Chapter VIII: Section III: is broader, more vigorous and in general more rewarding than (4)

Two questions now arise: (1) by whom should the money be owned, and (2) how much of it should there be? The answer to the first question, no doubt, is that the workers receive their wages in the form of money with which they buy consumer goods. From the point of view of society, this means merely that the workers are allocated a certain share of the fund for consumption: every society, whatever its historical form of production, makes such allocations to its workers. It is, however, an essential characteristic of the capitalist form of production that the workers do not obtain their share directly in the form of goods but by way of commodity exchange, just as it is an essential feature of the capitalist mode of production that their labour power is not applied directly, as a result of a relation of personal domination, but again by way of commodity exchange: the workers selling their labour power to the owners of the means of production, and purchasing freely their consumer goods. Variable capital in its money form is the expression and medium of both these transactions.

Money, then, comes first into circulation by the payment of wages. The capitalist class must therefore set a certain quantity of money circulating in the first place, and this must be equal to the amount they pay in wages. The capitalists of Department I need 1,000 units of money, and the capitalists of Department II need 500 to meet their wages bill. Thus, according to our diagram, two quantities of money are circulating: I(1,000_v_) and II(500_v_). The workers spend the total of 1,500 on consumer goods, i.e. on the products of Department II. In this way, labour power is maintained, that is to say the variable capital of society is reproduced in its natural form, as the foundation of all other reproductions of capital. At the same time, the capitalists of Department II dispose of their aggregate product (1,500) in the following manner: their own workers receive 500 and the workers of Department I receive 1,000. This exchange gives the capitalists of Department II possession of 1,500 money units: 500 are their own variable capital which has returned to them; these may start circulating again as variable capital but for the time being they have completed their course. The other 1,000 accrue to them year by year out of the realisation of one-third of their own products. The capitalists of Department II now buy means of production from the capitalists of Department I for these 1,000 money units in order to renew the part of their own constant capital that has been used up. By means of this purchase, Department II renews in its natural form half of the constant capital II_c_ it requires. Department I now has in return 1,000 money units which are nothing more than the money originally paid to its own workers. Now, after having changed hands twice, the money has returned to Department I, to become effective later as variable capital. This completes the circulation of this quantity of money for the moment, but the circulation within society has not yet come to an end. The capitalists of Department I have not yet realised their surplus value to buy consumer goods for themselves; it is still contained in their product in a form which is of no use to them. Moreover, the capitalists of Department II have not yet renewed the second half of their constant capital. These two acts of exchange are identical both in substance and in value, for the capitalists of Department I receive their goods from Department II in exchange for the I(1,000_c_) means of production needed by the capitalists of Department II. However, a new quantity of money is required to effect this exchange. It is true that the same money which has already completed its course, might be brought into circulation again for this purpose--in theory, there could be no objection to this. In practice, however, this solution is out of the question, for the needs of the capitalists, as consumers, must be satisfied just as constantly as the needs of the workers--they run parallel to the process of production and must be mediated by specific quantities of money. Hence it follows that the capitalists of both departments--that is to say all capitalists--must have a further cash reserve in hand, in addition to the money required as variable capital, in order to realise their own surplus value in the form of consumer goods. On the other hand, before the total product is realised and during the process of its production, certain parts of the constant capital must be bought continually. These are the circulating parts of the constant capital, such as raw and auxiliary materials, semi-finished goods, lighting and the like. Therefore, not only must the capitalists of Department I have certain quantities of money in hand to satisfy their needs as consumers, but the capitalists of Department II must also have money to meet the requirements of their constant capital. The exchange of 1,000s I (the surplus value of Department I contained in the means of production) against goods is thus effected by money which is advanced partly by the capitalists of Department I in order to satisfy their needs as consumers, and partly by the capitalists of Department II in order to satisfy their needs as producers.[91] Both lots of capitalists may each advance 500 units of the money necessary for the exchange, or possibly the two departments will contribute in different proportions. At any rate, two things are certain: (_a_) the money set aside for the purpose by both departments must suffice to effect the exchange between I(1,000_s_) and II(1,000_c_); (_b_) whatever the distribution of this money between the two departments may have been, the exchange transaction completed, each department of capitalist production must again possess the same amount of money it had earlier put into circulation. This latter maxim applies quite generally to social circulation as a whole: once the process of circulation is concluded, money will always have returned to its point of origin. Thus all capitalists, after universal exchange, have achieved a twofold result: first they have exchanged products which, in their natural form, were of no use to them, against other products which, in their natural form, the capitalists require either as means of production or for their own consumption. Secondly, they have regained possession of the money which they set in circulation so as to effect these acts of exchange.

This phenomenon is unintelligible from the point of view of simple commodity circulation, where commodity and money continually change places--possession of the commodity excluding the possession of money, as money constantly usurps the place which the commodity has given up, and _vice versa_. Indeed, this is perfectly true with regard to every individual act of commodity exchange which is the form of social circulation. Yet this social circulation itself is more than mere exchange of commodities: it is the circulation of capital. It is, however, an essential and characteristic feature of this kind of circulation, that it does not only return to the capitalist the value of his original capital plus an increase, the surplus value, but that it also assists social reproduction by providing the means of production and labour power in the natural form of productive capital, and by ensuring the maintenance of those who do not work. Possessing both the means of production and the money needed, the capitalists start the total social process of circulation; as soon as the social capital has completed its circuit, everything is again in their hands, apportioned to each department according to the investments made by it. The workers have only temporary possession of money during which time they convert the variable capital from its money form into its natural form. The variable capital in the capitalists' hands is nothing but the outward shape of part of their capital, and for this reason it must always revert to them.

So far, we have only considered circulation as it takes place between the two large departments of production. Yet 4,000 units of the first Department's produce remain there in the form of means of production to renew its constant capital of 4,000_c_. Moreover 500 of the consumer goods produced in Department II [corresponding to the surplus value II(500_s_)] also remain in this department in the form of consumer goods for the capitalist class. Since in both departments the mode of production is capitalistic, that is unplanned, private production, each department can distribute its own products--means of production in Department I and consumer goods in Department II--amongst its own capitalists only by way of commodity exchange, i.e. by a large number of individual sale transactions between capitalists of the same department. Therefore the capitalists of both departments must have a reserve of money with which to perform these exchange transactions--to renew both the means of production in Department I and the consumer goods for the capitalist class in Department II. This part of circulation does not present any features of specific interest, as it is merely simple commodity circulation. Vendor and purchaser alike belong to the same category of agents of production, and circulation is concerned only with money and commodity changing hands within the same class and department. All the same, the money needed for this circulation must from the outset be in the hands of the capitalist class: it is part of their capital.

So far, the circulation of total social capital presents no peculiarities, even if we consider the circulation of money. From the very outset it is self-evident that society must possess a certain quantity of money to make this circulation possible, and this for two reasons: first, the general form of capitalist production is that of commodity production which implies the circulation of money; secondly, the circulation of capital is based upon the continuous alternation of the three forms of capital: money capital, productive capital, and commodity capital. And as it is this very money, finally, which operates as capital--our diagram referring to capitalist production exclusively--the capitalist class must have possession of this money, as it has possession of every other form of capital; it throws it into circulation in order to regain possession as soon as the process of circulation has been completed.

At first glance, only one detail might strike us: if the capitalists themselves have set in motion all the money which circulates in society, they must also advance the money needed for the realisation of their own surplus value. Thus it seems that the capitalists as a class ought to buy their own surplus value with their own money. As the capitalist class has possession of this money resulting from previous periods of production, even prior to the realisation of the product of each working period, the appropriation of surplus value at first sight does not seem to be based upon the unpaid labour of the wage labourer--as it in fact is--but merely the result of an exchange of commodities against an equivalent quantity of money both supplied by the capitalist class itself. A little reflection, however, dispels this illusion. After the general completion of circulation, the capitalists, now as before, possess their money funds which either reverted to them or remained in their hands. Further, they acquired consumer goods for the same amount which they have consumed. (Note that we are still confining ourselves to simple reproduction as the prime condition of our diagram of reproduction: the renewal of production on the old scale and the use of all surplus value produced for the personal consumption of the capitalist class.)

Moreover, the illusion vanishes completely if we do not confine ourselves to one period of production but observe a number of successive periods in their mutual interconnections. The value the capitalist puts into circulation to-day in the form of money for the purpose of realising his own surplus value, is in fact nothing but his surplus value resulting from the preceding period of production in form of money. The capitalist must advance money out of his own pocket in order to buy his goods for consumption. On the one hand, the surplus value which he produces each year either exists in a natural form which renders it unfit for consumption, or, if it takes a consumable form, it is temporarily in the hands of another person. On the other hand, he (the capitalist) has regained possession of the money, and he is now making his advances by realising his surplus value from the preceding period. As soon as he has realised his new surplus value, which is still embodied in the commodity-form, this money will return to him. Consequently, in the course of several periods of production, the capitalist class draws its consumer goods from the pool, as well as the other natural forms of its capital. The quantity of money originally in its possession, however, remains unaffected by this process.

Investigation of the circulation of money in society shows that the individual capitalist can never invest the whole of his money capital in production but must always keep a certain money reserve to be employed as variable capital, i.e. as wages. Further, he must keep a capital reserve for the purchase of means of production at any given period, and in addition, he must have a cash reserve for his personal consumption.

The process of reproducing the total social capital thus entails the necessity of producing and reproducing the substance of money. Money is also capital, for Marx's diagram which we have discussed before, conceives of no other than capitalist production. Thus the diagram seems incomplete. We ought to add a further department, that of production of the means of exchange, to the other two large departments of social production [those of means of production (I) and of consumer goods (II)]. It is, indeed, a characteristic feature of this third department that it serves neither the purposes of production nor those of consumption, merely representing social labour in an undifferentiated commodity that cannot be used. Though money and its production, like the exchange and production of commodities, are much older than the capitalist mode of production, it was only the latter which made the circulation of money a general form of social circulation, and thus the essential element of the social reproductive process. We can only obtain a comprehensive diagram of the essential points of capitalist production if we demonstrate the original relationship between the production and reproduction of money and the two other departments of social production.

Here, however, we deviate from Marx. He included the production of gold (we have reduced the total production of money to the production of gold for the sake of simplicity) in the first department of social production.

'The production of gold, like that of metals generally, belongs to department I, which occupies itself with means of production.'[92]

This is correct only in so far as the production of gold is the production of metal for industrial purposes (jewellery, dental stoppings, etc.). But gold in its capacity as money is not a metal but rather an embodiment of social labour _in abstracto_. Thus it is no more a means of production than it is a consumer good. Besides, a mere glance at the diagram of reproduction itself shows what inconsistencies must result from confusing means of exchange with means of production. If we add a diagrammatic representation of the annual production of gold as the substance of money to the two departments of social production, we get the following three sets of figures:

I. _4,000c + 1,000v + 1,000s = 6,000_ means of production
II. _2,000c + 500v + 500s = 3,000_ means of subsistence
III. _20c + 5v + 5s = 30_ means of exchange

This quantity of value of 30, chosen by Marx as an example, obviously does not represent the quantity of money which circulates annually in society; it only stands for that part which is annually reproduced, the annual wear and tear of the money substance which, on the average, remains constant so long as social reproduction remains on the same level. The turnover of capital goes on in a regular manner and the realisation of commodities proceeds at an equal pace. If we consider the third line as an integral part of the first one, as Marx wants us to do, the following difficulty arises: the constant capital of the third department consists of real and concrete means of production, premises, tools, auxiliary materials, vessels, and the like, just as it does in the two other departments. Its product, however, the 30_g_ which represent money, cannot operate in its natural form as constant capital in any process of production. If we therefore include this 30_g_ as an essential part of the product of Department I (6,000 means of production) the means of production will show a social deficit of this size which will prevent Departments I and II from resuming their reproduction on the old scale. According to the previous assumption--which forms the foundation of Marx's whole diagram--reproduction as a whole starts from the product of each department in its actual use-form. The proportions of the diagram are based upon this assumption; without it, they dissolve in chaos. Thus the first fundamental relation of value is based upon the equation: I(6,000) equals I(4,000_c_) + II(2,000_c_). This cannot apply to the product III(30_g_), since neither department can use gold as a means of production [say, in the proportion of I(20_c_) + II(10_c_)]. The second fundamental relation derived from this is based upon the equation I(1,000_v_) + I(1,000_s_) = II(2,000_c_). This would mean, with regard to the production of gold, that as many consumer goods are taken from Department II as there are means of production supplied to it. But this is equally untrue. Though the production of gold removes concrete means of production from the total social product and uses them as its constant capital, though it takes concrete consumer goods for the use of its workers and capitalists, corresponding to its variable capital and surplus value, the product it supplies yet cannot operate in any branch of production as a means of production, nor is it a consumer good, fit for human consumption. To include the production of money in the activities of Department I, therefore, is to run counter to all the general proportions which express the relations of value in Marx's diagram, and to diminish the diagram's validity.

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 accumulated as a hoard 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 quantity 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 hoarded, 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 analysis 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 constitutes 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 mass 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 analytic 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 Économique_ strike us at once. These two diagrams, the beginning and end of the period of classical 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 classical 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 analysis 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 analysis, 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 analysis, 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 Économique_ 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 Économique_, 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 quantity 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' (_Analyse du Tableau Économique_, 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 assumption 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 analysis 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 accumulation 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 class, 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 assumption 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 analysis of the accumulation 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 circumstances which determine the accumulation 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 accumulation; 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 accumulation. In the course of this discussion, Marx deals with two inspired notions of bourgeois economists with regard to accumulation: the 'theory of abstinence' as held by the more vulgar economists, who proclaim that the division of surplus value into capital, and thus accumulation itself, is an ethical and heroic act of the capitalists; and the fallacy of the classical 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 assumption, 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 assumption 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 class. The classical 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 quantity 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 classical 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 masses 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 assumption 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 accumulation 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 accumulation.[99]

From the accumulation 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 accumulation starts with that part of the surplus value which is intended for capitalisation being divided into constant and variable capital.

(3) Accumulation 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 accumulative 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 analyses of bourgeois economists. Now, however, our problem is to demonstrate the accumulation 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 accumulation.

The essential difference between enlarged reproduction and simple reproduction consists in the fact that in the latter the capitalist class 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 hoarding, 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 accumulation 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 class, 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 accumulate 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 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.'[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 class into a class dependent on wages, a class 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 class 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 accumulation 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 accumulation and enlarged reproduction of the aggregate capital.

Let us examine Marx's diagrammatic exposition of accumulation 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.

Assuming 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 class.

Now let us take the same aggregate product of 9,000 in the following equation:

I. _4,000c + 1,000v + 1,000s = 6,000_
II. _1,500c + 750v + 750s = 3,000_
-----
Total: 9,000

Here a double disproportion confronts us: 6,000 means of production are created--more than those which are actually used by the society, i.e. _4,000c + 1,500c_, leaving a surplus of 500. Similarly, less consumer goods (3,000) are produced than the sum of what is paid out in wages (i.e. _1,000v + 750v_, the requirement of the workers), plus the aggregate of surplus value that has been produced (_1,000s + 750s_). This results in a deficit of 500. Since our premises do not allow us to decrease the number of workers employed, the consequence must be that the capitalist class cannot consume the entire surplus value it has pocketed. This proves fully consistent with the two material preconditions of enlarged reproduction on a capitalist basis: part of the appropriated surplus value is not to be consumed but is used for the purposes of production; and more means of production must be produced so as to ensure the use of the capitalised surplus value for the actual expansion of reproduction.

In considering the diagram of simple reproduction, we saw that its fundamental social conditions are contained in the following equation: the aggregate of means of production (the product of Department I) must be equivalent to the constant capital of both departments, but the aggregate of consumer goods (the product of Department II) must equal the sum of variable capitals _and_ surplus values of the two departments. As regards enlarged reproduction, we must now infer a precise inverse double ratio. The general precondition of enlarged reproduction is that the product of Department I must be greater in value than the constant capital of both departments taken together, and that of Department II must be so much less than the sum total of both the variable capital and the surplus value in the two departments.

This, however, by no means completes the analysis of enlarged reproduction; rather has it led us merely to the threshold of the question. Having deduced the proportions of the diagram, we must now pursue their further activities, the flow of circulation and the continuity of reproduction. Just as simple reproduction may be compared to an unchanging circle, to be repeated time and again, so enlarged reproduction, to quote Sismondi, is comparable to a spiral with ever expanding loops. Let us begin by examining the loops of this spiral. The first general question arising in this connection is how actual accumulation proceeds in the two departments under the conditions now known to us, i.e. how the capitalists may capitalise part of their surplus value, and at the same time acquire the material prerequisites necessary for enlarged reproduction.

Marx expounds the question in the following way:

Let us assume that half the surplus value of Department I is being accumulated. The capitalists, then, use 500 for their consumption but augment their capital by another 500. In order to become active, this additional capital of 500 must be divided, as we now know, into constant and variable capital. Assuming the ratio of 4 to 1 remains what it was for the original capital, the capitalists of Department I will divide their additional capital of 500 thus: they will buy new means of production for 400 and new labour for 100. This does not present any difficulties, since we know that Department I has already produced a surplus of 500 means of production. Yet the corresponding enlargement of the variable capital by 100 units of money is not enough, since the new additional labour power must also find adequate consumer goods which can only be supplied by Department II. Now the circulation between the two large departments is shifting. Formerly, under conditions of simple reproduction, Department I acquired 1,000 consumer goods for its own workers, and now it must find another 100 for its new workers. Department I therefore engages in enlarged reproduction as follows:

_4,400c + 1,100v_.

Department II, in turn, after selling these consumer goods to the value of 100, is now in a position to acquire additional means of production to the same amount from Department I. And in fact, Department I still has precisely one hundred of its surplus product left over which now find their way into Department II, enabling the latter to expand its own reproduction as well. