Setting the Stage: Stationary Reproduction as Circular-Flow Process

B. Setting the Stage: Stationary Reproduction as Circular-Flow Process

Capital 1 on “Simple Reproduction” (Chapter 23) explains the process whereby money is “converted into means of production and labour power”; these latter “converted” via the production process into commodities “whose value exceeds that of their component parts, and, therefore, contains the capital originally advanced, plus a surplus value”; the value of those commodities then realized against money in the market; and the process repeated “over and over again” (MECW 35: 564). Marx refers readers to the “detailed analysis” of the process (appearing later in Capital 2), and also to the complexity (appearing in Capital 3) that the surplus value received

1 For a particularly instructive sampling of “extensions” to the Marxian analysis, see Bronfen- brenner 1965, 1966, and 1979 and Bronfenbrenner and Wolfson 1984.

56 Elements of Growth Theory

initially by the capitalist “who extracts unpaid labour directly from the labourers” – the “first appropriation” – must in fact share it with others as interest, merchants’

profit, rent, etc. (564–5). 2 To abstract from the latter complexity, and also to assure that “capital circulates in its normal way” – there being no obstructions to purchase of inputs or sale of outputs – was to allow “[a]n exact analysis of the process” by “disregard[ing] all phenomena that hide the play of its inner mechanism.” Finally, that the global dimensions of the economy remain unchanged reflects the assumption that surplus value is spent by its recipients entirely on consumer goods: “As

a periodic increment of the capital advanced, or periodic fruit of capital in process, surplus value acquires the form of a revenue flowing from capital” – a formulation ascribed to Sismondi 3 – and “[i]f this revenue serve the capitalist only as a fund to provide for his consumption, and be spent periodically as it is gained, then ceteris paribus, simple reproduction will take place” (566).

Marx was prepared to admit that the circular-flow process – “the process of capitalist production in the flow of its constant renewal” – “must have had a beginning of some kind,” and even that the capitalist “once upon a time, became possessed of money, by some accumulation that took place independently of the unpaid labour of others” allowing him to acquire labor-power (569). But this concession was irrelevant considering the circularity dimension actually at play, which reveals that “it is [the] labour of last week, or of last year, that pays for his labour power this week or this year,” a relation understood by Ramsay and

James Mill (567). 4 The intervention of money suggested some kind of advance by capitalists to labour, but this illusion was dispelled by taking an aggregative or class perspective: “The capitalist class is constantly giving to the labouring class order- notes, in the form of money, on a portion of the commodities produced by the latter and appropriated by the former. The labourers give these order-notes back just as constantly to the capitalist class, and in this way get their share of their own product. The transaction is veiled by the commodity form of the product and the money form of the commodity.” That under capitalism labor is paid from “variable capital,” did not alter the fact that in all social systems the laborer produces and reproduces

his own maintenance (567–8). Marx cites Smith and Cazenove approvingly; 5 but 2 Marx’s letter to Engels dated 6 July 1863 elaborates aspects of this complexity diagrammatically

(MECW 41: 483–7). 3 Cf. Sismondi 1819: I. 82 [1951: I, 86]: “ . . . in the social order, wealth has acquired the power

of reproducing itself through the labour of others, without the help of its owners. Wealth, like labour, and by means of labour, bears fruit every year, but this fruit can be destroyed every year without making the rich man any poorer thereby. This fruit is the revenue which arises out of capital.” 4 The reference is to Ramsay: “Wages as well as profits are to be considered . . . as really a portion of the finished product” (1836: 142); and James Mill: “The share of the product which comes to the labourer in the form of wages” (1821: 25–6). 5 “Though the manufacturer” – i.e., laborer – “has his wages advanced to him by his master, he, in reality, costs him no expence, 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” (Smith

B. Setting the Stage: Stationary Reproduction as Circular-Flow Process

he evidently owed a special debt to Hodgskin regarding the undermining of the advances by the circular-flow orientation. 6

We come next to an elaboration of laborers’ “consumption,” perceived as using up both constant capital or “means of production,” and “means of subsistence”: “The labourer’s productive consumption, and his individual con- sumption are . . . distinct. In the former, he acts as the motive power of capital, and belongs to the capitalist. In the latter, he belongs to himself, and performs his necessary vital functions outside the process of production. The result of the one is, that the capitalist lives; of the other, that the labourer lives” (571).

