity of some commodity or other. In this
form the new capital is but advanced, and the new surplus value created
by it is still in a form in which it is of no use to the capitalist. The
new capital as well as the surplus value which it has created must cast
off their commodity-form, re-assume the form of pure value, and thus
revert to the capitalist as money. Unless this process is successfully
concluded, the new capital and surplus value will be wholly or partly
lost, the capitalisation of surplus value will have miscarried, and
there will have been no accumulation. It is absolutely essential to the
accumulation of capital that a sufficient quantity of commodities
created by the new capital should win a place for itself on the market
and be realised.
Thus we see that expanding reproduction as accumulation of capital in a
capitalist system is bound up with a whole series of special conditions.
Let us look at these more closely. The first condition is that
production should create surplus value, for surplus value is the
elementary form in which alone increased production is possible under
capitalist conditions. The entire process of production must abide by
this condition when determining the relations between capitalist and
worker in the production of commodities. Once this first condition is
given, the second is that surplus value must be realised, converted into
the form of money, so that it can be appropriated for the purposes of
expanding reproduction. This second condition thus leads us to the
commodity market. Here, the hazards of exchange decide the further fate
of the surplus value, and thus the future of reproduction. The third
condition is as follows: provided that part of the realised surplus
value has been added to capital for the purpose of accumulation, this
new capital must first assume its productive form of labour and
inanimate means of production. Moreover, that part of it which had been
exchanged for labour must be converted into provisions for the workers.
Thus we are led again to the markets of labour and commodities. If all
these requirements have been met and enlarged reproduction of
commodities has taken place, a fourth condition must be added: the
additional quantity of commodities representing the new capital plus
surplus value will have to be realised, that is, reconverted into money.
Only if this conversion has been successful, can it be said that
expanding capitalist reproduction has actually taken place. This last
condition leads us back to the commodity market.
Thus capitalist production and reproduction imply a constant shifting
between the place of production and the commodity market, a shuttle
movement from the private office and the factory where unauthorised
persons are strictly excluded, where the sovereign will of the
individual capitalist is the highest law, to the commodity market where
nobody sets up any laws and where neither will nor reason assert
themselves. But it is this very licence and anarchy of the commodity
market which brings home to the individual capitalist that he is
dependent upon society, upon the entirety of its producing and consuming
members. The individual capitalist may need additional means of
production, additional labour and provisions for these workers in order
to expand reproduction, but whether he can get what he needs depends
upon factors and events beyond his control, materialising, as it were,
behind his back. In order to realise his increased aggregate of
products, the individual capitalist requires a larger market for his
goods, but he has no control whatever over the actual increase of demand
in general, or of the particular demand for his special kind of good.
The conditions we have enumerated here, which all give expression to the
inherent contradiction between consumption and private production and
their social interconnection, are nothing new, and it is not only at
the stage of reproduction that they become apparent. These conditions
express the general contradiction inherent in capitalist production.
They involve, however, particular difficulties as regards the process of
reproduction for the following reasons. With regard to reproduction,
especially expanding reproduction, the capitalist method of production
not only reveals its general fundamental character, but, what is more,
it shows, in the various periods of production, a definite rhythm within
a continuous progression--the characteristic interplay of individual
wills. From this point of view, we must inquire in a general way how it
is possible for every individual capitalist to find on the market the
means of production and the labour he requires for the purpose of
realising the commodities he has produced, although there exists no
social control whatever, no plan to harmonize production and demand.
This question may be answered by saying that the capitalist's greed for
surplus value, enhanced by competition, and the automatic effects of
capitalist exploitation, lead to the production of every kind of
commodity, including means of production, and also that a growing class
of proletarianised workers becomes generally available for the purposes
of capital. On the other hand, the lack of a plan in this respect shows
itself in the fact that the balance between demand and supply in all
spheres can be achieved only by continuous deviations, by hourly
fluctuations of prices, and by periodical crises and changes of the
market situation.
From the point of view of reproduction the question is a different one.
How is it possible that the unplanned supply in the market for labour
and means of production, and the unplanned and incalculable changes in
demand nevertheless provide adequate quantities and qualities of means
of production, labour and opportunities for selling which the individual
capitalist needs in order to make a sale? How can it be assured that
every one of these factors increases in the right proportion? Let us put
the problem more precisely. According to our well-known formula, let the
composition of the individual capitalist's production be expressed by
the proportion _40c + 10v + 10s_. His constant capital is consequently
four times as much as his variable capital, and the rate of exploitation
is 100 per cent. The aggregate of commodities is thus represented by a
value of 60. Let us now assume that the capitalist is in a position to
capitalise and to add to the old capital of this given composition half
of his surplus value. In this case, the formula _44c + 11v + 11s = 66_
would apply to the next period of production.
Let us assume now that the capitalist can continue the annual
capitalisation of half his surplus value for a number of years. For this
purpose it is not sufficient that means of production, labour and
markets in general should be forthcoming, but he must find these factors
in a proportion that is strictly in keeping with his progress in
accumulation.
FOOTNOTES:
[58] 'If production be capitalistic in form, so, too, will be
reproduction' (_Capital_, vol. i, p. 578).
[59] Surplus value in our exposition is identical with profit. This is
true for production as a whole, which alone is of account in our further
observations. For the time being, we shall not deal with the further
division of surplus value into its component parts: profit of
enterprise, interest, and rent, as this subdivision is immaterial to the
problem of reproduction.
_CHAPTER II_
QUESNAY'S AND ADAM SMITH'S ANALYSES OF THE PROCESS OF REPRODUCTION
So far we have taken account only of the individual capitalist in our
survey of reproduction; he is its typical representative, its agent, for
reproduction is indeed brought about entirely by individual capitalist
enterprises. This approach has already shown us that the problem
involves difficulties enough. Yet these difficulties increase to an
extraordinary degree and become even more complicated, when we turn our
attention from the individual capitalist to the totality of capitalists.
A superficial glance suffices to show that capitalist reproduction as a
social whole must not be regarded simply as a mechanical summation of
all the separate processes of individual capitalist reproduction. We
have seen, for instance, that one of the fundamental conditions for
enlarged reproduction by an individual capitalist is a corresponding
increase of his opportunities to sell on the commodity market. But the
individual capitalist may not always expand because of an absolute
increase in the absorptive capacity of the market, but also as a result
of the competitive struggle, at the cost of other individual
capitalists. Thus one capitalist may win what another or many others who
have been shouldered from the market must write off as a loss. This
process will enable one capitalist to increase his reproduction by the
amount that it compels others by losses to restrict their own. One
capitalist will be able to engage in enlarged reproduction because
others cannot even achieve simple reproduction. In the same way, one
capitalist may enlarge his reproduction by using labour power and means
of production which another's bankruptcy, that is his partial or
complete retirement from reproduction, has set free.
These commonplaces prove that reproduction of the social capital as a
whole is not the same as the reproduction of the individual capitalist
raised to the _n_th degree. They show that the reproductive activities
of individual capitalists ceaselessly cut across one another and to a
greater or smaller degree may cancel each other out.
Therefore we must clarify our concept of reproduction of capital as a
whole, before we examine the laws and mechanisms of capitalist total
reproduction. We must raise the question whether it is even possible to
deduce anything like total reproduction from the disorderly jumble of
individual capitals in constant motion, changing from moment to moment
according to uncontrollable and incalculable laws, partly running a
parallel course, and partly intersecting and cancelling each other out.
Can one actually talk of total social capital of society as an entity,
and if so, what is the real meaning of this concept? That is the first
question a scientific examination of the laws of reproduction has to
consider. At the dawn of economic theory and bourgeois economics,
Quesnay, the father of the Physiocrats, approached the problem with
classical fearlessness and simplicity and took it for granted that total
capital exists as a real and active entity. In his famous _Tableau
Économique_, so intricate that no one before Marx could understand it,
Quesnay demonstrated the phases of the reproduction of aggregate capital
with a few figures, at the same time taking into account that it must
also be considered from the aspect of commodity exchange, that is as a
process of circulation.[60]
Society as Quesnay sees it consists of three classes: the productive
class of agriculturists; the sterile class containing all those who are
active outside the sphere of agriculture--industry, commerce, and the
liberal professions; and lastly the class of landowners, including the
Sovereign and the collectors of tithes. The national aggregate product
materialises in the hands of the productive class as an aggregate of
provisions and raw materials to the value of some 5,000 million livres.
Of this sum, 2,000 millions represent the annual working capital of
agriculture, 1,000 millions represent the annual wear and tear of fixed
capital, and 2,000 millions are the net revenue accruing to the
landowners. Apart from this total produce, the agriculturists, here
conceived quite in capitalist terms as tenant farmers, have 2,000
million livres cash in hand. Circulation now takes place in such a way
that the tenant class pay the landowners 2,000 millions cash as rent (as
the cost of the previous period of production). For this money the
landowning class buy provisions from the tenants for 1,000 millions and
industrial products from the sterile class for the remaining 1,000
millions. The tenants in their turn buy industrial products for the
1,000 millions handed back to them, whereupon the sterile class buy
agricultural products for the 2,000 millions they have in hand: for
1,000 millions raw materials etc., to replace their annual working
capital, and provisions for the remaining 1,000 millions. Thus the money
has in the end returned to its starting point, the tenant class; the
product is distributed among all classes so that consumption is ensured
for everyone; at the same time the means of production of the sterile as
well as of the productive class have been renewed and the landowning
class has received its revenue. The prerequisites of reproduction are
all present, the conditions of circulation have all been fulfilled, and
reproduction can start again on its regular course.[61]
We shall see later in the course of our investigation that this
exposition, though showing flashes of genius, remains deficient and
primitive. In any case, we must stress here that Quesnay, on the
threshold of scientific economics, had not the slightest doubt as to the
possibility of demonstrating total social capital and its reproduction.
Adam Smith, on the other hand, while giving a more profound analysis of
the relations of capital, laid out what seems like a maze when compared
with the clear and sweeping outlines of the Physiocrat conception. By
his wrong analysis of prices, Smith upset the whole foundation of the
scientific demonstration of the capitalist process as a whole. This
wrong analysis of prices ruled bourgeois economics for a long time; it
is the theory which maintains that, although the value of a commodity
represents the amount of labour spent in its production, yet the price
consists of three elements only: the wage of labour, the profit of
capital, and the rent.
