Obstacles to Value Realization

C. Obstacles to Value Realization

The next point to note relates to the prospect of “the most extreme dissonances,” alluding in part to “crises” with reference to periods of excess demand for money to hold: “As the exchange value of a commodity has a dual form of existence, as a specific commodity and as money, so the act of exchange consists of two mutually independent acts: exchange of the commodity for money, exchange of the money for a commodity, buying and selling. . . . True, they will always seek to get into balance, but . . . [i]t is possible that consonance between them may now

be fully attained only by passing through the most extreme dissonances “(MECW

28: 85–6). “The separation of exchange into purchase and sale makes it possible for me to buy without selling (stockpiling of commodities) or to sell without buying (accumulation of money). . . . At times in which purchase and sale assert themselves as essentially distinct acts, a general depreciation of all commodities takes place. At those in which money only functions as a means of exchange, a depreciation of money takes place. General fall or rise in prices” (134–5). The potential for “dissonance” is enhanced by the distinction between demand for

1857–1858 II: Value “Realization”

business and for final consumption purposes; and whereas “[t]he merchant in his exchange is guided merely by the difference between purchase and sale of the commodity . . . the consumer must once and for all replace the exchange value of the commodity he buys. Circulation, exchange within the merchant estate, and the final stage of circulation, exchange between the merchants and the consumers, however much they must ultimately condition each other, are determined by quite different laws and motives, and the greatest contradiction can develop between them. This separation alone can be the cause of trade crises” (86; emphasis added). In fact, this outcome was inevitable: “But since production is geared directly to trade and only indirectly to consumption, it must get caught up in this incongruity between trade and exchange for consumption just as much as, for its own part, it must produce it. (The relationships between demand and supply are completely reversed.)” (86–7).

Marx subsequently elaborates on market devices relating to information designed to mitigate the potential for trade crises due to the dissonance between production and consumption decisions: “current price lists, exchange rates, communication between commercialists by letters, telegrams, etc. (the means of communication of course develop simultaneously), by means of which each individual provides himself with information on the activities of all others and seeks to adjust his own activity accordingly. . . . [E]ach seeks to inform himself of the general state of demand and supply; and this knowledge influences their action” (98). There is brief mention of “[t]he possibility of general statistics, etc.”, and of “overcoming” the discordances deriving from independent supply and demand components by means of improved information. Such promise is particularly stressed in interna- tional trade: “In the world market the connection of the individual with all others, but at the same time also the independence of this connection from the individuals, has itself developed to such a point that its formation already contains the conditions for its being transcended.”

We return to the circular-flow perspective – assuming no breakdown – much in evidence in the Section devoted to the “Circulation Process of Capital” as one would expect: “We have now seen how, by means of the valorisation process, capital has (1) maintained its value by means of exchange (i.e. exchange with living labour); (2) increased, produced surplus value. There now appears, as the result of this unity of the production and valorisation process, the product of the process, i.e. capital itself, as it emerges as the product of the process whose precondition it was – as a product which is value” (329). But this is still a half-way house: “what is actually there, is a commodity of a certain (ideal) price, i.e. a commodity which exists only in idea in the form of a certain sum of money, and which can be realised as such only in exchange, i.e. it must first re-enter the process of simple circulation in order to be posited as money. Hence we arrive at the third side of the process in which capital is posited as such.” This “third side,” namely final sale, permits the “realisation of value.” But should the process “miscarry,” the products constituting capital will remain “devalued ” notwithstanding the labor embodied therein and the “surplus value” generated, for “the money of the capitalist has been

C. Obstacles to Value Realization 275 transformed into a worthless product; not only has it not gained any new value, it

has lost its original value” (330). And since the value of capital “consists precisely in the process of valorisation . . . this loss [of value of capital] only means that time passes for it unutilised, time in which it could appropriate surplus labour time, alien labour, by exchange with living labour, if the deadlock had not occurred” (470; also 445, 462).

Marx represents the various “processes” entailed as “exist[ing] independently alongside one another, despite their inner unity, and each . . . as the precondition of the other” (330). To attend to the production stage alone neglected those “barriers” to realization of “exchange value” and “surplus value” which “lie outside the process [of production]”: “In the production process itself – where capital always remained presupposed as value – its valorisation appeared to be entirely dependent upon its relationship as objectified labour to living labour, i.e. upon the relationship of capital to wage labour. But now as product, as commodity, it appears dependent on circulation, which lies outside the production process . . . ” (331).

