Total Production

III) Total Production

Industrial profit 1 3 Wages Profit Interest ⁄ 2 ⁄ 3 233 466

Rent

Constant capital Variable capital Surplus value Product

Table 11.1. Tableau ´economique of the Reproduction Process as a Whole Source: MECW 34: 244.

1861–1863 II: Sectoral Analysis, Accumulation, and Stability

I as that part of the product which replaces the variable capital (the wages fund) and the revenues of the classes which share the surplus value between them (MECW 41: 486–7).

Whereas intra-departmental product flows are fully spelled out with respect to consumer goods this is not the case for capital goods, since “category II retains

533 1 / 3 of its gross product, and, with this, it replaces its own constant capital, which has been used up.” This feature constitutes a major preoccupation of the Economic Manuscripts. The problem relates specifically to “simple” reproduction – as it came to be called – rather than “extended” reproduction or net accumulation: “The difficulty is the reproduction of the existing constant capital, not the formation of new constant capital in excess of what has to be reproduced. The new constant capital obviously originates in profit, and has existed for a moment in the form of revenue which is later transformed into capital” (MECW 30: 411–12). Again: “Here we leave entirely out of account the part of the profit which is transformed into new capital. . . . It has nothing to do with our problem, for here new variable capital as well as new constant capital are created and replaced by new labour (a part of the surplus labour)” (444).

The specific problem Marx set himself was to explain how profit and wages paid out of the current “working day” sufficed to purchase the annual product which had also to replace used-up constant capital: “Who is it that labours in order to replace the equivalent of the constant capital already expended in production? The part of the labour which the labourer performs for himself replaces his wages, or, considered in relation to the whole of production, creates his wages. On the other hand, his surplus labour which forms the profit is in part a consumption fund for the capitalist, and in part is transformed into additional capital” – this latter omitted in the present context. “But the capitalist does not replace the capital already used up in his own production out of this surplus labour or profit. But the necessary labour which forms the wages and the surplus labour which forms the profit make up the whole working day, and no other labour is performed in addition to these. . . . What then is the source, the labour, that replaces the constant

capital?” (412–13). 5 In fact, apparently it was “impossible for the value of the [net] revenue to cover the value of the total product” (427). Now there is no problem at all with respect to replacement of capital goods in the consumer-goods sector, since the entire value of consumer goods is accounted for by “new labour,” i.e. labour employed annually, including capital goods acquired by sectoral exchange against consumer goods:

The constant capital that is consumed during a year in those spheres of production which produce the means of subsistence [consumer goods], is simultaneously being produced in other spheres of production [capital goods sector], so that during the course

5 The “labour of superintendence is included in wages. In this aspect [the capitalist] is the wage

B. Sectoral Analysis and the Constant Capital “Riddle” 331 of the year or by the end of the year it is renewed in natura. Both of them, the means of

subsistence as well as this part of the constant capital, are the products of new labour employed during the year. In the spheres producing the means of subsistence . . . that portion of the value of the product which replaces the constant capital in these spheres, forms the revenue of the producers of this constant capital (MECW 32: 105; also 109).

Again: “We have now disposed of the product of the entire category A [or I] and a part of category B’s [or I’s] product. A is completely consumed: 1 / 3 by its own producers, 2 / 3 by the producers of B [or II], who cannot consume their own revenue in their own product” (MECW 31: 143). The problem thus reduces to the “residuum” or “third part of the total product whose constituent parts, when exchanged, can represent neither the exchange of revenue against revenue nor of capital against revenue and vice versa. This is the part of product B [or II] which represents B’s constant capital. This part is not included in B’s revenue and therefore cannot be replaced by or exchanged against product A, and therefore also cannot enter as a constituent part into A’s [or I’s] constant capital.” This part “like all other parts of the total product, must be replaced in the proportion in which it forms a component part of the total product, and indeed it must be replaced in natura by new products of the same sort. On the other hand, it is not replaced by any new labour” (143–4; also 30: 428–9, 438–9, 446; 31: 146–7; 32: 105–6).