As this obviously must also apply to the aggregate of commodities, the
national product, we are faced with the startling discovery that,
although the value of the aggregate of commodities manufactured by
capitalist methods represents all paid wages together with the profits
of capital and the rents, that is the aggregate surplus value, and
consequently can replace these, there is no component of value which
corresponds to the constant capital used in production. According to
Smith, _v + s_ is the formula expressing the value of the capitalist
product as a whole. Demonstrating his view with the example of corn,
Smith says as follows:
These three parts (wages, profit, and rent) seem either immediately or
ultimately to make up the whole price of corn. A fourth part, it may
perhaps be thought, is necessary for replacing the stock of the farmer,
or for compensating the wear and tear of his labouring cattle, and other
instruments of husbandry. But it must be considered that the price of
any instrument of husbandry, such as a labouring horse, is itself made
up of the same three parts: the rent of the land upon which he is
reared, the labour of tending and rearing him, and the profits of the
farmer who advances both the rent of this land and the wages of this
labour. Though the price of the corn, therefore, may pay the price as
well as the maintenance of the horse, the whole price still resolves
itself either immediately or ultimately into the same three parts of
rent, of labour and profit.'[62]
Sending us in this manner 'from pillar to post', as Marx has put it,
Smith again and again resolved constant capital into _v + s_. However,
he had occasional doubts and from time to time relapsed into the
contrary opinion. He says in the second book:
'It has been shown in the first Book, that the price of the greater part
of commodities resolves itself into three parts, of which one pays the
wages of the labour, another the profits of the stock, and a third the
rent of the land which had been employed in producing and bringing them
to market.... Since this is the case ... with regard to every particular
commodity, taken separately; it must be so with regard to all the
commodities which compose the whole annual produce of the land and
labour of every country, taken complexly. The whole price or
exchangeable value of that annual produce must resolve itself into the
same three parts, and be parcelled out among the different inhabitants
of the country, either as the wages of their labour, the profits of
their stock, or the rent of their land.'[63]
Here Smith hesitates and immediately below explains: 'But though the
whole value of the annual produce of the land and labour of every
country is thus divided among and constitutes a revenue to its different
inhabitants, yet as in the rent of a private estate we distinguish
between the gross rent and the neat rent, so may we likewise in the
revenue of all the inhabitants of a great country.
'The gross rent of a private estate comprehends whatever is paid by the
farmer; the neat rent, what remains free to the landlord after deducting
the expense of management, of repairs, and all other necessary charges;
or what, without hurting his estate, he can afford to place in his stock
reserved for immediate consumption, or to spend upon his table,
equipage, the ornaments of his house and furniture, his private
enjoyments and amusements. His real wealth is in proportion, not to his
gross, but to his neat rent.
'The gross revenue of all the inhabitants of a great country comprehends
the whole annual produce of their land and labour; the neat revenue,
what remains free to them after deducting the expense of maintaining,
first, their fixed, and secondly, their circulating capital, or what,
without encroaching upon their capital, they can place in their stock
reserved for immediate consumption, or spend upon their subsistence,
conveniences, and amusements. Their real wealth too is in proportion,
not to their gross, but to their neat revenue.'[64]
Here Smith introduces a portion of value which corresponds to constant
capital, only to eliminate it the very next moment by resolving it into
wages, profits, and rents. And in the end, the matter rests with this
explanation:
'As the machines and instruments of trade, etc. which compose the fixed
capital either of an individual or of a society, make no part either of
the gross or the neat revenue of either, so money, by means of which the
whole revenue of the society is regularly distributed among all its
different members, makes itself no part of that revenue.'[65]
Constant capital, the fixed capital of Adam Smith, is thus put on the
same level as money and does not enter into the total produce of
society, its gross revenue. It does not exist within this total product
as an element of value.
You cannot get blood out of a stone, and so circulation, the mutual
exchange of the total product constituted in this manner, can only lead
to realisation of the wages (_v_) and of the surplus value (_s_).
However, as it cannot by any means replace the constant capital,
continued reproduction evidently must become impossible. Smith indeed
knew quite well, and did not dream of denying, that every individual
capitalist requires constant capital in addition to his wages fund, his
variable capital, in order to run his enterprise. Yet the above analysis
of commodity prices, when it comes to take note of capitalist production
as a whole, allows constant capital to disappear without a trace in a
puzzling way. Thus the problem of the reproduction of capital is
completely muddled up. It is plain that if the most elementary premise
of the problem, the demonstration of social capital as a whole, were on
the rocks, the whole analysis was bound to fail. Ricardo, Say, Sismondi
and others took up this erroneous theory of Adam Smith, and they all
stumbled in their observations on the problem of reproduction over this
most elementary difficulty: the demonstration of social capital.
Another difficulty is mixed up with the foregoing from the very outset
of scientific analysis. What is the nature of the total capital of a
society? As regards the individual producer, the position is clear: his
capital consists of the expenses of his enterprise. Assuming capitalist
methods of production, the value of his product yields him a surplus
over and above his expenses, that surplus value which does not replace
his capital but constitutes his net income, which he can consume
completely without encroaching upon his capital and which is thus his
fund of consumption. It is true that the capitalist may save part of
this net income, not consuming it himself but adding it to his capital.
But that is another matter, a new step, the formation of a new capital
which again must be replaced by subsequent reproduction and must again
yield him a surplus. In any case, the capital of an individual always
consists of what he requires for production, together with his advances
on the running of his enterprise, and his income is what he himself
actually consumes or may consume, his fund of consumption. If we ask a
capitalist: 'What are the wages you pay your workers?' his answer will
be: 'They are obviously part of my working capital.' But if we ask:
'What are these wages for the workers who have received them?'--it is
impossible that he should describe them as capital, for wages received
are not capital for the workers but income, their fund of consumption.
Let us now take another example. A manufacturer of machinery produces
machines in his factory. The annual output is a certain number of
machines. In its value, however, this annual output contains the capital
advanced by the manufacturer as well as the net income that has been
earned. Part of the manufactured machines thus represent income for the
manufacturer and are destined to realise this income in the process of
circulation and exchange. But the person who buys these machines from
the manufacturer does not buy them as income but in order to use them as
a means of production; for him they are capital.
These examples make it seem plausible that an object which is capital
for one person may be income for another and _vice versa_. How can it be
possible under these circumstances to construct anything in the nature
of a total capital of society? Indeed almost every scientific economist
up to the time of Marx concluded that there is no social capital.[66]
Smith was still doubtful, undecided, vacillating about this question; so
was Ricardo. But already Say declared categorically:
'It is in this way, that the total value of products is distributed
amongst the members of the community; I say, the _total_ value, because
such part of the whole value produced, as does not go to one of the
consuming producers, is received by the rest. The clothier buys wool of
the farmer, pays his workmen in every department, and sells the cloth,
the result of their united exertion, at a price that reimburses all his
advances, and affords himself a profit. He never reckons as profit, or
as the revenue of his own industry, anything more than the _net_
surplus, after deducting all charges and outgoings; but those outgoings
are merely an advance of their respective revenues to the previous
producers, which are refunded by the _gross_ value of the cloth. The
price paid to the farmer for his wool is the compound of the several
revenues of the cultivator, the shepherd and the landlord. Although the
farmer reckons as _net_ produce only the surplus remaining after payment
of his landlord and his servants in husbandry, yet to them these
payments are items of revenue--rent to the one and wages to the
other--to the one, the revenue of the land, to the other, the revenue of
his industry. The aggregate of all these is defrayed out of the value of
the cloth, the whole of which forms the revenue of some one or other,
and is entirely absorbed in that way.--Whence it appears that the term
_net_ produce applies only to the individual revenue of each separate
producer or adventurer in industry, but that the aggregate of individual
revenue, the total revenue of the community, is equal to the _gross_
produce of its land, capital and industry, which entirely subverts the
system of the economists of the last century, who considered nothing but
the net produce of the land as farming revenue, and therefore concluded,
that this net produce was all that the community had to consume; instead
of closing with the obvious inference, that the whole of what had been
created, may also be consumed by mankind.'[67]
Say proves his theory in his own peculiar fashion. Whereas Adam Smith
tried to give a proof by referring each private capital unit to its
place of production in order to resolve it into a mere product of
labour, but conceived of every product of labour in strictly capitalist
terms as a sum of paid and unpaid labour, as _v + s_, and thus came to
resolve the total product of society into _v + s_; Say, of course, is
cocksure enough to 'correct' these classical errors by inflating them
into common vulgarities. His argument is based upon the fact that the
entrepreneur at every stage of production pays other people, the
representatives of previous stages of production, for the means of
production which are capital for him, and that these people in their
turn put part of this payment into their own pockets as their income and
partly use it to recoup themselves for expenses advanced in order to
provide yet another set of people with an income. Say converts Adam
Smith's endless chain of labour processes into an equally unending chain
of mutual advances on income and their repayment from the proceeds of
sales. The worker appears here as the absolute equal of the
entrepreneur. He has his income advanced in the form of wages, paying
for it in turn by the labour he performs. Thus the final value of the
aggregate social product appears as the sum of a large number of
advanced incomes and is spent in the process of exchange on repayment of
all these advances. It is characteristic of Say's superficiality that he
illustrates the social connections of capitalist reproduction by the
example of watch manufacture--a branch of production which at that time
and partly even to-day is pure 'manufacture' where every worker is also
an entrepreneur on a small scale and the process of production of
surplus value is masked by a series of successive acts of exchange
typical of simple commodity production.
Thus Say gives an extremely crude expression to the confusion
inaugurated by Adam Smith. The aggregate of annual social produce can be
completely resolved as regards its value into a sequence of various
incomes. Therefore it is completely consumed every year. It remains an
enigma how production can be taken up again without capital and means of
production, and capitalist reproduction appears to be an insoluble
problem.
If we compare the varying approaches to the problem from the time of the
Physiocrats to that of Adam Smith, we cannot fail to recognise partial
progress as well as partial regression. The main characteristic of the
economic conception of the Physiocrats was their assumption that
agriculture alone creates a surplus, that is surplus value, and that
agricultural labour is the only kind of labour which is productive in
the capitalist sense of the term. Consequently we see in the _Tableau
Économique_ that the unproductive class of industrial workers creates
value only to the extent of the same 2,000 million livres which it
consumes as raw materials and foodstuffs. Consequently, too, in the
process of exchange, the total of manufactured products is divided into
two parts, one of which goes to the tenant class and the other to the
landowning class, while the manufacturing class does not consume its own
products. Thus in the value of its commodities, the manufacturing class
reproduces, strictly speaking, only that circulating capital which has
been consumed, and no income is created for the class of entrepreneurs.
The only income of society that comes into circulation in excess of all
capital advances, is created in agriculture and is consumed by the
landowning class in the form of rents, while even the tenant class do no
more than replace their capital: to wit, 1,000 million livres interest
from the fixed capital and 2,000 million circulating capital, two-thirds
being raw materials and foodstuffs, and one-third industrial products.
Further it is striking that it is in agriculture alone that Quesnay
assumes the existence of fixed capital which he calls _avances
primitives_ as distinct from _avances annuelles_. Industry, as he sees
it, apparently works without any fixed capital, only with circulating
capital turned over each year, and consequently does not create in its
annual output of commodities any element of value for making good the
wear and tear of fixed capital (such as premises, tools, and so on).[68]
In contrast with this obvious defect, the English classical school shows
a decisive advance above all in proclaiming every kind of labour as
productive, thus revealing the creation of surplus value in manufacture
as well as in agriculture. We say: the English classical school, because
on this point Adam Smith himself occasionally relapses quietly into the
Physiocrat point of view. It is only Ricardo who develops the theory of
the value of labour as highly and logically as it could advance within
the limits of the bourgeois approach. The consequence is that we must
assume all capital investment to produce annual surplus value, in the
manufacturing part of social production as a whole no less than in
agriculture.[69]
On the other hand, the discovery of the productive, value-creating
property of every kind of labour, alike in agriculture and in
manufacture, suggested to Smith that agricultural labour, too, must
produce, apart from the rent for the landowning class, a surplus for the
tenant class over and above the total of their capital expenses. Thus,
in addition to the replacement of capital, an annual income of the
tenant class comes into being.[70]
Lastly, by a systematic elaboration of the concepts of _avances
primitives_ and _avances annuelles_ introduced by Quesnay, which he
calls fixed and circulating capital, Smith has made clear, among other
things, that the manufacturing side of social production requires a
fixed as well as a circulating capital. Thus he was well on the way to
restoring to order the concepts of capital and revenue of society, and
to describing them in precise terms. The following exposition represents
the highest level of clarity which he achieved in this respect:
'Though the whole annual produce of the land and labour of every country
is, no doubt, ultimately destined for supplying the consumption of its
inhabitants and for procuring a revenue to them, yet when it first comes
either from the ground or from the hands of the productive labourer, it
naturally divides itself into two parts. One of them, and frequently
the largest, is, in the first place, destined for replacing a capital,
or for renewing the provisions, materials, and finished work, which had
been withdrawn from a capital; the other for constituting a revenue
either to the owner of this capital, as the profit of his stock, or to
some other person, as the rent of his land.'[71]
'The gross revenue of all the inhabitants of a great country comprehends
the whole annual produce of their land and labour; the neat revenue,
what remains free to them after deducting the expense of maintaining,
first, their fixed, and secondly, their circulating capital; or what,
without encroaching upon their capital, they can place in their stock
reserved for immediate consumption, or spend upon their subsistence,
conveniencies, and amusements. Their real wealth too is in proportion,
not to their gross, but to their neat revenue.'[72]
The concepts of total capital and income appear here in a more
comprehensive and stricter form than in the _Tableau Économique_. The
one-sided connection of social income with agriculture is severed and
social income becomes a broader concept; and a broader concept of
capital in its two forms, fixed and circulating capital, is made the
basis of social production as a whole. Instead of the misleading
differentiation of production into two departments, agriculture and
industry, other categories of real importance are here brought to the
fore: the distinction between capital and income and the distinction,
further, between fixed and circulating capital.
Now Smith proceeds to a further analysis of the mutual relations of
these categories and of how they change in the course of the social
process, in production and circulation--in the reproductive process of
society. He emphasises here a radical distinction between fixed and
circulating capital from the point of view of the society:
'The whole expense of maintaining the fixed capital must evidently be
excluded from the neat revenue of the society. Neither the materials
necessary for supporting their useful machines and instruments of trade,
their profitable buildings, etc., nor the produce of the labour
necessary for fashioning those materials into the proper form, can ever
make any part of it. The price of that labour may indeed make a part of
it; as the workmen so employed may place the whole value of their wages
in their stock reserved for immediate consumption. But in other sorts of
labour, both the price and the produce go to this stock, the price to
that of the workmen, the produce to that of other people whose
subsistence, convenience and amusements are augmented by the labour of
those workmen.'[73]
Here Smith comes up against the important distinction between workers
who produce means of production and those who produce consumer goods.
With regard to the former he remarks that they create the
value--destined to replace their wages and to serve as their income--in
the form of means of production such as raw materials and instruments
which in their natural form cannot be consumed. With regard to the
latter category of workers, Smith observes that conversely the total
product, or better that part of value contained in it which replaces the
wages, the income of the workers together with its other remaining
value, appears here in the form of consumer goods. (The real meaning
latent in this conclusion, though Smith does not say so explicitly, is
that the part of the product which represents the fixed capital employed
in its production appears likewise in this form.) In the further course
of our investigation we shall see how close Smith has here come to the
vantage point from which Marx tackled the problem. The general
conclusion, however, maintained by Smith without any further examination
of the fundamental question, is that, in any case, whatever is destined
for the preservation and renewal of the fixed capital of society cannot
be added to society's net income.
The position is different with regard to circulating capital. 'But
though the whole expenses of maintaining the fixed capital is thus
necessarily excluded from the neat revenue of the society, it is not the
same case with that of maintaining the circulating capital. Of the four
parts of which this latter capital is composed, money, provisions,
materials and finished work, the three last, it has already been
observed, are regularly withdrawn from it and placed either in the fixed
capital of the society, or in their stock reserved for immediate
consumption. Whatever portion of those consumable goods is not employed
in maintaining the former, goes all to the latter, and makes a part of
the neat revenue of the society, besides what is necessary for
maintaining the fixed capital.'[74]
We see that Smith here simply includes in this category of circulating
capital everything but the fixed capital already employed, that is to
say, foodstuffs and raw materials and in part commodities which,
according to their natural form, belong to the replacement of fixed
capital. Thus he has made the concept of circulating capital vague and
ambiguous. But a further and most important distinction crops up and
cuts right through this conception: 'The circulating capital of a
society is in this respect different from that of an individual. That of
an individual is totally excluded from making any part of his neat
revenue, which must consist altogether in his profits. But though the
circulating capital of every individual makes a part of that of the
society to which he belongs, it is not upon that account totally
excluded from making a part likewise of their neat revenues.'[75]
In the following illustration Smith expounds what he means: 'Though the
whole goods in a merchant's shop must by no means be placed in his own
stock reserved for immediate consumption, they may in that of other
people, who, from a revenue derived from other funds, may regularly
replace their value to him, together with its profits, without
occasioning any diminution either of his capital or theirs.'[76]
Here Smith has established fundamental categories with regard to the
reproduction and movement of circulating social capital. Fixed and
circulating capital, private and social capital, private and social
revenue, means of production and consumer goods, are marked out as
comprehensive categories, and their real, objective interrelation is
partly indicated and partly drowned in the subjective and theoretical
contradictions of Smith's analysis. The concise, strict, and classically
clear scheme of the Physiocrat theory is dissolved here into a
disorderly jumble of concepts and relations which at first glance
appears an absolute chaos. But we may already perceive new connections
within the social process of reproduction, understood by Smith in a
deeper, more modern and vital way than was within Quesnay's grasp,
though, like Michelangelo's slave in the unhewn block of marble, they
are still inchoate.
This is the only illustration Smith gives of this problem. But at the
same time he attacks it from another angle--by an analysis of value.
This very same theory which represents an advance beyond the
Physiocrats--the theory that it is an essential quality of all labour to
create value; the strictly capitalist distinction between paid labour
replacing wages, and unpaid labour creating surplus value; and, finally,
the strict division of surplus value into its two main categories, of
profit and rent--all this progress from the analysis of the Physiocrats
leads Smith to the strange proposition that the price of every commodity
consists of wages, plus profits, plus rent, or, in Marx's shorthand, of
_v + s_. In consequence, the commodities annually produced by society as
a whole can be resolved completely, as to value, into the two
components: wages and surplus value. Here the category of capital has
disappeared all of a sudden; society produces nothing but income,
nothing but consumer goods, which it also consumes completely.
Reproduction without capital becomes a paradox, and the treatment of the
problem as a whole has taken an immense backward step against that of
the Physiocrats.
The followers of Adam Smith have tackled this twofold theory from
precisely the wrong approach. Before Marx nobody concerned himself with
the important beginnings of an exact exposition of the problem in
Smith's second book, while most of his followers jealously preserved
Smith's radically wrong analysis of prices, accepting it, like Ricardo,
without question, or else, like Say, elaborating it into a trite
doctrine. Where Smith raised fruitful doubts and stimulating
contradictions, Say flaunted the opinionated presumption of a
commonplace mind. Smith's observation that the capital of one person may
be the revenue of another induced Say to proclaim every distinction
between capital and income on the social scale to be absurd. The
absurdity, however, that income should completely absorb the total
value of annual production which is thus consumed completely, assumes in
Say's treatment the character of an absolutely valid dogma. If society
annually consumes its own total product completely, social reproduction
without any means of production whatever must become an annual
repetition of the Miracle of the Creation.
In this state the problem of reproduction remained up to the time of
Karl Marx.
FOOTNOTES:
[60] 'Quesnay's _Tableau Économique_ shows ... how the result of
national production in a certain year, amounting to some definite value,
is distributed by means of the circulation in such a way, that ...
reproduction can take place.... The innumerable individual acts of
circulation are at once viewed in their characteristic social mass
movement--the circulation between great social classes distinguished by
their economic function' (_Capital_, vol. ii, p. 414).
[61] Cf. _Analyse du Tableau Économique_, in _Journal de l'Agriculture,
du Commerce et des Finances_, by Dupont (1766), pp. 305 ff. in Oncken's
edition of _OEuvres de F. Quesnay_. Quesnay remarks explicitly that
circulation as he describes it is based upon two conditions: unhampered
trade, and a system of taxation applying only to rent: 'Yet these facts
have indispensable conditions; that the freedom of commerce sustains the
sale of products at a good price, ... and moreover, that the farmer need
not pay any other direct or indirect charges but this income, part of
which, say two sevenths, must form the revenue of the Sovereign' (op.
cit., p. 311).
[62] Adam Smith, _An Enquiry into the Nature and Causes of the Wealth of
Nations_ (ed. MacCulloch, Edinburgh London, 1828), vol. i, pp. 86-8.
[63] Op. cit., vol. ii, pp. 17-18.
[64] Ibid., pp. 18-19.
[65] Ibid., p. 23.
[66] As to the concept of 'national capital' specific to Rodbertus, see
below, Section II.
[67] J. B. Say, _A Treatise on Political Economy_ (transl. by C. R.
Prinsep, vol. ii, London, 1821); pp. 75-7.
[68] Attention must be drawn to the fact that Mirabeau in his
_Explications_ on the _Tableau Économique_ explicitly mentions the fixed
capital of the unproductive class: 'The primary advances of this class,
for the establishment of manufactures, for instruments, machines, mills,
smithies (ironworks) and other factories ... (amount to) 2,000 million
livres' (_Tableau Économique avec ses Explications_, 1760, p. 82). In
his confusing sketch of the _Tableau_ itself, Mirabeau, too, fails to
take this fixed capital of the sterile class into account.
[69] Smith accordingly arrives at this general formulation: 'The value
which the workmen add to the materials, therefore, resolves itself in
this case into two parts, of which the one pays their wages, the other
the profits of their employer upon the whole stock of materials and
wages which he advanced' (op. cit., vol. i, p. 83). Further, in Book II,
chap. 8, on industrial labour in particular: 'The labour of a
manufacturer adds generally to the value of the materials which he works
upon, that of his own maintenance and of his master's profit. The labour
of a menial servant, on the contrary, adds to the value of nothing.
Though the manufacturer has his wages advanced to him by his master, he
in reality costs him no expense, the value of those wages being
generally restored, together with a profit, in the improved value of the
subject upon which his labour is bestowed' (op. cit., vol. ii, pp.
93-4).
[70] 'The labourers ... therefore, employed in agriculture, not only
occasion, like the workmen in manufactures, the reproduction of a value
equal to their own consumption, or to the capital which employs them,
together with its owner's profit, but of a much greater value. Over and
above the capital of the farmer and all its profits, they regularly
occasion the reproduction of the rent of the landlord' (ibid., p. 149).
