Inter- and Intra-Departmental Imbalance

G. Inter- and Intra-Departmental Imbalance

Crises are partly explained in terms of failure to satisfy the inter- and intra- departmental balances outlined in Chapter 2. Assuming Single Reproduction, Marx considers the implications of a change in actual fixed-capital replacements by department II given its aggregate fixed capital, including equipment and structures in course of depreciation but continuing to function in the production process until worn out (MECW 36:460). Now a consequence of the purchase by department II from department I of increased amounts of fixed capital is the production by the latter of smaller amounts of circulating capital (including raw materials etc.), a result threatening the supposed constant flow of output from department II; in addition, the increased purchases by II of fixed-capital goods from I is accomplished by an increased money flow unaccompanied by reciprocal purchases of consumer goods on the part of I (466–7). The basic requirements for Simple Reproduction are not fulfilled. In the reverse case “in which the reproduction of demises of fixed capital II in a certain year is less and on the contrary the depreciation part greater . . . [t]here would be a crisis − a crisis of overproduction [of capital goods] − in spite of reproduction on an unchanging scale.” Of this “overproduction” Marx goes on to say that “I must curtail its production, which implies a crisis for its labourers and capitalists, or produce an excess which again implies crisis,” adding that “[s]uch excess is not an evil in itself, but an advantage; however, it is an evil under capitalist production” (468).

One is struck by Marx’s pride in his discovery of the potential for disruptions in the capitalist production process even in the course of “preserving” total fixed capital: “This illustration of fixed capital, on the basis of an unchanged scale or reproduction, is striking. A disproportion in the production of fixed and circulating capital is one of the favourite arguments of the economists in explaining crises. That such a disproportion can and must arise even when the fixed capital is merely preserved, that it can and must do so on the assumption of ideal normal production on the basis of simple reproduction of the already functioning social capital is something new to them” (468–9). And in our day Joan Robinson paid tribute to Marx’s “simple and penetrating argument” demonstrating the possibility of aggregative disequilibrium in a “simple reproduction” system:

[Marx] shows how even a system of simple reproduction (with zero net investment) is not free from the danger of disequilibrium. The value of c partly consists of amortization funds attached to long-lived equipment, and these are generally allowed to accumulate over a period of years and are then expended in a single burst when the equipment requires to be renewed. If the age-composition of the stock of equipment is such that renewals are required at a steady rate, equilibrium is not disturbed. If, however, the ages of the machine are not spread evenly, outlay on renewals in some years will exceed, and in some years fall short of the amortization funds, and equilibrium will be ruptured.

When renewals are in excess, v I + s I exceeds c 2 ; the increase in v I in turn increases v 2 + s 2 and boom conditions develop. When amortization funds exceed renewals there is a slump (Robinson 1967 [1942]: 45–6).

The Cyclical Dimension

Robinson focusses on Marx’s suggestion according to which “the fact that the trade cycle has a period of ten years may indicate that the average length of life of plant is ten years” (46). This “passing hint” was, she observes, unconvincing since “the differences in the length of life of various types of plant must dampen down the cycle of renewals, while variations in net investment swamp it altogether.” And the high importance of net investment in Marx’s general vision – the cycle occurring about a rising trend – reinforces Robinson’s criticism of the regularity feature of

Marxian cycles. 29 Nonetheless, Robinson opines that “Marx was on the track of the idea that variations in investment are the key to the trade cycle” – a view attributed to Robertson 1915: 36–45, and suggesting affinities with Keynes. 30

The potential for crisis emerges also in the chapter on Extended Reproduction with reference to the requirement for balanced purchase and sale at numerous points, the achievement of which balance would be purely accidental “owing to the spontaneous nature” of production in a monetary system (494). Of particular interest is an insistence – it confirms the picture of economic organization given in

Chapter 2.B – that “the exchange of I v for a corresponding value of II c ” must not be viewed as a direct exchange between “aggregate capitalists” of the two departments. Rather capital-goods workers and consumer-goods producers are engaged in the commodity market, and those same workers and capital-goods producers face each other in the labor market (the market for labor power):

II c sells its commodities to working class I. The latter confronts it one-sidedly, as a buyer of commodities, and it confronts that class one-sidedly as a seller of commodities. With the money proceeds so obtained II c confronts aggregate capitalist I one-sidedly as a seller of commodities up to the amount of I v . It is only by means of this sale of commodities that I finally reproduces its variable capital in the form of money capital. If capital I faces that of II one-sidedly as a seller of commodities to the amount of I v , it faces working class I as a buyer of commodities purchasing their labour power. And if working class I faces capitalist II one-sidedly as a buyer of commodities (namely, as a buyer of means

29 The generation of boom conditions by (net) investment has been touched on above (see pp. 146–7) regarding MECW 36: 314–15); and the technical basis for that case, in substance

involving an excess of investment over saving – as Joan Robinson suggested in 1942 – may be found in the analysis of Extended Reproduction (Chapter 2, note 21).

There are international implications flowing from Marx’s Volume 2 analysis, namely that boom conditions reflecting heavy home investment generate an excess of imports over exports, while a deficiency of home investment may be balanced by an export surplus (MECW 36: 315, 465–6). 30 Subsequently, Robinson may have had second thoughts: “I have argued elsewhere [1942: Chapter VI] that the theory adumbrated in Volume II of Capital has close affinities with Keynes. But it is possible that I have overemphasized the resemblance. The last two volumes of Capital, which Marx did not complete, are excessively obscure and have been subjected to many interpretations. The waters are dark and it may be that whoever peers into them sees his own face” (Robinson 1980 [1948]: 140). Any such revision is not apparent in the Preface to the second edition of her Essay (1967 [1942]: vi–vii, xvi).

159 of subsistence), it faces capitalist I one-sidedly as a seller of commodities, namely, as a

H. A Note on the “Echo Effect”

seller of labour power (495). Here too Marx emphasizes the “occasions for running abnormally” created by the

complexities entailed: “The constant supply of labour power on the part of working class I, the reconversion of a portion of commodity capital I into the money form of variable capital, the replacement of a portion of commodity capital II by natural

elements of constant capital II c − all these necessary premises demand one another, but they are brought about by a very complicated process, including . . . processes of circulation which occur independently of one another but intermingle. This process is so complicated that it offers ever so many occasions for running abnormally.”