Adam Smith’s reduction of national income entirely to wages and profits is thus partially vindicated – it holds good as far as concerns consumer goods since the replacement of A’s capital goods reflects wages and profits generated in B: “Adam Smith would have been entirely correct if he had said that this part of the annual product resolves itself into mere income, which is paid by wages, profit (interest), rent. He would nevertheless have had to add here too that this total income replaces the total constant capital of class I [or A]. But Smith is wrong in asserting this of the totality of the annual product, and in having the constant capital of class II [or B] replaced by its income and that of class I” (MECW 33: 213). This is precisely Marx’s position in Capital 2 (see Chapter 2, Appendix).

We turn to the proposed solution to the dilemma that if labor is not engaged in producing the replacement of B’s used-up capital goods, how is B’s constant capital replaced? The answer is twofold: “Partly by his own reproduction (vegetative or animal), as in all agriculture and stock-raising; partly by exchange in natura of parts of one constant capital for parts of another constant capital, because the product of one sphere enters as raw material or means of production into the other sphere, and vice versa; that is, because the products of the various spheres of production, the various sorts of constant capital, enter reciprocally in natura

into each other’s sphere as conditions of production” (MECW 31: 147). 6 Similarly,

6 The first component, Marx emphasized, was not quantitatively insignificant: “Vegetative mate- rials and animals reproduce themselves. Vegetation and generation. By seed we mean actual

1861–1863 II: Sectoral Analysis, Accumulation, and Stability replacement of “the part of the value which represents the depreciation of the

fixed capital and mati`ere instrumentale and mati`ere brute s’il y en a,” entails in part replacement “in natura in its own sphere of production” – “as corn enters as seed, breeding cattle, etc.”; and in part replacement “through exchange with products between different spheres of this same class,” in which case “the product of sphere A

e.g. enters into the product of sphere B as condition of production, and the product of sphere B enters into the product of sphere A, as iron into machine production or machines into iron production” amounting in effect, to “exchange of constant capital for constant capital” (MECW 33: 217–18; also 30: 431–2, 439–40, 447–51). Marx emphasizes here that “since . . . the products merely change their place in the production process reciprocally, the money constantly flows back to the person who expends it. E.g. when the machine manufacturer buys iron in order to replace his machine-building machine, there enters into this: 1) the depreciation of the machine-building machine itself; he advances this himself; 2) iron, etc. He buys this from the iron manufacturer; the iron manufacturer buys machines from him in order to replace the depreciation of his own machinery and thus the money flows back to the machine-builder” (218).

Marx’s solution itself is not plain sailing. How can replacements of constant capital in natura account for a value component (amounting in the basic illus- tration of Table 11.1 to 533 1 / 3 )? Marx was troubled by the implications of the notion that the replacement of capital goods in the capital-goods sector “resolves neither in profit nor in wages. It contains no newly added labour. It is not exchanged against revenue. It is neither directly not indirectly paid for by con- sumers” (MECW 31: 149). After all, “since these products are new (machinery, iron, coal, timber, etc., which reciprocally replace each other) . . . [and] the wheat which serves as seed is just as much a product of new labour as the wheat which passes into consumption, etc. – how can it be said that no newly added labour is contained in these products? And moreover isn’t their form striking evidence to the contrary? Even if not in the case of wheat or cattle, surely in the case of a machine, its form bears witness to the labour which has transformed it from iron, etc., into a machine, and so forth.” His response is laconic: “This problem has been resolved earlier. It is not necessary to go into it again.” We must refer then to that “resolution.”

The essential point is that the capital goods currently produced for replacement purposes in the capital-goods sector albeit the product of labor, are not – so runs the assertion – the product of current labor but of “pre-existing” labor:

part of the annual product – or of the constant part of the annual product – itself serves directly as material for regeneration, it reproduces itself ” (MECW 31: 144–5; also 30: 431–2).

The principle applied to mining: “Apart from agriculture . . . in mining there is the partial replacement of constant capital in natura out of the product, so that the part which enters into circulation does not have to replace this part of the constant capital. For example, in coal production some of the coal is used to work the steam-engine which pumps out water or raises coal” (MECW 30: 447).

B. Sectoral Analysis and the Constant Capital “Riddle” 333 The whole quantity of coal, iron, timber and machinery which are reciprocally

replaced . . . by the exchange of constant capital for constant capital, of constant capital in one natural form for constant capital in another natural form, has absolutely nothing to do either with the exchange of revenue for constant capital or with the exchange of revenue for revenue. It plays exactly the same role as seed in agriculture or the capital stock of cattle in cattle-rearing. It is a part of the yearly product of labour, but it is not

a part of the product of the year’s labour (on the contrary it is the product of the year’s labour + the pre-existing labour), which (conditions of production remaining the same) replaces itself annually as means of production, as constant capital, without entering into any circulation other than that between dealers and dealers and without affecting the value of the part of the product which enters into the circulation between dealers and consumers (87; emphasis added).

Assuming then an annual output of 30,000 hundredweight of coal two-thirds of which are consumed and one-third used as means of production: “It comes to the same thing . . . as if the 20,000 hundredweight represented only labour newly added (during the year, for example) and no pre-existing labour.” For while the final consumer “pays the whole value of each hundredweight, pre-existing labour + newly added labour . . . yet he pays only for the newly added labour, and that is because the quantity he buys is only 20,000 hundredweight, only that quantity of the total product which is equal to the value of all the newly added labour. Just as little does he pay for the farmer’s seed in paying for the wheat which [the farmer] eats” (87–8). We also have a clarification with respect to “the value of the seed sown [which] determined the portion of the value of the harvest (and thus the quantity of corn) which must be returned to the land, to production, as constant capital,” that “[t]his portion would not be reproduced without the labour newly added during the course of the year; but it is in fact produced by the labour of the year before, or past labour and – in so far as the productivity of labour remains unchanged – the value which it adds to the annual product is not the result of this

year’s labour, but of that of the previous year” (MECW 32: 105–6). 7 The conflation of the “natural” form of constant capital and its value, identified with past labor, requires that we take too much on trust (see also below p. 351.)

Apart from replacement of used-up capital goods there is “[a] large part of the constant capital – the fixed capital – [which] enters into the annual process of labour without entering into the annual valorisation process. It is not consumed and, therefore, does not need to be reproduced” (MECW 32: 103). And “[t]he greater this part of capital is in a particular country in one year, the greater, relatively, will

7 For a discussion of the effects on value of technical change in the capital-goods’ sector, see MECW 31: 88–94, 106–7. The effects of productivity change are then summarized: “If it grows

more productive, it replaces the product, but not its value, reducing this value post festum. If it grows less productive, it raises its value. In the first case the aliquot part drawn by past labour from the total product falls; in the second case it rises. In the first case the living labour becomes more productive, in the second, less productive” (MECW 31: 114).

1861–1863 II: Sectoral Analysis, Accumulation, and Stability

be its purely formal reproduction (preservation) in the following year, providing that the production process is renewed, continued and kept flowing, even if only on the same scale” (104). We have here the background to an objection raised against Ricardo’s proposition that “[t]he labour of a million of men in manufactures, will always produce the same value, but will not always produce the same riches” (Ricardo 1951–73 1: 273). The objection is that Ricardo’s formulation neglected the circumstance that the greater the stock of constant capital – and ceteris paribus this implies greater output or “riches” – the greater will be the used-up component which does contribute to value: “This value . . . is the result not only of the current year’s labour, but equally the result of the labour of the previous year, of past labour, although without the immediate annual labour it would not reappear, any more than would the product of which it forms a part. If this portion [of constant capital] grows, not only does the annual mass of products grow, but also their value, even” – pace Ricardo – “if the annual labour remains the same” (MECW 32: 106; also 167). And “[t]his growth,” Marx continues, “is one form of the accumulation of capital, which it is essential to understand.” “What then,”

he asks, “is the position with regard to the increase of capital, its accumulation as distinct from reproduction, the transformation of revenue into capital?” (109). To this extension of the analysis we now turn.