[71] Ibid., pp. 97-8. Yet already in the following sentence Smith
converts capital completely into wages, that is variable capital: 'That
part of the annual produce of the land and labour of any country which
replaces a capital, never is immediately employed to maintain any but
productive hands. It pays the wages of productive labour only. That
which is immediately destined for constituting a revenue, either as
profit or as rent, may maintain indifferently either productive or
unproductive hands' (ibid., p. 98).
[72] Ibid., p. 19.
[73] Smith, op. cit., vol. ii, pp. 19-20.
[74] Ibid., vol. i, pp. 21-2.
[75] Ibid., p. 22.
[76] Ibid.
_CHAPTER III_
A CRITICISM OF SMITH'S ANALYSIS
Let us recapitulate the conclusions to which Smith's analysis has
brought us:
(1) There is a fixed capital of society, no part of which enters into
its net revenue. This fixed capital consists in 'the materials necessary
for supporting their useful machines and instruments of trade' and 'the
produce of labour necessary for fashioning those materials into the
proper form'.[77] By singling out the production of such fixed capital
as of a special kind, and explicitly contrasting it with the production
of consumer goods, Smith in effect transformed fixed capital into what
Marx calls 'constant capital'--that part of capital which consists of
all material means of production, as opposed to labour power.
(2) There is a circulating capital of society. After eliminating the
part of fixed, or constant, capital, there remains only the category of
consumer goods; these are not capital for society but net revenue, a
fund of consumption.
(3) Capital and net revenue of an individual do not strictly correspond
with capital and net revenue of society. What is nothing but fixed, or
constant capital for society as a whole cannot be capital for the
individual; it must be revenue, too, a fund of consumption, comprising
as it does those parts of fixed capital which represent the workers'
wages and the capitalists' profits. On the other hand, the circulating
capital of the individuals cannot be capital for society but must be
revenue, especially in so far as it takes the form of provisions.
(4) As regards the value of the total annual social product, no trace of
capital remains. It can be resolved completely into the three kinds of
income: wages, profits of capital, and rents.
If we tried from this haphazard collection of odd ideas to build up a
picture of the annual reproduction of total social capital, and of its
mechanism, we should soon despair of our task. Indeed, all these
observations leave us infinitely remote from the solution of the problem
how social capital is annually renewed, how everybody's consumption is
ensured by his income, while the individuals can nevertheless adhere to
their own points of view on capital and income. Yet if we wish to
appreciate fully Marx's contribution to the elucidation of this problem,
we must be fully aware of all this confusion of ideas, the mass of
conflicting points of view.
Let us begin with Adam Smith's last thesis which alone would suffice to
wreck the treatment of the problem of reproduction in classical
economics.
Smith's basic principle is that the total produce of society, when we
consider its value, resolves itself completely into wages, profits and
rents: this conception is deeply rooted in his scientific theory that
value is nothing but the product of labour. All labour performed,
however, is wage labour. This identification of human labour with
capitalist wage labour is indeed the classical element in Smith's
doctrine. The value of the aggregate product of society comprises both
the recompense for wages advanced and a surplus from unpaid labour
appearing as profit for the capitalist and rent for the landowner. What
holds good for the individual commodity must hold good equally for the
aggregate of commodities. The whole mass of commodities produced by
society--taken as a quantity of value--is nothing but a product of
labour, of paid as well as unpaid labour, and thus it is also to be
completely resolved into wages, profits, and rents.
It is of course true that raw materials, instruments, and the like, must
be taken into consideration in connection with all labour. Yet is it not
true also that these raw materials and instruments in their turn are
equally products of labour which again may have been paid or unpaid? We
may go back as far as we choose, we may twist and turn the problem as
much as we like, yet we shall find no element in the value of any
commodity--and therefore none in the price--which cannot be resolved
purely in terms of human labour. We can distinguish, however, two parts
in all labour: one part repays the wages and the other accrues to the
capitalist and landlord. There seems nothing left but wages and
profits--and yet, there is capital, individual and social capital. How
can we overcome this blatant contradiction? The fact that Marx himself
stubbornly pursued this matter for a long time without getting anywhere
at first as witness his _Theories of the Surplus Value_,[78] proves that
this theoretical problem is indeed extremely hard to solve. Yet the
solution he eventually hit on was strikingly successful, and it is based
upon his theory of value. Adam Smith was perfectly right: nothing but
labour constitutes the value of the individual commodity and of the
aggregate of commodities. He was equally right in saying that from a
capitalist point of view all labour is either paid labour which restores
the wages, or unpaid labour which, as surplus value, accrues to the
various classes owning the means of production. What he forgot, however,
or rather overlooked, is the fact that, apart from being able to create
new value, labour can also transfer to the new commodities the old
values incorporated in the means of production employed. A baker's
working day of ten hours is, from the capitalist point of view, divided
into paid and unpaid hours, into _v + s_. But the commodity produced in
these ten hours will represent a greater value than that of ten hours'
labour, for it will also contain the value of the flour, of the oven
which is used, of the premises, of the fuel and so on, in short the
value of all the means of production necessary for baking. Under one
condition alone could the value of any one commodity be strictly equal
to _v + s_; if a man were to work in mid-air, without raw materials,
without tools or workshop. But since all work on materials (material
labour) presupposes means of production of some sort which themselves
result from preceding labour, the value of this past labour is of
necessity transferred to the new product.
The process in question does not only take place in capitalist
production; it is the general foundation of human labour, quite
independent of the historical form of society. The handling of man-made
tools is a fundamental characteristic of human civilisation. The concept
of past labour which precedes all new labour and prepares its basis,
expresses the nexus between man and nature evolved in the history of
civilisation. This is the eternal chain of closely interwoven labouring
efforts of human society, the beginnings of which are lost in the grey
dawn of the socialisation of mankind, and the termination of which would
imply the end of the whole of civilised mankind. Therefore we have to
picture all human labour as performed with the help of tools which
themselves are already products of antecedent labour. Every new product
thus contains not only the new labour whereby it is given its final
form, but also past labour which had supplied the materials for it, the
instruments of labour and so forth. In the production of value, that is
commodity production into which capitalist production also enters, this
phenomenon is not suspended, it only receives a particular expression.
Here the labour which produces commodities assumes a twofold
characteristic: it is on the one hand useful concrete labour of some
kind or other, creating the useful object, the value-in-use. On the
other hand, it is abstract, general, socially necessary labour and as
such creates value. In its first aspect it does what labour has always
done: it transfers to the new product past labour, incorporated in the
means of production employed, with this distinction only, that this past
labour, too, now appears as value, as old value. In its second aspect,
labour creates new value which, in capitalist terms, can be reduced to
paid and unpaid labour, to _v + s_. Thus the value of every commodity
must contain old value which has been transferred by labour _qua_ useful
concrete labour from the means of production to the commodity, as well
as the new value, created by the same labour _qua_ socially necessary
labour merely as this labour is expended hour by hour.
This distinction was beyond Smith: he did not differentiate the twofold
character of value-creating labour. Marx once claimed to have discovered
the ultimate source of Smith's strange dogma--that the aggregate of
produced values can be completely resolved into _v + s_--in his
fundamentally erroneous theory of value.[79] Failure to differentiate
between the two aspects of commodity-producing labour as concrete and
useful labour on the one hand, and abstract and socially necessary
labour on the other, indeed forms one of the most important
characteristics of the theory of value as conceived not only by Smith
but by all members of the classical school.
Disregarding all social consequences, classical economics recognised
that human labour alone is the factor which creates value, and it worked
out this theory to that degree of clarity which we meet in Ricardo's
formulation. There is a fundamental distinction, however, between
Marx's theory of value and Ricardo's, a distinction which has been
misunderstood not only by bourgeois economists but also in most cases by
the popularisers of Marx's doctrine: Ricardo, conceiving as he did, of
bourgeois economy in terms of natural law, believed also that the
creation of value, too, is a natural property of human labour, of the
specific and concrete labour of the individual human being.
This view is even more blatantly revealed in the writings of Adam Smith
who for instance declares what he calls the 'propensity to exchange' to
be a quality peculiar to human nature, having looked for it in vain in
animals, particularly in dogs. And although he doubted the existence of
the propensity to exchange in animals, Smith attributed to animal as
well as human labour the faculty of creating value, especially when he
occasionally relapses into the Physiocrat doctrine:
'No equal capital puts into motion a greater quantity of productive
labour than that of the farmer. Not only his labouring servants, but his
labouring cattle, are productive labourers....'[80]
'The labourers and labouring cattle, therefore, employed in agriculture,
not only occasion, like the workmen in manufactures, the reproduction of
a value equal to their own consumption, or to the capital which employs
them, together with its owner's profits, but of a much greater value.
Over and above the capital of the farmer and all its profits, they
regularly occasion the reproduction of the rent of the landlord.'[81]
Smith's belief that the creation of value is a direct physiological
property of labour, a manifestation of the animal organism in man, finds
its most vivid expression here. Just as the spider produces its web from
its own body, so labouring man produces value--labouring man pure and
simple, every man who produces useful objects--because labouring man is
by birth a producer of commodities; in the same way human society is
founded by nature on the exchange of commodities, and a commodity
economy is the normal form of human economy.
It was left to Marx to recognise that a given value covers a definite
social relationship which develops under definite historical conditions.
Thus he came to discriminate between the two aspects of
commodity-producing labour: concrete individual labour and socially
necessary labour. When this distinction is made, the solution of the
money problem becomes clear also, as though a spotlight had been turned
on it.
Marx had to establish a dynamic distinction in the course of history
between the commodity producer and the labouring man, in order to
distinguish the twin aspects of labour which appear static in bourgeois
economy. He had to discover that the production of commodities is a
definite historical form of social production before he could decipher
the hieroglyphics of capitalist economy. In a word, Marx had to approach
the problem with methods of deduction diametrically opposed to those of
the classical school, he had in his approach to renounce the latter's
faith in the human and normal element in bourgeois production and to
recognise their historical transience: he had to reverse the
metaphysical deductions of the classics into their opposite, the
dialectical.
On this showing Smith could not possibly have arrived at a clear
distinction between the two aspects of value-creating labour, which on
the one hand transfers the old value incorporated in the means of
production to the new product, and on the other hand creates new value
at the same time. Moreover, there seems to be yet another source of his
dogma that total value can be completely resolved into _v + s_. We
should be wrong to assume that Smith lost sight of the fact that every
commodity produced contains not only the value created by its
production, but also the values incorporated in all the means of
production that had been spent upon it in the process of manufacturing
it. By the very fact that he continually refers us from one stage of
production to a former one--sending us, as Marx complains, from pillar
to post, in order to show the complete divisibility of the aggregate
value into _v + s_--Smith proves himself well aware of the point. What
is strange in this connection is that he again and again resolves the
old value of the means of production, too, into _v + s_, so as finally
to cover the whole value contained in the commodity.
'In the price of corn, for example, one part pays the rent of the
landlord, another pays the wages of maintenance of the labourers and
labouring cattle employed in producing it, and the third pays the profit
of the farmer. These three parts (wages, profit, and rent) seem either
immediately or ultimately to make up the whole price of corn. A fourth
part, it may perhaps be thought, is necessary for replacing the stock of
the farmer, or for compensating the wear and tear of his labouring
cattle and other instruments of husbandry. But it must be considered
that the price of any instrument of husbandry, such as a labouring
horse, is itself made up of the same three parts: the rent of the land
upon which he is reared, the labour of tending and rearing him, and the
profits of the farmer who advances both the rent of this land and the
wages of this labour. Though the price of the corn, therefore, may pay
the price as well as the maintenance of the horse, the whole price still
resolves itself either immediately or ultimately into the same three
parts of rent, of labour, and profit.'[82]
Apparently Smith's confusion arose from the following premises: first,
that all labour is performed with the help of means of production of
some kind or other--yet what are these means of production associated
with any given labour (such as raw materials and tools) if not the
product of previous labour? Flour is a means of production to which the
baker adds new labour. Yet flour is the result of the miller's work, and
in his hands it was not a means of production but the very product, in
the same way as now the bread and pastries are the product of the baker.
This product, flour, again presupposes grain as a means of production,
and if we go one step further back, this corn is not a means of
production in the hands of the farmer but the product. It is impossible
to find any means of production in which value is embodied, without it
being itself the product of some previous labour.
Secondly, speaking in terms of capitalism, it follows further that all
capital which has been completely used up in the manufacture of any
commodity, can in the end be resolved into a certain quantity of
performed labour.
Thirdly, the total value of the commodity, including all capital
advances, can readily be resolved in this manner into a certain quantity
of labour. What is true for every commodity, must go also for the
aggregate of commodities produced by a society in the course of a year;
its aggregate value can similarly be resolved into a quantity of
performed labour.
Fourthly, all labour performed under capitalist conditions is divided
into two parts: paid labour which restores the wages advanced, and
unpaid labour which creates profit and rent, or surplus value. All
labour carried out under capitalist conditions thus corresponds to our
formula _v + s_.[83]
All the arguments outlined above are perfectly correct and unassailable.
Smith handled them in a manner which proves his scientific analysis
consistent and undeviating, and his conceptions of value and surplus
value a distinct advance on the Physiocrat approach. Only occasionally,
in his third thesis, he went astray in his final conclusion, saying that
the aggregate value of the annually produced aggregate of commodities
can be resolved into the labour of that very year, although he himself
had been acute enough to admit elsewhere that the value of the
commodities a nation produces in the course of one year necessarily
includes the labour of former years as well, that is the labour embodied
in the means of production which have been handed down.
But even if the four statements enumerated are perfectly correct in
themselves, the conclusion Smith draws from them--that the total value
of every commodity, and equally of the annual aggregate of commodities
in a society, can be resolved entirely into _v + s_--is absolutely
wrong. He has the right idea that the whole value of a commodity
represents nothing but social labour, yet identifies it with a false
principle, that all value is nothing but _v + s_. The formula _v + s_
expresses the function of living labour under capitalism, or rather its
double function, first to restore the wages, or the variable capital,
and secondly, to create surplus value for the capitalist. Wage labour
fulfils this function whilst it is employed by the capitalists, in
virtue of the fact that the value of the commodities is realised in
cash. The capitalist takes back the variable capital he had advanced in
form of wages, and he pockets the surplus value as well. _v + s_
therefore expresses the relation between wage labour and capitalist, a
relationship that is terminated in every instance as soon as the
process of commodity production is finished. Once the commodity is sold,
and the relation _v + s_ is realised for the capitalist in cash, the
whole relationship is wiped out and leaves no traces on the commodity.
If we examine the commodity and its value, we cannot ascertain whether
it has been produced by paid or by unpaid labour, nor in what proportion
these have contributed. Only one fact is beyond doubt: the commodity
contains a certain quantity of socially necessary labour which is
expressed in its exchange. It is completely immaterial for the act of
exchange as well as for the use of the commodity whether the labour
which produced it could be resolved into _v + s_ or not. In the act of
exchange all that matters is that the commodity represents value, and
only its concrete qualities, its usefulness, are relevant to the use we
make of it. Thus the formula _v + s_ only expresses, as it were, the
intimate relationship between capital and labour, the social function of
wage labour, and in the actual product this is completely wiped out. It
is different with the constant capital which has been advanced and
invested in means of production, because every activity of labour
requires certain raw materials, tools, and buildings. The capitalist
character of this state of affairs is expressed by the fact that these
means of production appear as capital, as _c_, the property of a person
other than the labourer, divorced from labour, the property of those who
themselves do not work. Secondly, the constant capital _c_, a mere
advance laid out for the purpose of creating surplus value, appears here
only as the foundation of _v + s_. Yet the concept of constant capital
involves more than this: it expresses the function of the means of
production in the process of human labour, quite independently of all
its historical or social forms. Everybody must have raw materials and
working tools, the means of production, be it the South Sea Islander for
making his family canoe, the communist peasant community in India for
the cultivation of their communal land, the Egyptian fellah for tilling
his village lands or for building Pharaoh's pyramids, the Greek slave in
the small workshops of Athens, the feudal serf, the master craftsman of
the medieval guild, or the modern wage labourer. They all require means
of production which, having resulted from human labour, express the link
between human labour and natural matter, and constitute the eternal and
universal prerequisites of the human process of production. _c_ in the
formula _c + v + s_ stands for a certain function of the means of
production which is not wiped out in the succession of the labour
process. Whereas it is completely immaterial, for both the exchange and
the actual use made of a commodity, whether it has been produced by paid
or by unpaid labour, by wage labour, slave labour, forced labour or any
other kind of labour; on the other hand, it is of decisive importance,
as for using it, whether the commodity is itself a means of production
or a consumer good. Whether paid or unpaid labour has been employed in
the production of a machine, matters to the machinery manufacturer and
to his workers, but only to them; for society, when it acquires this
machine by an act of exchange, only the quality of this machine as a
means of production, only its function in the process of production is
of importance. Just as every producing society, since time immemorial,
has had to give due regard to the important function of the means of
production by arranging, in each period of production, for the
manufacture of the means of production requisite for the next period, so
capitalist society, too, cannot achieve its annual production of value
to accord with the formula _v + s_--which indicates the exploitation of
wage labour--unless there exists, as the result of the preceding period,
the quantity of means of production necessary to make up the constant
capital. This specific connection of each past period of production with
the period following forms the universal and eternal foundation of the
social process of reproduction and consists in the fact that in every
period parts of the produce are destined to become the means of
production for the succeeding period: but this relation remained hidden
from Smith's sight. He was not interested in means of production in
respect of their specific function within the process to which they are
applied; he was only concerned with them in so far as they are like any
other commodity, themselves the product of wage labour that has been
employed in a capitalist manner. The specifically capitalist function of
wage labour in the productive process completely obscured for him the
eternal and universal function of the means of production within the
labour process. His narrow bourgeois approach overlooked completely the
general relations between man and nature underneath the specific social
relations between capital and wage labour. Here, it seems, is the real
source of Adam Smith's strange dogma, that the total value of the
annual social product can be resolved into _v + s_. He overlooked the
fact that _c_ as the first link in the formula _c + v + s_ is the
essential expression of the general social foundation of exploitation of
wage labour by capital.
We conclude that the value of every commodity must be expressed by the
formula _c + v + s_. The question now arises how far this formula
applies to the aggregate of commodities within a society. Let us turn to
the doubts expressed by Smith on this point, the statement that an
individual's fixed and circulating capital and his revenue do not
strictly correspond to the same categories from the point of view of
society. (Cf. above, p. 64, no. 3.) What is circulating capital for one
person is not capital for another, but revenue, as for instance capital
advances for wages. This statement is based upon an error. If the
capitalist pays wages to the workers, he does not abandon his variable
capital and let it stray into the workers' hands, to become their
income. He only exchanges the value-form of his variable capital against
its natural form, labour power. The variable capital remains always in
the hand of the capitalist, first as money, and then as labour power, to
revert to him later together with the surplus value as the cash proceeds
from the commodities. The worker, on the other hand, never gains
possession of the variable capital. His labour power is never capital to
him, but it is his only asset, the power to work is the only thing he
possesses. Again, if he has sold it and taken a money wage, this wage is
for him not capital but the price of his commodity which he has sold.
Finally, the fact that the worker buys provisions with the wages he has
received, has no more connection with the function this money once
fulfilled as variable capital in the hands of the capitalist, than has
the private use a vendor of a commodity can make of the money he has
obtained by a sale. It is not the capitalist's variable capital which
becomes the workers' income, but the price of the worker's commodity
'labour power' which he has sold, while the variable capital, now as
ever, remains in the hands of the capitalist and fulfils its specific
function. Equally erroneous is the conception that the income of the
capitalist (the surplus value) which is hidden in machines--in our
example of a machinery manufacturer--which has not as yet been realised,
is fixed capital for another person, the buyer of the machines. It is
not the machines, or parts of them, which form the income of the
machinery manufacturer, but the surplus value that is hidden in
them--the unpaid labour of his wage labourers. After the machine has
been sold, this income simply remains as before in the hand of the
machinery manufacturer; it has only changed its outward shape: it has
been changed from the 'machine-form' into the 'money-form'. Conversely,
the buyer of this machine has not, by its purchase, newly obtained
possession of his fixed capital, for he had this fixed capital in hand
even before the purchase, in the form of a certain amount of cash. By
buying this machine, he has only given to his capital the adequate
material form for it to become productive. The income, or surplus value,
remains in the hands of the machinery manufacturer before and after the
sale of the machine, and the fixed capital remains in the hands of the
other person, the capitalist buyer of the machine, just as the variable
capital in the first example always remained in the hands of the
capitalist and the income in the hands of the worker.
Smith and his followers have caused confusion because, in their
investigation of capitalist exchange, they mixed up the use-form of the
commodities with their relations of value. Further, they did not
distinguish the individual circulations of capitals and commodities
which are ever interlacing. One and the same act of exchange can be
circulation of capital, when seen from one aspect, and at the same time
simple commodity exchange for the purpose of consumption. The fallacy
that whatever is capital for one person must be income for another, and
_vice versa_, must be translated thus into the correct statement that
what is circulation of capital for one person, may be simple commodity
exchange for another, and _vice versa_. This only expresses the capacity
of capital to undergo transformations of its character, and the
interconnections of various spheres of interest in the social process of
exchange. The sharply outlined existence of capital in contrast with
income still stands in both its clearly defined forms of constant and
variable capital. Even so, Smith comes very close to the truth when he
states that capital and income of the individual are not strictly
identical with the same categories from the point of view of the
community. Only a few further connecting links are lacking for a clear
revelation of the true relationship.
FOOTNOTES:
[77] _An Enquiry into the Nature and Causes of the Wealth of Nations_,
vol. i, p. 19.
[78] _Theorien über den Mehrwert_ (Stuttgart, 1905), vol. i, pp.
179-252.
[79] _Capital_, vol. ii, p. 435.
[80] Smith, op. cit., vol. ii, p. 148.
[81] Ibid., p. 149.
[82] Op. cit., vol. i, pp. 86-7.
[83] In this connection, we have disregarded the contrary conception
which also runs through the work of Smith. According to that, the
_price_ of the commodity cannot be resolved into _v + s_, though the
_value_ of commodities consists in _v + s_. This distinction, however,
is more important with regard to Smith's theory of value than in the
present context where we are mainly interested in his formula _v + s_.
