The attempt by Marx to find room for the production of gold within Department I (means of production) moreover leads to dubious results.

The first act of circulation between this new sub-Department (called by Marx I_g_) and Department II (consumer goods) consists as usual in the workers' purchase of consumer goods from Department II with the money obtained as wages from the capitalists. This money is not yet a product of the new period of production. It has been reserved by the capitalists of Department I_g_ out of the money contained in their product of an earlier period. This, indeed, is the normal procedure. But now Marx allows the capitalists of Department II to buy gold from I_g_ with the money they have reserved, gold as a commodity material to the value of 2. This is a leap from the production of money into the industrial production of gold which is no more to do with the problem of the production of money than with the production of boot-polish. Yet out of the 5 I_g v_ that have been reserved, 3 still remain, and as the capitalist, unable to use them as constant capital, does not know what to do with them, Marx arranges for him to add them on to his own reserve of money. Marx further finds the following way out to avoid a deficit in the constant capital of II which must be exchanged completely against the means of production (I_v_ + I_s_):

'Therefore, this money must be entirely transferred from II_c_ to II_s_, no matter whether it exists in necessities of life or articles of luxury, and vice versa, a corresponding value of commodities must be transferred from II_s_ to II_c_. Result: A portion of the surplus-value is acc.u.mulated as a h.o.a.rd of money.'[93]

A strange result, in all conscience! We have achieved an increase in money, a surplus of the money substance, by simply confining ourselves to the annual wear and tear of the money fund. This surplus value comes into existence, for some unknown reason, at the expense of the capitalists in the consumer goods department. They practise abstinence, not because they may want to expand their production of surplus value, let us say, but in order to secure a sufficient quant.i.ty of consumer goods for the workers engaged in the production of gold.

The capitalists of Department II, however, get poor reward for this Christian virtue. In spite of their abstinence, they are not only unable to expand their reproduction, but they are no longer even in the position to resume their production on its former scale. Even if the corresponding 'commodity value' is transferred from II_g_ to II_c_, it is not only the value but its actual and concrete form which matters. As the new part of the product of I now consists of money which cannot be used as a means of production, Department II, in spite of its abstinence, cannot renew its constant material capital on the old scale.

As our diagram presupposes simple reproduction, its condition are thus violated in two directions: surplus value is being h.o.a.rded, and the constant capital shows a deficit. Marx's own results, then, prove that the production of gold cannot possibly find a place in either of the two departments of his diagram; the whole diagram is upset as soon as the first act of exchange between Departments I and II has been completed.

As Engels remarks in his footnote, 'the a.n.a.lysis of the exchange of newly produced gold within the constant capital of Department I is not contained in the MS.'[94] Besides, the inconsistency would then only have been greater. The point of view we advocate is confirmed by Marx himself when he gives an exhaustive answer to the question, as striking as it is brief: 'Money in itself is not an element of actual reproduction.'[95]

There is another important reason why we should put the production of money in a third and separate department of social production as a whole: Marx's diagram of simple reproduction is valid as the starting-point and foundation of the reproductive process not only for capitalism but also, _mutatis mutandis_, for every regulated and planned economic order, for instance a socialist one. However, the production of money, just like the commodity-form of the products, becomes obsolete when private ownership of the means of production is abolished. It const.i.tutes the 'illegitimate' liabilities, the _faux frais_ of the anarchic economy under capitalism, a peculiar burden for a society based upon private enterprise, which implies the annual expenditure of a considerable amount of labour on the manufacture of products which are neither means of production nor yet consumer goods. This peculiar expenditure of labour by a society producing under capitalism will vanish in a socially planned economy. It is most adequately demonstrated by means of a separate department within the process of reproducing social capital. It is quite immaterial in this connection whether we picture a country which produces its own gold or a country which imports gold from abroad. The same expenditure of social labour which in the first case is necessary for the direct production of gold, is required in the second case to effect the exchange transactions.

These observations show that the problem of the reproduction of total capital is not so crude as it often appears to those who approach it merely from the point of view of crises. The central problem might be formulated as follows: how is it possible that, in an unplanned economy, the aggregate production of innumerable individual capitalists can satisfy all the needs of society? One answer that suggests itself points to the continual fluctuations in the level of production in accordance with the fluctuating demand, i.e. the periodical changes in the market.