Marx may have benefited here from J. B. Say’s helpful notion of a sort of “double consumption” entailed by the production process (see Hollander 2005: 175–6). At all events, he goes on to apply the term “productive consumption” not only to con- stant capital – the laborer “converting” means of production “into products with a higher value than that of the capital advanced” – but also to variable capital, effec- tively treating the maintenance of the laborer as maintenance of an indispensable “means of production,” though with a qualification, opening up a veritable mare’s- nest: “The capital given in exchange for labour power is converted into necessaries, by the consumption of which the muscles, nerves, bones, and brains of existing labourers are reproduced, and new labourers are begotten. Within the limits of what is strictly necessary, the individual consumption of the working class is, therefore, the reconversion of the means of subsistence given by capital in exchange for labour power, into fresh labour power at the disposal of capital for exploitation” (MECW

35: 572; emphasis added). The qualification is elaborated thus: “The maintenance and reproduction of the working class is, and must ever be, a necessary condition to the reproduction of capital. But the capitalist may safely leave its fulfillment to the labourer’s instincts of self-reservation and of propagation. All the capitalist cares for, is to reduce the labourer’s individual consumption as far as possible to what is strictly necessary. . . . ” Strangely, Marx proceeds to attribute to the “ideological representative” of the capitalist (citing James Mill and Ricardo) the restriction of the designation “productive consumption” to what is “requisite for the perpetuation of the [labouring] class . . . ” – a formulation implying constant population – for “what the labourer consumes for his own pleasure beyond that part is unproduc- tive consumption” (572–3), as though this were not his own position. As for such excess consumption, he made no serious objection to the Mill-Ricardo viewpoint, avoiding the issue by taking for granted that wages are at their minimum. 7

1937 [1776]: 314). “When capital is employed in advancing to the workman his wages, it adds nothing to the funds for the maintenance of labour” (Cazenove 1853: 22). 6 On Hodgkin’s emphasis on synchronized activity, see Hollander 1995: 134–5, 142. Marx’s hostility to “wage-fund” theorizing in the dogmatic form attributed to Bentham, Malthus, James Mill, and McCulloch will be found in MECW 35: 605–7. 7 Marx also cites Malthus’s Definitions [1853 (1827): 30] to support the position that “[i]n reality, the individual consumption of the labourer is unproductive as regards himself . . . it is productive to the capitalist and the State, since it is the production of the power that creates

58 Elements of Growth Theory

A further theme relates to skill. Here Marx explicitly follows Hodgskin’s position (Hodgskin 1825: 12–13) that “[t]he only thing . . . that is stored up and prepared beforehand, is the skill of the labourer. . . . The accumulation and storage of skilled labour, that most important operation, is, as regards the great mass of labourers, accomplished without any capital whatever” (574). One deduces that training comes to the employer free, “[t]he reproduction of the working class” – as Marx puts it – “carry[ing] with it the accumulation of skill, that is handed down from one generation to another.” Nothing is said here of the issues raised by Smith and J. S. Mill regarding the wage structure. And that problems relating to skill obsolescence are ignored is perhaps to be expected in a wholly static context.

The chapter closes with a summary of the essential nature of the “reproduction” process as one that enforces the status of the laborer as seller of “labor-power” and “converts his own product into a means by which another man can purchase him” (577). Accordingly: “Capitalist production . . . under its aspect of a continuous connected process, of a process of reproduction, produces not only commodities, not only surplus value, but it also produces and reproduces the capitalist relation; on the one side the capitalist, on the other the wage labourer.” Here Marx cites his own “Wages, Labour and Capital” of 1849: “Capital presupposes wage labour, and wage labour presupposes capital. One is a necessary condition to the existence of the other; they mutually call each other into existence. Does an operative in

a cotton-factory produce nothing but cotton goods? No, he produces capital. He produces values that give fresh command over his labour, and that, by means of such command, create fresh values” (MECW 9: 214).

A passage from the “Departmental” analysis of Capital 2 to be discussed later in this chapter illustrates Marx’s position that however important the labor-power notion may be in understanding surplus value, actual consumption by labor out of wages is not treated differently from that by any other class; thus capital-goods workers and consumer-goods producers are engaged in the commodity (wage-goods) market, and these same workers and capital-goods producers face each other in the labor market, or market for labor power (MECW 36: 495). A second illustration of the same theme may be drawn from Capital 3: “in practice wages are indeed paid in money, that is, in the pure expression of value, likewise interest and rent. For the cap- italist, the transformation of his product into the pure expression of value is indeed very important; in the distribution itself this transformation is already assumed. Whether these values are reconverted into the same product, the same commodity, out of whose production they arose, whether the labourer buys back a part of the product directly produced by himself or buys the product of some other labour of

a different kind, has nothing to do with the matter itself ” (MECW 37: 840n).

their wealth” (MECW 35: 573), implying that even the necessary element in the workers’ consumption is “unproductive” from the workers’ perspective – a wholly uncontroversial

C. Capital Accumulation