_CHAPTER IV_
MARX'S SCHEME OF SIMPLE REPRODUCTION
Let us now consider the formula _c + v + s_ as the expression of the
social product as a whole. Is it only a theoretical abstraction, or does
it convey any real meaning when applied to social life--has the formula
any objective existence in relation to society as a whole? It was left
to Marx to establish the fundamental importance of _c_, the constant
capital, in economic theory. Yet Adam Smith before him, working
exclusively with the categories of fixed and circulating capital, in
effect transformed this fixed capital into constant capital, though he
was not aware of having achieved this result. This constant capital
comprises not only those means of production which wear out in the
course of years, but also those which are completely absorbed by
production in any one year. His very dogma that the total value is
resolved into _v + s_ and his arguments on this point lead Smith to
distinguish between the two categories of production--living labour and
inanimate means of production. On the other hand, when he tries to
construe the social process of reproduction on the basis of the capitals
and incomes of individuals, the fixed capital he conceives of as
existing apart from these, is, in fact, constant capital.
Every individual capitalist uses for the production of his commodities
certain material means of production such as premises, raw materials and
instruments. In order to produce the aggregate of commodities in a given
society, an aggregate of all material means of production used by the
individual capitalists is an obvious requisite. The existence of these
means of production within the society is a real fact, though they
themselves exist in the form of purely private individual capitals. This
is the universal absolute condition of social production in all its
historical forms.[84]
The specific capitalist form manifests itself in the fact that the
material means of production function as _c_, as constant capital, the
property of those who do not work; it is the opposite pole to
proletarianised labour power, the counterpart of wage labour. The
variable capital, _v_, is the aggregate of wages actually paid in the
society in the course of a year's production. This fact, too, has real
objective existence, although it manifests itself in an innumerable mass
of individual wages. In every society the amount of labour power
actually engaged in production and the annual maintenance of the workers
is a question of decisive importance. Where this factor takes the
specific capitalist form of _v_, the variable capital, it follows that
the means of subsistence first come to the workers in form of a wage
which is the price of the labour power they have sold to another person,
the owner of the material means of production who does not work himself;
under this aspect, it is the latter's capitalist property. Further, _v_
is an aggregate of money, that is to say it is the means of subsistence
for the workers in a form of pure value. This concept of _v_ implies
that the workers are free in a double sense--free in person and free of
all means of production. It also expresses the fact that in a given
society the universal form of production is commodity production.
Finally, _s_, the surplus value, stands for the total of all surplus
values gained by the individual capitalists. Every society performs
surplus labour, and even a socialist society will have to do the same.
It must perform surplus labour in a threefold sense: it has to provide a
quantity of labour for the maintenance of non-workers (those who are
unable to work, such as children, old people, invalids, and also civil
servants and the so-called liberal professions who do not take an
immediate part in the satisfaction of material[85] wants), it has to
provide a fund of social insurance against elementary disasters which
may threaten the annual produce, such as bad harvests, forest fires and
floods; and lastly it must provide a fund for the purpose of increasing
production, either because of an increase in the population, or because
higher standards of civilisation lead to additional wants. It is in two
respects that the capitalist character manifests itself: surplus labour
comes into being (1) as surplus value, i.e. in commodity-form,
realisable in cash, and (2) as the property of non-workers, of those who
own the means of production.
Similarly, if we consider _v + s_, these two amounts taken together, we
see that they represent objective quantities of universal validity: the
total of living labour that has been performed within a society in the
course of one year. Every human society, whatever its historical form,
must take note of this datum, with reference to both the results that
have been achieved, and the existing and available labour power. The
division into _v + s_ is a universal phenomenon, independent of the
society's particular historical form. In its capitalist form, this
division shows itself not only in the qualitative peculiarities of both
_v_ and _s_ as already outlined, but also in their quantitative
relationship: _v_ tends to become depressed to a minimum level, just
sufficient for the physiological and social existence of the worker, and
_s_ tends to increase continually at the cost of, and relative to, _v_.
The predominant feature of capitalist production is expressed in this
last circumstance: it is the fact that the creation and appropriation of
surplus value is the real purpose of, and the incentive to, production.
We have examined the relations upon which the capitalist formula of the
aggregate product is based, and have found them universally valid. In
every planned economy they are made the object of conscious regulation
on the part of society; in a communist society by the community of
workers and their democratic organs, and in a society based upon
class-rule by the nucleus of owners and their despotic power. In a
system of capitalist production there is no such planned regulation. The
aggregate of the society's capitals and the aggregate of its commodities
alike consist in reality of innumerable fragments of individual capitals
and individual items of merchandise, taken together.
Thus the question arises whether these sums themselves mean anything
more in a capitalist society than a mere statistical enumeration which
is, moreover, inexact and fluid. Applying the standards of society as a
whole, we perceive that the completely independent and sovereign
individual existence of private enterprises is only the historically
conditioned form, whereas it is social interconnections that provide the
foundation. Although individual capitals act in complete independence of
one another, and a social regulation is completely lacking, the movement
of capitals forms a homogeneous whole. This movement, too, appears in
specifically capitalist forms. In every planned system of production it
is, above all, the relation between all labour, past and present, and
the means of production (between _v + s_ and _c_, according to our
formula), or the relation between the aggregate of necessary consumer
goods (again, in the terms of our formula, _v + s_) and _c_ which are
subjected to regulation. Under capitalist conditions, on the other hand,
all social labour necessary for the maintenance of the inanimate means
of production and also of living labour power is treated as one entity,
as capital, in contrast with the surplus labour that has been performed,
i.e. with the surplus value _s_. The relation between these two
quantities _c_ and (_v + s_) is a palpably real, objective relationship
of capitalist society: it is the average rate of profit; every capital
is in fact treated only as part of a common whole, the whole of social
capital, and assigned the profit to which it is entitled, according to
its size, out of the surplus value wrested from society, regardless of
the quantity which this particular capital has actually created. Thus
social capital and its counterpart, the whole of social surplus value,
are not merely real quantities, having an objective existence, but, what
is more, the relation between them, the average profit, guides and
directs the whole process of exchange. This it does in three ways: (1)
by the mechanism of the law of value which establishes the quantitative
relations of exchange between the individual kinds of commodities
independently of their specific value relationship; (2) by the social
division of labour, the assignment of certain portions of capital and
labour to the individual spheres of production; (3) by the development
of labour productivity which on the one hand stimulates individual
capitals to engage in pioneering work for the purpose of securing a
higher profit than the average, and on the other hand extends the
progress that has been achieved by individuals over the whole field of
production. By means of the average rate of profit, in a word, the total
capital of society completely governs the seemingly independent motions
of individual capitals.
The formula _c + v + s_ thus applies to the aggregate of commodities
produced in a society under capitalism no less than to the value
composition of every individual commodity. It is, however, only the
value-composition for which this holds good--the analogy cannot be
carried further.
The formula is indeed perfectly exact if we regard the total product of
a capitalistically producing society as the output of one year's labour,
and wish to analyse it into its respective components. The quantity _c_
shows how much of the labour of former years has been taken over towards
the product of the present year in the form of means of production.
Quantities _v + s_ show the value components of the product created by
new labour during the last year only; the relation between _v_ and _s_
finally shows us how the annual labour programme of society is
apportioned to the two tasks of maintaining the workers and maintaining
those who do not work. This analysis remains valid and correct also with
regard to the reproduction of individual capital, no matter what may be
the material form of the product this capital has created. All three,
_c_, _v_, and _s_, appear alike to a capitalist of the machinery
industry in the form of machinery and its parts; to the owner of a music
hall they are represented by the charms of the dancers and the skill of
the acrobats. So long as the product is left undifferentiated, _c_, _v_,
and _s_ differ from one another only in so far as they are _aliquot_
components of value. This is quite sufficient for the reproduction of
individual capital, as such reproduction begins with the value-form of
capital, a certain amount of money that has been gained by the
realisation of the manufactured product. The formula _c + v + s_ then is
the given basis for the division of this amount of money; one part for
the purchase of the material means of production, a second part for the
purchase of labour power, and a third part--in the case of simple
reproduction assumed in the first instance--for the capitalist's
personal consumption. In the case of expanding reproduction part three
is further subdivided, only a fraction of it being devoted to the
capitalist's personal consumption, the remainder to increasing his
capital. In order to reproduce his capital actually, the capitalist
must, of course, turn again to the commodity market with the capital he
has divided in this manner, so that he can acquire the material
prerequisites of production such as raw materials, instruments, and so
on. It seems a matter of course to the individual capitalist as well as
to his scientific ideologist, the 'vulgar economist', that he should in
fact find there just those means of production and labour power he needs
for his business.
The position is different as regards the total production of a society.
From the point of view of society as a whole, the exchange of
commodities can only effect a shifting around, whereby the individual
parts of the total product change hands. The material composition of the
product, however, cannot be changed by this process. After this change
of places, as well as before it, there can be reproduction of total
capital, if, and only if, there is in the total product of the preceding
period: first, a sufficient quantity of means of production, secondly,
adequate provisions to maintain the same amount of labour as hitherto,
and, last but not least, the goods necessary to maintain the capitalist
class and its hangers-on in a manner suitable to their station. This
brings us to a new plane: we are now concerned with material points of
view instead of pure relations of value. It is the use-form of the total
social product that matters now. What the individual capitalist
considers nobody else's business becomes a matter of grave concern for
the totality of capitalists. Whereas it does not make the slightest
difference to the individual capitalist whether he produces machinery,
sugar, artificial manure or a progressive newspaper--provided only that
he can find a buyer for his commodity so that he can get back his
capital plus surplus value--it matters infinitely to the 'total
capitalist' that his total product should have a definite use-form. By
that we mean that it must provide three essentials: the means of
production to renew the labour process, simple provisions for the
maintenance of the workers, and provisions of higher quality and luxury
goods for the preservation of the 'total capitalist' himself. His desire
in this respect is not general and vague, but determined precisely and
quantitatively. If we ask what quantities of all three categories are
required by the 'total capitalist', the value-composition of last year's
total product gives us a definite estimate, as long, that is, as we
confine ourselves to simple reproduction, which we have taken for our
starting point. Hitherto we have conceived of the formula _c + v + s_
as a merely quantitative division of the total value, applicable alike
to total capital and to individual capital, and representing the
quantity of labour contained in the annual product of society. Now we
see that the formula is also the basis of the material composition of
the product. Obviously the 'total capitalist', if he is to take up
reproduction to the same extent as before, must find in his new total
product as many means of production as correspond to the size of _c_, as
many simple provisions for the workers as correspond to the sum of wages
_v_, and as many provisions of better quality for himself and his
hangers-on as correspond to _s_. In this way our analysis of the value
of the society's aggregate product is translated into a general recipe
for this product as follows: the total _c_ of society must be
re-embodied in an equal quantity of means of production, the _v_ in
provisions for the workers, and the _s_ in provisions for the
capitalists, in order that simple reproduction may take place.
Here we come up against palpable differences between the individual
capitalist and the total capitalist. The manner in which the former
always reproduces his constant and variable capital as well as his
surplus value is such that all three parts are contained in the same
material form within his homogeneous product, that this material form,
moreover, is completely irrelevant and may have different qualities in
the case of each individual capitalist. The 'total capitalist', for his
part, reproduces every component of the value of his annual product in a
different material form, _c_ as means of production, _v_ as provisions
for the workers, and _s_ as provisions for the capitalists. In the case
of the reproduction of individual capitals, there is no discrepancy
between relations of value and material points of view. Besides, it is
quite clear that individual capital may concentrate on aspects of value,
accepting material conditions as a law from heaven, as self-evident
phenomena of commodity-exchange, whereas the 'total capitalist' has to
reckon with material points of view. If the total _c_ of society were
not reproduced annually in the form of an equal amount of means of
production, every individual capitalist would be doomed to search the
commodity market in vain with his _c_ realised in cash, unable to find
the requisite materials for his individual reproduction. From the point
of view of reproducing the total capital, the formula _c + v + s_ is
inadequate. This again is proof of the fact that the concept of total
capital is something real and does not merely paraphrase the concept of
production. We must, however, make general distinctions in our
exposition of total capital: instead of showing it as a homogeneous
whole, we must demonstrate its three main categories; and we shall not
vitiate our theory if, for the sake of simplicity, we consider for the
present only two departments of total capital: the production of
producer goods, and that of consumer goods for workers and capitalists.
We have to examine each department separately, adhering to the
fundamental conditions of capitalist production in each case. At the
same time, we must also emphasise the mutual connections between these
two departments from the point of view of reproduction. For only if each
is regarded in connection with the other, do they make up the basis of
the social capital as a whole.
We made a start by investigating individual capital. But we must
approach the demonstration of total capital and its total product in a
somewhat different manner. Quantitatively, as a quantity of value, the
_c_ of society consists precisely in the total of individual constant
capitals, and the same applies to the other amounts, _v_ and _s_. But
the outward shape of each has changed--the _c_ of constant capitals
re-emerges from the process of production as an element of value with
infinitely varied facets, comprising a host of variegated objects for
use, but in the total product it appears, as it were, contracted into a
certain quantity of means of production. Similarly with _v_ and _s_,
which in the case of the individual capitalist re-emerge as items in a
most colourful jumble of commodities, being provisions in adequate
quantities for the workers and capitalists. Adam Smith came very close
to recognising this fact when he observed that the categories of fixed
and circulating capital and of revenue in relation to the individual
capitalist do not coincide with these categories in the case of society.
We have come to the following conclusions:
(1) The formula _c + v + s_ serves to express the production of society
viewed as a whole, as well as the production of individual capitalists.
(2) Social production is divided into two departments, engaged in the
production of producer and consumer goods respectively.
(3) Both departments work according to capitalist methods, that is to
say they both aim at the production of surplus value, and thus the
formula _c + v + s_ will apply to each of them.
(4) The two departments are interdependent, and are therefore bound to
display a certain quantitative relationship, namely the one department
must produce all means of production, the other all provisions for the
workers and capitalists of both departments.
Proceeding from this point of view, Marx devised the following diagram
of capitalist reproduction:
I. _4,000c + 1,000v + 1,000s = 6,000_ means of production
II. _2,000c + 500v + 500s = 3,000_ articles of consumption.[86]
The figures in this diagram express quantities of value, amounts of
money which are chosen arbitrarily, but their ratios are exact. Each
department is characterised by the use-form of the commodities produced.
Their mutual circulation takes place as follows: Department I supplies
the means of production for the entire productive process, for itself as
well as for Department II. From this alone it follows that for the
undisturbed continuance of reproduction--for we still presume simple
reproduction on the old scale--the total produce of Department I (I
6,000) must have the same value as the sum of constant capitals in both
departments: (I 4,000_c_ + II 2,000_c_). Similarly, Department II
supplies provisions for the whole of society, for its own workers and
capitalists as well as for the workers and capitalists of Department I.
Hence it follows that for the undisturbed course of consumption and
production and its renewal on the old scale it is necessary that the
total quantity of provisions supplied by Department II should equal in
value all the incomes of the employed workers and capitalists of society
[here II 3,000 = I(_1,000v + 1,000s_) + II(_500v + 500s_)].
Here we have indeed expressed relationships of value which are the
foundation not only of capitalist reproduction but of reproduction in
every society. In every producing society, whatever its social form, in
the primitive small village community of the Bakairi of Brazil, in the
_oikos_ of a Timon of Athens with its slaves, or in the imperial
_corvée_ farm of Charlemagne, the labour power available for society
must be distributed in such a way that means of production as well as
provisions are produced in adequate quantities. The former must suffice
for the immediate production of provisions as well as for the future
renewal of the means of production themselves, and the provisions in
their turn must suffice for the maintenance of the workers occupied in
the production alike of these same provisions and of the means of
production, and moreover for the maintenance of all those who do not
work.
In its broad outline, Marx's scheme corresponds with the universal and
absolute foundation of social reproduction, with only the following
specifications: socially necessary labour appears here as value, the
means of production as constant capital, the labour necessary for the
maintenance of the workers as variable capital and that necessary for
the maintenance of those who do not work as surplus value.
In capitalist society, however, the connections between these two great
departments depend upon exchange of commodities, on the exchange of
equivalents. The workers and capitalists of Department I can only obtain
as many provisions from Department II as they can deliver of their own
commodities, the means of production. The demand of Department II for
means of production, on the other hand, is determined by the size of its
constant capital. It follows therefore that the sum of the variable
capital and of the surplus value in the production of producer goods
[here I(_1,000v + 1,000s_)] must equal the constant capital in the
production of provisions [here II(2,000_c_)].
An important proviso remains to be added to the above scheme. The
constant capital which has been spent by the two departments is in
reality only part of the constant capital used by society. This constant
capital is divided into two parts; the first is fixed capital--premises,
tools, labouring cattle--which functions in a number of periods of
production, in every one of which, however, only part of its value is
absorbed by the product, according to the amount of its wear and tear.
The second is circulating capital such as raw materials, auxiliary
semi-finished products, fuel and lighting--its whole value is completely
absorbed by the new product in every period of production. Yet only that
part of the means of production is relevant for reproduction which is
actually absorbed by the production of value; without becoming less
correct, an exact exposition of social circulation may disregard the
remaining part of the fixed capital which has not been absorbed by the
product, though it should not completely forget it. This is easy to
prove.
Let us assume that the constant capital, 6,000_c_, in the two
departments, which is in fact absorbed by the annual product of these
departments, consists of 1,500_c_ fixed and 4,500_c_ circulating
capital, the 1,500_c_ of fixed capital representing here the annual wear
and tear of the premises, machinery and labouring cattle. This annual
wear and tear equals, say, 10 per cent of the total value of the fixed
capital employed. Then the total social capital would really consist of
_19,500c + 1,500v_, the constant capital in both departments being
1,500_c_ of fixed and 4,500_c_ of circulating capital. Since the term of
life of the aggregate fixed capital, with a 10 per cent wear and tear,
is ten years _ex hypothesi_, the fixed capital needs renewal only after
the lapse of ten years. Meanwhile one-tenth of its value enters into
social production in every year. If all the fixed capital of a society,
with the same rate of wear and tear, were of equal durability, it would,
on our assumption, need complete renewal once within ten years. This,
however, is not the case. Some of the various use-forms which are part
of the fixed capital may last longer and others shorter, wear and tear
and duration of life are quite different in the different kinds and
individual representations of fixed capital. In consequence, fixed
capital need not be renewed--reproduced in its concrete use-form--all at
once, but parts of it are continually renewed at various stages of
social production, while other parts still function in their older form.
Our assumption of a fixed capital of 15,000_c_ with a 10 per cent rate
of wear and tear does not mean that this must be renewed all at once
every ten years, but that an annual average renewal and replacement must
be effected of a part of the total fixed social capital corresponding to
one-tenth of its value; that is to say, Department I which has to
satisfy the needs of society for means of production must reproduce,
year by year not only all its raw and partly finished materials, etc.,
its circulating capital to the value of 4,500, but must also reproduce
the use-forms of its fixed capital--premises, machinery, and the
like--to the extent of 1,500, corresponding with the annual wear and
tear of fixed capital. If Department I continues in this manner to renew
one-tenth of the fixed capital in its use-form every year, the result
will be that every ten years the total fixed capital of society will
have been replaced throughout by new items; thus it follows that the
reproduction of those parts disregarded so far is also completely
accounted for in the above scheme.
In practice, the procedure is that every capitalist sets aside from his
annual production, from the realisation of his commodities, a certain
amount for the redemption of his fixed capital. These individual annual
deductions must amount to a certain quantity of capital, therefore the
capitalist has in fact renewed his fixed capital, that is, he has
replaced it by new and more efficient items. This alternating procedure
of building up annual reserves of money for the renewal of fixed capital
and of the periodical employment of the accumulated amounts for the
actual renewal of fixed capital varies with the individual capitalist,
so that some are accumulating reserves, while others have already
started their renewals. Thus every year part of the fixed capital is
actually renewed. The monetary procedure here only disguises the real
process which characterises the reproduction of fixed capital.
On closer observation we see that this is as it should be. The whole of
the fixed capital takes part in the process of production, for
physically the mass of usable objects, premises, machinery, labouring
cattle, are completely employed. It is their peculiarity as fixed
capital, on the other hand, that only part of the value is absorbed in
the production of value, since in the process of reproduction (again
postulating simple reproduction), all that matters is to replace in
their natural form the values which have been actually used up as means
of subsistence and production during a year's production. Therefore,
fixed capital need only be reproduced to the extent that it has in fact
been used up in the production of commodities. The remaining portion of
value, embodied in the total use-form of fixed capital, is of decisive
importance for production as a labour process, but does not exist for
the annual reproduction of society as a process of value-formation.
Besides, this process which is here expressed by relations of value
applies equally to every society, even to a community which does not
produce commodities. If once upon a time, for instance, say ten years'
labour of 1,000 fellaheen was required for the construction of the
famous Lake Moeris and the related Nile canals--that miraculous lake,
which Herodotus tells us was made by hand--and if for the maintenance of
this, the most magnificent drainage system of the world, the labour of a
further 100 fellaheen was annually required (the figures, of course, are
chosen at random), we might say that after every hundred years the
Moeris dam and the canals were reproduced anew, although in fact the
entire system was not constructed as a whole in every century. This is
manifestly true. When, amid the stormy incidents of political history
and alien conquests, the usual crude neglect of old monuments of culture
set in--as displayed, e.g. by the English in India when the
reproductional needs of ancient civilisations were understood no
longer--then in the course of time the whole Lake Moeris, its water,
dikes and canals, the two pyramids in its midst, the colossus upon it
and other marvellous erections, disappeared without a trace, as though
they had never been built. Only ten lines in Herodotus, a dot on
Ptolemy's map of the world, traces of old cultures, and of villages and
cities bear witness that at one time rich life sprang from this
magnificent irrigation system, where to-day there are only stretches of
arid desert in inner Lybia, and desolate swamps along the coast. There
is only one point where Marx's scheme of simple reproduction may appear
unsatisfactory or incomplete in relation to constant capital, and that
is when we go back to that period of production, when the total fixed
capital was first created. Indeed, society possesses transformed labour
amounting to more than those parts of fixed capital which are absorbed
into the value of the annual product and are in turn replaced by it. In
the figures of our example the total social capital does not consist of
_6,000c + 1,500v_, as in the diagram, but of _19,500c + 1,500v_. Though
1,500 of the fixed capital (which, on our assumption, amounts to 15,000)
are annually reproduced in the form of appropriate means of production,
an equal amount is also consumed by the same production each year,
though the whole of the fixed capital as a use-form, an aggregate of
objects, has been renewed. After ten years, society possesses in the
eleventh, just as in any other year, a fixed capital of 15,000, whereas
it has annually achieved only 1,500_c_; and its constant capital as a
whole is 19,500, whereas it has created only 6,000. Obviously, since it
must have created this surplus of 13,500 fixed capital by its labour, it
possesses more accumulated past labour than our scheme of reproduction
warrants. Even at this stage, the annual labour of society must be based
on some previous annual labour that has been hoarded. This question of
past labour, however, as the foundation of all present labour, brings us
to the very first beginning which is as meaningless with regard to the
economic development of mankind as it is for the natural development of
matter. The scheme of reproduction grasps the social process as
perpetually in motion, as a link in the endless chain of events, it
neither wants to demonstrate its initial origin, nor should it do so.
The social reproductive process is always based on past labour, we may
trace it back as far as we like. Social labour has no beginning, just as
it has no end. Like the historical origin of Herodotus' Lake Moeris, the
beginnings of the reproductive process in the history of civilisation
are lost in the twilight of legend. With the progress of techniques and
with cultural development, the means of production change their form,
crude paleoliths are replaced by sharpened tools, stone implements by
elegant bronze and iron, the artisan's tool by steam-driven machinery.
Yet, though the means of production and the social organisation of the
productive process continually change their form, society already
possesses for its labour process a certain amount of past labour serving
as the basis for annual reproduction.
Under capitalist methods of production past labour of society preserved
in the means of production takes the form of capital, and the question
of the origin of this past labour which forms the foundation of the
reproductive process becomes the question of the genesis of capital.
This is much less legendary, indeed it is writ in letters of blood in
modern history. The very fact, however, that we cannot think of simple
reproduction unless we assume a hoard of past labour, surpassing in
volume the labour annually performed for the maintenance of society,
touches the sore spot of simple reproduction; and it shows that simple
reproduction is a fiction not only for capitalist production but also
for the progress of civilisation in general. If we merely wish to
understand this fiction properly, and to reduce it to a scheme, we must
presume, as its _sine qua non_, results of a past productive process
which cannot possibly be restricted to simple reproduction but
inexorably points towards enlarged reproduction. By way of illustration,
we might compare the aggregate fixed capital of society with a railway.
The durability and consequently the annual wear and tear of its various
parts is very different. Parts such as viaducts and tunnels may last for
centuries, steam engines for decades, but other rolling stock will be
used up in a short time, in some instances in a few months. Yet it is
possible to work out an average rate of wear and tear, say thirty years,
so that the value of the whole is annually depreciated by one thirtieth.
This loss of value is now continually made good by partial reproduction
of the railway (which may count as repairs), so that a coach is renewed
to-day, part of the engine to-morrow, and a section of sleepers the day
after. On our assumption then, the old railway is replaced by a new one
after thirty years, a similar amount of labour being performed each year
by the society so that simple reproduction takes place. But the railway
can only be reproduced in this manner--it cannot be so produced. In
order to make it fit for use and to make good its gradual wear and tear,
the railway must have been completed in the first place. Though the
railway can be repaired in parts, it cannot be made fit for use
piecemeal, an axle to-day and a coach to-morrow. Indeed, the very
essence of fixed capital is always to enter into the productive process
in its entirety, as a material use-value. In order to get this use-form
ready in the first place, society must apply a more concentrated amount
of labour to its manufacture. In terms of our example, the labour of
thirty years that is used for repairs, must be compressed into, say, two
or three years. During this period of manufacture, society must
therefore expend an amount of labour far greater than the average, that
is to say it must have recourse to expanding reproduction; later, when
the railway is finished, it may return to simple reproduction. Though we
need not visualise the aggregate fixed capital as a single coherent
use-object or a conglomeration of objects which must be produced all at
once, the manufacture of all the more important means of production,
such as buildings, transport facilities, and agricultural structures,
requires a more concentrated application of labour, and this is true for
the modern railway or steamship as much as it was for the rough
stone-axe and the handmill. Therefore it is only in theory that simple
reproduction can be conceived as alternating with enlarged reproduction;
the latter is not only a general condition of a progressive civilisation
and an expanding population, but also the _sine qua non_ for the
economic form of fixed capital, or those means of production which in
every society correspond to the fixed capital.
Marx deals with this conflict between the formation of fixed capital and
simple reproduction but indirectly, in connection with fluctuations in
the wear and tear of the fixed capital, more rapid in some years than in
others. Here he emphasises the need for perpetual 'over-production',
i.e. enlarged reproduction, since a strict policy of simple reproduction
would periodically lead to reproductive losses. In short, he regards
enlarged reproduction under the aspect of an insurance fund for the
fixed capital of the society, rather than in the light of the actual
productive process.[87]
In quite a different context Marx appears to endorse the opinion
expressed above. In _Theories on the Surplus Value_, vol ii, part 2,
analysing the conversion of revenue into capital, he speaks of the
peculiar reproduction of the fixed capital, the replacement of which in
itself already provides a fund for accumulation. He draws the following
conclusion:
'The point we have in mind is as follows: even if the aggregate capital
employed in machine manufacture were just large enough to make good the
annual wear and tear of the machines, many more machines could be
annually produced than are required, since the wear and tear is in parts
merely _idealiter_ and must be made good _realiter_, _in natura_, only
after a certain number of years. Capital so employed supplies each year
a mass of machinery which becomes available for, and anticipates new,
capital investments. Let us suppose, for instance, a machine
manufacturer who starts production this year. During this year, he
supplies machines for £12,000. If he were merely to reproduce the
machines he has manufactured, he would have to produce, during the
subsequent eleven years, machines for £1,000 only, and even then, a
year's production would not be consumed within the year. Still less
could it be consumed, if he were to employ the whole of his capital. To
keep this capital working, to keep it reproducing itself every year, a
new and continuous expansion of the branches of manufacture that require
these machines, is indispensable. This applies even more, if the
machine manufacturer himself accumulates. In consequence, even _if the
capital invested in one particular branch of production is simply being
reproduced_,[88] a continuous accumulation in the other branches of
production must go with it.'[89]
We might take the machine manufacturer of Marx's example as illustrating
the production of fixed capital. Then the inference is that if society
maintains simple reproduction in this sphere, employing each year a
similar amount of labour for the production of fixed capital (a
procedure which is, of course, impossible in practical life), then
annual production in all other spheres must expand. But if here, too,
simple reproduction is to be maintained, then, if the fixed capital once
created is to be merely renewed, only a small part of the labour
employed in its creation can be expended. Or, to put it the other way
round: if society is to provide for investment in fixed capital on a
large scale, it must, even assuming simple reproduction to prevail on
the whole, resort periodically to enlarged reproduction.
With the advance of civilisation, there are changes not only in the form
of the means of production but also in the quantity of value they
represent--or better, changes in the social labour stored up in them.
Apart from the labour necessary for its immediate preservation, society
has increasingly more labour time and labour power to spare, and it
makes use of these for the manufacture of means of production on an ever
increasing scale. How does this affect the process of reproduction? How,
in terms of capitalism, does society create out of its annual labour a
_greater_ amount of capital than it formerly possessed? This question
touches upon enlarged reproduction, and it is not yet time to deal with
it.
FOOTNOTES:
[84] For the sake of simplicity, we shall follow general usage and speak
here and in the following of annual production, though this term,
strictly speaking, applies in general to agriculture only. The periods
of industrial production, or of the turnover of capitals, need not
coincide with calendar years.
[85] The distinction between intellectual and material labour need not
involve special categories of the population in a planned society, based
on common ownership of the means of production. It will always find
expression in the existence of a certain number of spiritual leaders who
must be materially maintained. The same individuals may exercise these
various functions at different times.
[86] _Capital_, vol. ii, p. 459.
[87] _Capital_, vol. ii, pp. 544-7. Cf. also p. 202 on the necessity of
enlarged reproduction under the aspect of a reserve fund.
[88] Marx's italics.
[89] _Theorien über den Mehrwert_, vol. ii, part 2, p. 248.
_CHAPTER V_
THE CIRCULATION OF MONEY
In our study of the reproductive process we have not so far considered
the circulation of money. Here we do not refer to money as a measuring
rod, an embodiment of value, because all relations of social labour have
been expressed, assumed and measured in terms of money. What we have to
do now is to test our diagram of simple reproduction under the aspect of
money as a means of exchange.
Quesnay already saw that we shall only understand the social
reproductive process if we assume, side by side with the means of
production and consumer goods, a certain quantity of money.[90]
Two questions now arise: (1) by whom should the money be owned, and (2)
how much of it should there be? The answer to the first question, no
doubt, is that the workers receive their wages in the form of money with
which they buy consumer goods. From the point of view of society, this
means merely that the workers are allocated a certain share of the fund
for consumption: every society, whatever its historical form of
production, makes such allocations to its workers. It is, however, an
essential characteristic of the capitalist form of production that the
workers do not obtain their share directly in the form of goods but by
way of commodity exchange, just as it is an essential feature of the
capitalist mode of production that their labour power is not applied
directly, as a result of a relation of personal domination, but again by
way of commodity exchange: the workers selling their labour power to the
owners of the means of production, and purchasing freely their consumer
goods. Variable capital in its money form is the expression and medium
of both these transactions.
Money, then, comes first into circulation by the payment of wages. The
capitalist class must therefore set a certain quantity of money
circulating in the first place, and this must be equal to the amount
they pay in wages. The capitalists of Department I need 1,000 units of
money, and the capitalists of Department II need 500 to meet their wages
bill. Thus, according to our diagram, two quantities of money are
circulating: I(1,000_v_) and II(500_v_). The workers spend the total of
1,500 on consumer goods, i.e. on the products of Department II. In this
way, labour power is maintained, that is to say the variable capital of
society is reproduced in its natural form, as the foundation of all
other reproductions of capital. At the same time, the capitalists of
Department II dispose of their aggregate product (1,500) in the
following manner: their own workers receive 500 and the workers of
Department I receive 1,000. This exchange gives the capitalists of
Department II possession of 1,500 money units: 500 are their own
variable capital which has returned to them; these may start circulating
again as variable capital but for the time being they have completed
their course. The other 1,000 accrue to them year by year out of the
realisation of one-third of their own products. The capitalists of
Department II now buy means of production from the capitalists of
Department I for these 1,000 money units in order to renew the part of
their own constant capital that has been used up. By means of this
purchase, Department II renews in its natural form half of the constant
capital II_c_ it requires. Department I now has in return 1,000 money
units which are nothing more than the money originally paid to its own
workers. Now, after having changed hands twice, the money has returned
to Department I, to become effective later as variable capital. This
completes the circulation of this quantity of money for the moment, but
the circulation within society has not yet come to an end. The
capitalists of Department I have not yet realised their surplus value to
buy consumer goods for themselves; it is still contained in their
product in a form which is of n
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