This point of view, which regards the aggregate product of society as an undifferentiated ma.s.s of commodities, and treats social demand in an equally absurd way, overlooks the most important element, the _differentia specifica_ of the capitalist mode of production. We have seen that the problem of capitalist reproduction contains quite a number of precisely defined relations referring to specific capitalist categories and also, _mutatis mutandis_, to the general categories of human labour. The real problem consists in their inherent tendencies towards both conflict and harmony. Marx's diagram is the scientific formulation of the problem.

Inquiry must now be made into the implications of this diagram a.n.a.lytic of the process of production. Has it any real bearing on the problems of actual life? According to the diagram, circulation absorbs the entire social product; all consumers' needs are satisfied, and reproduction takes place without friction. The circulation of money succeeds the circulation of commodities, completing the cycle of social capital. But what is the position in real life? The relations outlined in the diagram lay down a precise first principle for the division of social labour in a planned production--always providing a system of simple reproduction, i.e. no changes in the volume of production. But no such planned organisation of the total process exists in a capitalist economy, and things do not run smoothly, along a mathematical formula, as suggested by the diagram. On the contrary, the course of reproduction shows continual deviations from the proportions of the diagram which become manifest (_a_) in the fluctuations of prices from day to day; (_b_) in the continual fluctuations of profits; (_c_) in the ceaseless flow of capital from one branch of production to another, and finally in the periodical and cyclical swings of reproduction between over-production and crisis.

And yet, apart from all these deviations, the diagram presents a socially necessary average level in which all these movements must centre, to which they are always striving to return, once they have left it. That is why the fluctuating movements of the individual capitalists do not degenerate into chaos but are reduced to a certain order which ensures the prolonged existence of society in spite of its lack of a plan.

In comparison, the similarities and the profound discrepancies between Marx's diagram of reproduction and Quesnay's _Tableau economique_ strike us at once. These two diagrams, the beginning and end of the period of cla.s.sical economics, are the only attempts to describe an apparent chaos in precise terms, a chaos created by the interrelated movements of capitalist production and consumption, and by the disparity of innumerable private producers and consumers. Both writers reduce this chaotic jumble of individual capitals to a few broadly conceived rules which serve, as it were, as moorings for the development of capitalist society, in spite of its chaos. They both achieve a synthesis between the two aspects which are the basis of the whole movement of social capital: that circulation is at one and the same time a capitalist process of producing and appropriating surplus value, and also a social process of producing and consuming material goods necessary to civilised human existence. Both show the circulation of commodities to act as a mediator for the social process as a whole, and both conceive of the circulation of money as a subsidiary phenomenon, an external and superficial expression of the various stages within the circulation of commodities.

It is socially necessary labour which creates value. This inspired fundamental law of Marx's theory of value which provided the solution of the money problem, amongst others, further led him first to distinguish and then to integrate those two aspects in the total reproductive process: the aspect of value and that of actual material connections.

Secondly, Marx's diagram is based upon the precise distinction between constant and variable capital which alone reveals the internal mechanisms of the production of surplus value and brings it, as a value-relationship, into precise relation with the two material categories of production: that of producer and consumer goods.

After Quesnay, some cla.s.sical economists, Adam Smith and Ricardo in particular, came fairly close to this point of view. Ricardo's contribution, his precise elaboration of the theory of value, has even been frequently confused with that of Marx. On the basis of his own theory of value, Ricardo saw that Smith's method of resolving the price of all commodities into _v + s_--a theory which wrought so much havoc in the a.n.a.lysis of reproduction--is wrong; but he was not much interested in Smith's mistake, nor indeed very enthusiastic about the problem of reproduction as a whole. His a.n.a.lysis, in fact, represents a certain decline after that of Adam Smith, just as Smith had partly retrogressed as against the Physiocrats. If Ricardo expounded the fundamental value categories of bourgeois economy--wages, surplus value and capital--much more precisely and consistently than his predecessors, he also treated them more rigidly. Adam Smith had shown infinitely more understanding for the living connections, the broad movements of the whole. In consequence he did not mind giving two, or, as in the case of the problem of value, even three or four different answers to the same question. Though he contradicts himself quite cheerfully in the various parts of his a.n.a.lysis, these very contradictions are ever stimulating him to renewed effort, they make him approach the problem as a whole from an ever different point of view, and so to grasp its dynamics.

Ultimately, it was the limitation of their bourgeois mentalities which doomed both Smith and Ricardo to failure. A proper understanding of the fundamental categories of capitalist production, of value and surplus value as living dynamics of the social process demands the understanding of this process in its historical development and of the categories themselves as historically conditioned forms of the general relations of labour. This means that only a socialist can really solve the problem of the reproduction of capital. Between the _Tableau economique_ and the diagram of reproduction in the second volume of _Capital_ there lies the prosperity and decline of bourgeois economics, both in time and in substance.

FOOTNOTES:

[90] In his seventh note to the _Tableau economique_, following up his arguments against the mercantilist theory of money as identical with wealth, Quesnay says: 'The bulk of money in a nation cannot increase unless this reproduction itself increases; otherwise, an increase in the bulk of money would inevitably be prejudicial to the annual production of wealth.... Therefore we must not judge the opulence of states on the basis of a greater or smaller quant.i.ty of money: thus a stock of money, equal to the income of the landowners, is deemed much more than enough for an agricultural nation where the circulation proceeds in a regular manner, and where commerce takes place in confidence and full liberty'

(_a.n.a.lyse du Tableau economique_, ed. Oncken, pp. 324-5).

[91] Marx (_Capital_, vol. ii, p. 482) takes the money spent directly by the capitalists of Department II as the starting point of this act of exchange. As Engels rightly says in his footnote, this does not affect the final result of circulation, but the a.s.sumption is not the correct condition of circulation within society. Marx himself has given a better exposition in _Capital_, vol. ii, pp. 461-2.

[92] _Capital_, vol. ii, p. 548.

[93] _Capital_, vol. ii, p. 550.

[94] Ibid., p. 551.

[95] Ibid., p. 572.

_CHAPTER VI_

ENLARGED REPRODUCTION

The shortcomings of the diagram of simple reproduction are obvious: it explains the laws of a form of reproduction which is possible only as an occasional exception in a capitalist economy. It is not simple but enlarged reproduction which is the rule in every capitalist economic system, even more so than in any other.[96]

Nevertheless, this diagram is of real scientific importance in two respects. In practice, even under conditions of enlarged reproduction, the greater part of the social product can be looked on as simple reproduction, which forms the broad basis upon which production in every case expands beyond its former limits. In theory, the a.n.a.lysis of simple reproduction also provides the necessary starting point for all scientific exposition of enlarged reproduction. The diagram of simple reproduction of the aggregate social capital therefore inevitably introduces the further problem of the enlarged reproduction of the total capital.

We already know the historical peculiarity of enlarged reproduction on a capitalist basis. It must represent itself as acc.u.mulation of capital, which is both its specific form and its specific condition. That is to say, social production as a whole--which on a capitalist basis is the production of surplus value--can in every case be expanded only in so far as the social capital that has been previously active is now augmented by surplus value of its own creation. This use of part of the surplus value (and in particular the use of an increasing part of it) for the purpose of production instead of personal consumption by the capitalist cla.s.s, or else the increase of reserves, is the basis of enlarged reproduction under capitalist conditions of production.

The characteristic feature of enlarged reproduction of the aggregate social capital--just as in our previous a.s.sumption of simple reproduction--is the reproduction of individual capitals, since production as a whole, whether regarded as simple or as enlarged production, can in fact only occur in the form of innumerable independent movements of reproduction performed by private individual capitals.

The first comprehensive a.n.a.lysis of the acc.u.mulation of individual capitals is given in volume i of Marx's _Capital_, section 7, chapters 22, 23. Here Marx treats of (_a_) the division of the surplus value into capital and revenue; (_b_) the circ.u.mstances which determine the acc.u.mulation of capital apart from this division, such as the degree of exploitation of labour power and labour productivity; (_c_) the growth of fixed capital relative to the circulating capital as a factor of acc.u.mulation; and (_d_) the increasing development of an industrial reserve army which is at the same time both a consequence and a prerequisite of the process of acc.u.mulation. In the course of this discussion, Marx deals with two inspired notions of bourgeois economists with regard to acc.u.mulation: the 'theory of abstinence' as held by the more vulgar economists, who proclaim that the division of surplus value into capital, and thus acc.u.mulation itself, is an ethical and heroic act of the capitalists; and the fallacy of the cla.s.sical economists, their doctrine that the entire capitalised part of the surplus value is used solely for consumption by the productive workers, that is to say spent altogether on wages for the workers employed year by year. This erroneous a.s.sumption, which completely overlooks the fact that every increase of production must manifest itself not only in the increased number of employed workers but also in the increase of the material means of production (premises, tools, and, certainly, raw materials) is obviously rooted in that 'dogma' of Adam Smith which we have already discussed. Moreover, the a.s.sumption that the expenditure of a greater amount of capital on wages is sufficient to expand production, also results from the mistaken idea that the prices of all commodities are completely resolved into wages and surplus value, so that the constant capital is disregarded altogether. Strangely enough, even Ricardo who was, at any rate occasionally, aware of this element of error in Smith's doctrine, subscribes most emphatically to its ultimate inferences, mistaken though they were:

'It must be understood, that all the productions of a country are consumed; but it makes the greatest difference imaginable whether they are consumed by those who reproduce, or by those who do not reproduce another value. When we say that revenue is saved, and added to capital, what we mean is, that the portion of revenue, so said to be added to capital, is consumed by productive, instead of unproductive labourers.'[97]

If all the goods produced are thus swallowed up by human consumption, there can clearly be no room to spare in the total social product for such unconsumable means of production as tools and machinery, new materials and buildings, and consequently enlarged reproduction, too, will have to take a peculiar course. What happens--according to this odd conception--is simply that staple foodstuffs for new workers will be produced to the amount of the capitalised part of surplus value instead of the choice delicacies previously provided for the capitalist cla.s.s.

The cla.s.sical theory of enlarged reproduction does not admit of any variations other than those connected with the production of consumer goods. After our previous observations it is not surprising that Marx could easily dispose of this elementary mistake of both Ricardo and Smith. Just as simple reproduction requires a regulated renewal of the constant capital, the material means of production, quite apart from the production of consumer goods in the necessary quant.i.ty for labourer and capitalist, equally so in the case of expanding production must part of the new additional capital be used to enlarge the constant capital, that is to add to the material means of production. Another law, Marx discovered, must also be applied here. The constant capital, continually overlooked by the cla.s.sical economists, increases relative to the variable capital that is spent on wages. This is merely the capitalist expression of the general effects of increasing labour productivity.

With technical progress, human labour is able to set in motion ever larger ma.s.ses of means of production and to convert them into goods. In capitalist terms, this means a progressive decrease in expenses for living labour, in wages, relative to the expenses for inanimate means of production. Contrary to the a.s.sumption of Adam Smith and Ricardo, enlarged reproduction must not only start with the division of the capitalised part of the surplus value into constant and variable capital, but, as the technique of production advances, it is bound to allocate in this division ever increasing portions to the constant, and ever diminishing portions to the variable capital. This continuous qualitative change in the composition of capital is the specific manifestation of the acc.u.mulation of capital, that is to say of enlarged reproduction on the basis of capitalism.[98]

The other side of this picture of continual changes in the relation between the portions of constant and variable capital is the formation of a relative surplus population, as Marx called it, that is to say that part of the working population which exceeds the average needs of capital, and thus becomes redundant. This reserve of unemployable industrial labour (taken here in a broader sense, and including a proletariat that is dominated by merchant capital) is always present. It forms a necessary prerequisite of the sudden expansion of production in times of boom, and is another specific condition of capitalist acc.u.mulation.[99]

From the acc.u.mulation of individual capitals we can therefore deduce the following four characteristic phenomena of enlarged reproduction:

(1) The volume of enlarged reproduction is independent, within certain limits, of the growth of capital, and can transcend it. The necessary methods for achieving this are: increased exploitation of labour and natural forces, and increased labour productivity (including increased efficiency of the fixed capital).

(2) All real acc.u.mulation starts with that part of the surplus value which is intended for capitalisation being divided into constant and variable capital.

(3) Acc.u.mulation as a social process is accompanied by continuous changes in the relation between constant and variable capital, whereby that portion of capital which is invested in inanimate means of production continually increases as compared with that expended on wages.

(4) Concomitant with the acc.u.mulative process, and as a condition of the latter, there develops an industrial reserve army.

These characteristics, derived from the reproductive process as it is performed by the individual capitals, represent an enormous step forward as compared with the a.n.a.lyses of bourgeois economists. Now, however, our problem is to demonstrate the acc.u.mulation of the aggregate capital which originates from these movements of individual capitals, and on the basis of the diagram of simple reproduction to establish the precise relations between the aspects of value prevalent in the production of surplus value and the material considerations in the production of consumer and producer goods, with a view to acc.u.mulation.

The essential difference between enlarged reproduction and simple reproduction consists in the fact that in the latter the capitalist cla.s.s and its hangers-on consume the entire surplus value, whereas in the former a part of the surplus value is set aside from the personal consumption of its owners, not for the purpose of h.o.a.rding, but in order to increase the active capital, i.e. for capitalisation. To make this possible, the new additional capital must also find the material prerequisites for its activity forthcoming. Here the concrete composition of the aggregate social product becomes important. Marx says already in volume i, when he considers the acc.u.mulation of individual capitals:

'The annual production must in the first place furnish all those objects (use-values) from which the material components of capital, used up in the course of the year, have to be replaced. Deducting these there remains the net or surplus-product, in which the surplus-value lies. And of what does this surplus-product consist? Only of things destined to satisfy the wants and desires of the capitalist cla.s.s, things which, consequently, enter into the consumption fund of the capitalists? Were that the case, the cup of surplus-value would be drained to the very dregs, and nothing but simple reproduction would ever take place.--To acc.u.mulate it is necessary to convert a portion of the surplus-product into capital. But we cannot, except by a miracle, convert into capital anything but such articles as can be employed in the labour-process (i.e. means of production), and such further articles as are suitable for 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 quant.i.ty 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.'[100]

Additional means of production, however, and additional consumer goods for the workers alone are not sufficient; to get enlarged reproduction really going, additional labour is also required. Marx now finds a specific difficulty in this last condition:

'For this the mechanism of capitalist production provides beforehand, by converting the working cla.s.s into a cla.s.s dependent on wages, a cla.s.s whose ordinary wages suffice, not only for its maintenance, but for its increase. It is only necessary for capital to incorporate this additional labour-power, annually supplied by the working cla.s.s in the shape of labourers of all ages, with the surplus means of production comprised in the annual produce, and the conversion of surplus-value into capital is complete.'[101]

This is the first solution which Marx gave to the problem of the acc.u.mulation of the aggregate capital. Having dwelt on this aspect of the question already in volume i of _Capital_, Marx returns to the problem at the end of the second volume of his main work whose concluding 21st chapter is devoted to acc.u.mulation and enlarged reproduction of the aggregate capital.

Let us examine Marx's diagrammatic exposition of acc.u.mulation more closely. On the model of the diagram of simple reproduction with which we are already familiar, he devised a diagram for enlarged reproduction, the difference appearing most clearly if we compare the two.

a.s.suming that society's annual aggregate product can be represented by an amount to the value of 9,000 (denoting millions of working hours, or, in capitalist monetary terms, any arbitrary amount of money), the aggregate product is to be distributed as follows:

I. _4,000c + 1,000v + 1,000s = 6,000_ II. _2,000c + 500v + 500s = 3,000_ ----- Total: 9,000

Department I represents means of production, Department II consumer goods. One glance at the proportion of the figures shows that in this case simple reproduction alone is possible. The means of production made in Department I equal the total of the means of production actually used by the two departments. If these are merely renewed, production can be repeated only on its previous scale. On the other hand, the aggregate product of Department II equals the total of wages and surplus value in both departments. This shows that the consumer goods available permit only the employment of just as many workers as were previously employed, and that the entire surplus value is similarly spent on consumer goods, i.e. the personal consumption of the capitalist cla.s.s.