Capital Accumulation

C. Capital Accumulation

Net capital accumulation is the subject matter of Capital 1, Chapter 24: “Conversion of Surplus Value into Capital.” It is prefaced by a misleading paragraph: “Hitherto we have investigated how surplus value emanates from capital; we have now to see how capital arises from surplus value. Employing surplus value as capital, reconverting it into capital, is called accumulation of capital” (MECW 35: 578). In point of fact, “Simple Reproduction” concerned the realization not the production of surplus value, the latter being simply taken for granted.

The account of net accumulation proceeds on the standard illustrative assump- tion that s/v = 100%, and emphasizes the necessity that upon sale of the annual output the renewed process of reproduction on a larger scale can be set in motion, which implies purchase out of sale proceeds of an increased volume of capital goods (both “means of production” or constant capital and “means of subsistence”). In an illustration, the entire initial surplus value (£2000) is devoted to accumulation – “we here leave out of consideration the portion of surplus value consumed by the capitalist” (580) – implying a corresponding expansion of wage goods and constant capital (578). The process is repeated: “It is the old story: Abraham begat Isaac, Isaac begat Jacob, and so on. The original capital of £10,000 brings in a surplus value of £2,000, which is capitalised. The new capital of £2,000 brings in a surplus value of £400, and this, too, is capitalised, converted into a second additional capital, which, in its turn, produces a further surplus value of £80. And so the ball rolls on” (580). Marx emphasizes that “by the side of the newly-formed capital, the original capital continues to reproduce itself, and to produce surplus value, and that this is also true of all accumulated capital, and the additional capital engendered by it” (580–1).

Expansion of means of production – as well as necessaries for labor – plays the key role in the story, Marx taking issue with Smith for allegedly “represen[ting] accu- mulation as nothing more than consumption of surplus products by productive labourers, which amounts to saying, that the capitalizing of surplus value consists in merely turning surplus value into labour power” (585). And there was “no greater error than that which Ricardo and all subsequent economists repeat after A. Smith, viz., that ‘the part of revenue, of which it is said, it has been added to capital, is con- sumed by productive labourers’ [Ricardo 1951–73 1:151n].” Marx had particularly harsh words for J. S. Mill who, “[i]n spite of his Logic . . . never detects even such faulty analysis as this when made by his predecessors, an analysis which, even from the bourgeois standpoint of the science, cries out for rectification. In every case he registers with the dogmatism of a disciple, the confusion of his master’s thoughts, alluding to an early proposition (Mill 1963–91 [1844]:293) whereby replacement of capital out of sales proceeds reduces entirely to replacement of wages (MECW

35: 586). Rather: To accumulate it is necessary to convert a part of the surplus product into capital. But

we cannot . . . convert into capital anything but such articles as can be employed in the

60 Elements of Growth Theory

the sustenance of the labourer (i.e., means of subsistence). Consequently, a part of the annual surplus labour must have been applied to the production of additional means of production and subsistence, over and above the quantity of these things required to replace the capital advanced. In one word, surplus value is convertible into capital solely because the surplus product, whose value it is, already comprises the material elements of new capital (579–80). 8

Moreover, increase in means of production and wage goods to be effective requires corresponding expansion of the work force. This requirement, given the rate of exploitation, is satisfied by ongoing population expansion, the “ordinary” real wage allowing “not only for . . . maintenance, but for . . . increase” of the labor force (580; see Chapter 3, p. 93. In brief: “From a concrete point of view, accumulation resolves itself into the reproduction of capital on a progressively increasing scale. The cir- cle in which simple reproduction moves, alters its form, and to use Sismondi’s expression, changes into a spiral,” that is into exponential growth. 9

As in the discussion of Simple Reproduction (above, p. 56), Marx touches on the source of the “original capital,” apparently assuming it to entail a pre-capitalist state of affairs, or simple commodity production: “The original capital was formed by the advance of £10,000. How did the owner become possessed of it? ‘By his own labour and that of his forefathers,’ answer unanimously the spokesmen of political economy” (581); and he cites Sismondi regarding “[t]he original labour, to which his capital owed its origin” (Sismondi 1819 1: 109). To this he assents: “their supposition appears the only one consonant with the laws of the production of commodities.” But it is the net addition to capital, with which he is now concerned, and that “originated” from surplus value” or “unpaid labour”: “the working class creates by the surplus labour of one year the capital destined to employ additional labour in the following year.” Marx also cites Wakefield: “Labour creates capital before capital employs labour” (1833: II, 110); and concludes that “[t]he ownership of past unpaid labour is thenceforth the sole condition for the appropriation of living unpaid labour on a constantly increasing scale. The more the capitalist has accumulated, the more he is able to accumulate” (582). Beyond this, the “original”

8 Marx in effect assumes a closed economy: “We here take no account of export trade, by means of which a nation can change articles of luxury either into means of production or means of

subsistence, and vice versa. In order to examine the object of our investigation in its integrity, free from all disturbing subsidiary circumstances, we must treat the whole world as one nation, and assume that capitalist production is everywhere established and has possessed itself of every branch of industry” (MECW 35: 580n). 9 Marx refers to Sismondi 1819: I, 119 [1951: I, 112]: “La consommation absolue d´etermine une reproduction ´egale ou sup´erieure. C’est dans ce point que le cercle peut s’´etendre et se changer en spirale. . . .” Yet on substance Marx is critical, charging that Sismondi’s “analysis of accumulation suffers from the great defect, that he contents himself, to too great an extent, with the phrase ‘conversion of revenue into capital,’ without fathoming the material conditions of this operation” (MECW 35: 580n). It is unclear whether Marx intends failure to examine properly the source of surplus value or the determinants of the savings ratio or both.

61 capital in any event becomes increasingly insignificant quantitatively – “a vanishing

D. Determinants of the Rate of Accumulation

quantity (magnitudo evanescens, in the mathematical sense), compared with the directly accumulated capital, i.e., with the surplus value or surplus product that is reconverted into capital. . . . ” (583).