As the problem is phrased, more is involved than the prospect of “dissonance” alluded to earlier (above, p. 273), namely of a final-demand failure reflecting excess demand for money to hold. Rather Marx touches on a theoretical dilemma as he saw it: whence the source of adequate purchasing power to “realize” the surplus value “created” in the production process? The dilemma is broken down into its elements, the first of which entails apparently the assumption of totally inelastic market demand: “ . . . when capital emerges from the production process and returns into circulation, it appears . . . that as production it has come up against the barrier of the given volume of consumption, or of the consumption capacity . . . [whereby] it is required only in a specific quantity, i.e. in a certain measure” (332). How far we are to generalize this problem is unclear, since Marx refers only to “[c]ertain objects” such as corn characterized by totally inelastic demand.

The second element is more substantive, touching less on an apparent empirical assumption but rather on a matter of principle: “ . . . an equivalent for the commod- ity must be available, and since circulation was originally presupposed as a fixed magnitude, as having a given volume, while capital has produced a new value in the production process, it appears that there can in fact be no equivalent available for it . . . ”; for “[a]s new value and value as such, capital appears to come up against the barrier of the volume of available equivalents, in the first place of money – money not as means of circulation but as money. Surplus value (the surplus over and above the original value) requires a surplus equivalent.” In short, the specifically capi- talist production process seemed to be necessarily thwarted: “This specific form of production presupposes the specific form of exchange which finds its expression in money circulation. If the process is to be renewed, the whole product must be con- verted into money; not as in earlier stages of production, where exchange embraces only superfluous production and superfluous products, but not production

1857–1858 II: Value “Realization” in its totality” (333). 9 Needless to say, there had to be a solution to the appar-

ent dilemma, since the process played itself out in practice – albeit not smoothly: “These are the contradictions which cannot escape a simple, objective, impartial examination. How they are constantly transcended in production based on capital, yet constantly reproduced, and only forcibly transcended . . . is another question.”

The “circulation” problem applies a fortiori to the case of the growing economy entailing either expansion of the labor force and corresponding creation of addi- tional “absolute” surplus value, or productivity increase which generates increased “relative” surplus value, both forms of expansion requiring expanded circulation. And here Marx is rather more forthcoming regarding the solution to his dilemma; which is fortunate insofar as his primary concern is after all with growth.

As for the first form: “Capital’s creation of absolute surplus value – more objecti- fied labour – is conditional upon the expansion, indeed the constant expansion, of the periphery of circulation. The surplus value produced at one point requires the production of surplus value at another point, for which it may be exchanged. . . . A condition of production based on capital is therefore the production of a constantly expanding periphery of circulation, whether the sphere is directly expanded, or whether more points within it become points of production” (334–5). As for the solution: “If circulation initially appeared as a given magnitude, it appears here as

a moving one, expanding through production itself. In the light of this, it already appears itself as a moment of production. Hence, just as capital has the tendency to produce more surplus labour, it has the complementary tendency to produce more points of exchange” (335). Here the international-trade dimension in a develop- mental context – the modern term “globalization” seems appropriate – takes center stage:

With respect to absolute surplus value or surplus labour, this means that capital tends to generate more surplus labour as complement to itself; au fond, that it tends to propagate production based on capital or the mode of production corresponding to it. The tendency to create the world market is inherent directly in the concept of capital itself. Every limit appears as a barrier to be overcome. At first [capital strives] to subject each moment of production itself to exchange, and to transcend the production of immediate use values which do not enter into exchange, i.e. to replace the earlier and from its standpoint naturally evolved modes of production by production based on capital. Trade appears no longer as an activity carried on between independent productions for the exchange of their surplus product, but as the essential, all-embracing prerequisite for and moment of production itself.

There was then a two-fold “tendency of capital . . . to continually enlarge the periph- ery of circulation; [and] to transform it at all points into production carried on by capital.”

9 The “earlier stages . . . ” relate to pre-capitalist societies where exchange does occur but only at the margin of activity as in intercommunity exchange.

C. Obstacles to Value Realization 277 As for the increased flow of output reflecting productivity increase – “the produc-

tion of relative surplus value, i.e. the production of surplus value based upon the increase and development of the productive forces” – that too “requires produc- tion of new consumption, so that the sphere of consumption within circulation is enlarged, as that of production [of absolute surplus value] was enlarged before.” This expansion entailed – apart from “quantitative increase in existing consump- tion” – “the creation of new needs by the propagation of existing ones over a wider area . . . and discovery and creation of new use values. . . . [I]f because of a doubling of productivity, a capital of only 50 needs to be invested where 100 was needed before, and a capital of 50 and the necessary labour corresponding to it are released,

a new, qualitatively different branch of production satisfying and generating a new need, must be created for the released capital and labour. . .” (335–6). In this context is found some of Marx’s most brilliantly evocative writing touching on the societal transformation involved in expanding the sphere of circulation on a global scale:

Hence the exploration of the whole of nature in order to discover new useful properties of things; the universal exchange of the products coming from the most diverse climates and lands; new (artificial) modes of processing natural objects to give them new use values. . . . The all-round exploration of the earth to discover both new useful objects and new uses for old objects, such as their use as raw materials, etc.; hence the development of the natural sciences to their highest point; the discovery, creation and satisfaction of new needs arising from society itself; cultivating all the qualities of social man and producing him in a form as rich as possible in needs because rich in qualities and relations – producing man as the most total and universal social product possible (for in order to enjoy many different kinds of things he must be capable of enjoyment, that is he must be cultivated to a high degree) – all these are also conditions of production based on capital. This creation of new branches of production, i.e. qualitatively new surplus time, is not only the division of labour, but also the separation of a definite kind of production from itself as labour of a new use value; the development of a constantly expanding comprehensive system of different kinds of labour, different kinds of production, with a corresponding system of ever more extended and ever more varied needs (336).

It cannot be emphasized enough that when Marx writes of “the great civilising influence of capital” it is not technical change in a narrow sense that he intends, but transformations of the most profound order extending to consumption patterns:

Thus, just as production based on capital produces universal industry, i.e. surplus labour, value-creating labour, on the one hand, so does it on the other produce a system of universal exploitation of natural and human qualities, a system of universal utility, whose bearer is science itself as much as all the physical and spiritual qualities, and under these conditions nothing appears as something higher-in-itself, as an end in itself, outside this circle of social production and exchange. Thus it is only capital which creates bourgeois society and the universal appropriation of nature and of the social nexus itself by the members of society. Hence the great civilising influence of capital; hence its production of a stage of society compared to which all previous stages seem merely local developments of humanity and idolatry of nature. For the first time,

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nature becomes purely an object for men, nothing more than a matter of utility. It ceases to be acknowledged as a power for itself, and even the theoretical cognition of its autonomous laws appears merely as a stratagem for its subjection to human needs, whether as object of consumption or as means of production (336–7).

In concluding, the “Schumpeterian” notion of capitalistic creative destruction is much in evidence as is the emphasis (once again) on a form of globalization: “It is this same tendency which makes capital drive beyond national boundaries and prejudices and, equally, beyond nature worship, as well as beyond the traditional satisfaction of existing needs and the reproduction of old ways of life confined within long-established and complacently accepted limits. Capital is destructive towards, and constantly revolutionises, all this, tearing down all barriers which impede the development of the productive forces, the extension of the range of needs, the differentiation of production, and the exploitation and exchange of all natural and spiritual powers” (337).

Despite his remarkable descriptive accounts of the “tendency of capital . . . to con- tinually enlarge the periphery of circulation,” Marx insists that appropriate enlarge- ment cannot be taken for granted. In fact, he went so far as to suggest that whether the production process is completed successfully by final sale was a matter of chance: “As commodity in general, capital now shares the fate of commodities in general; it becomes a matter of chance, whether or not it is exchanged for money, whether or not its price is realised” (331). And most significant, the national and international credit system itself is interpreted within this framework – again demonstrating an aspect of the global economy: “The whole credit system, and the over-trading, over- speculation, etc., connected with it, rest upon the necessity to extend the range of, and to overcome the barrier to, circulation and exchange. This appears more colossal, more classical, in the relationship between peoples than in the relationship between individuals. Thus e.g. Englishmen compelled to lend to foreign nations to have them as their customers” (343). 10

The problem is described in terms of pressures to “overproduction” emanat- ing within competitive capitalism. 11 Thus, “if it is the tendency of capital to dis- tribute itself in the correct proportions” – the orthodox view – “it is just as

10 See also MECW 28: 459. The continuity of the various processess, which appears as chance, is “transcended” by credit, envisaged as “arising directly from the nature of the process of

[capitalist] production.” For “borrowing and lending” – such as existed in pre-capitalist orga- nization – “no more constitute credit than working constitutes industrial labour or free wage labour. As an essential, developed relation of production, credit appears historically only in circulation based on capital or wage labour.” 11 Marx paid his respects to Wakefield, who “correctly sniffs out in his commentary on Smith [1835–39: 244–6], [that] free competition has never been analysed at all by political economists, however much they may chatter about it, even though it is the basis of the entire bourgeois production based on capital. It has only been understood negatively, i.e. as the negation of monopolies, corporations, legal regulations, etc., and as the negation of feudal production”

C. Obstacles to Value Realization 279 much its necessary tendency to drive beyond the correct proportion, because it

strives boundlessly for surplus labour, surplus productivity, surplus consump- tion, etc.” (340); and this tendency towards general excess supply is represented as a “compulsion” inherent in the capitalist competitive structure: “In competition, this immanent tendency of capital appears as a compulsion imposed upon it by other capital and driving it beyond the correct proportion with a constant March, march!. . . . Conceptually, competition is nothing but the inner nature of capital, its essential character, manifested and realised as the reciprocal action of many capi- tals upon each other. . . . Capital exists and can only exist as many capitals; hence

its own character appears as their reciprocal action on each other” (340–1). 12 In this process it was inconceivable that production could proceed smoothly: “Capital is just as much the constant positing of, as it is the constant transcendence of pro- portionate production. The existing proportions must constantly be transcended through the creation of surplus values and the increase of productive forces. But to demand that production should be expanded instantaneously, simultaneously, and in the same proportions, is to impose external demands on capital, which in no way correspond to anything arising from capital itself ” (341). The problem was that “the departure from the given proportion in one branch of production drives all

the other branches out of that proportion, and at unequal rates.” 13 It was not only

a matter of general overproduction but disproportionate overproduction. Marx may have sensed that he had left the matter too much in the air, for he

steps back a little: “So far, we have in the valorisation process only the indifference of the individual moments to each other, that they determine each other internally and search for each other externally, but that they may or may not find each other, balance each other, correspond to each other.” But it was not good enough to leave an impression of a “mutually indifferent and apparently independent appearance of the individual moments of the process or, rather, of the totality of processes” (342). For various constraints on production inherent within capitalism, imposed a tighter linkage between the production process narrowly defined and “realization” of value in circulation, and these “necessary limits” counteracted to a degree the tendency

towards overproduction due to “competition” between individual capitals. 14 In fact, while capital had released the “fetters” on production imposed by earlier forms

12 The same notion of competition between capitals – “their indifference to and independence of one another” – is applied in the analysis of working-class consumption, see below, pp. 288–9.

13 The reference in this passage to “proportionate production” provides a foretaste of the formal analysis of structural or sectoral proportions in Marx’s later writings.

14 The “necessary limits” refer broadly to (1) necessary labour as the limit on the exchange value of living labour capacity or on the wages of

the industrial population; (2) surplus value as the limit on surplus labour time; and, with respect to relative surplus labour time, as the limit on the development of the productive forces; (3) what is the same, transformation into money, exchange value in general as the limit on production; or exchange based on value, or value based on exchange, as the limit on production. It is: (4) again identical as the restriction of the production of use values by exchange value; or that real wealth has to assume a specific form distinct from itself, i.e. a form not absolutely identical with itself, if it is to become an

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of organization, it now acted as a constraint relative at least to a post-capitalist universe: “Here it is sufficient to demonstrate that capital contains a particular restriction on production – which contradicts its general tendency to drive beyond every barrier to production . . . ; or, to put it more generally, to have uncovered that capital is not, as the economists believe, the absolute form for the development of the productive forces. . . . ” Thus, whereas pre-capitalist organization acted “as just so many fetters upon the productive forces,” so capital itself “appears as the condition for the development of the productive forces, only so long as they require an external spur, a spur which at the same time appears as their bridle. It is a discipline over them, which at a certain level of their development becomes quite as superfluous and burdensome as [previously] the corporations, etc.”

Overproduction crises are represented as the clash of the two conflicting tenden- cies – the drive to overproduction and the restraints – for the general tendency of capital was to “forget and abstract from” the limits (343). Thus “overproduction, i.e.

a sudden reminder of all these necessary moments of production based on capital; hence general devaluation in consequence of forgetting them. This immediately faces capital with the task of trying again from a higher level of development of the productive forces, etc., resulting in an ever greater collapse as capital. Therefore clear that the higher the level to which capital has developed, the more it appears as

a barrier to production – hence also to consumption – quite apart from the other contradictions which make it appear as a burdensome barrier on production and commerce.” At one point we find a reference to ultimate collapse of the system: “Moreover, the universality for which capital ceaselessly strives, comes up against barriers in capital’s own nature, barriers which at a certain stage of its development will allow it to be recognised as being itself the greatest barrier in the way of this tendency, and will therefore drive towards its transcendence through itself ” (337).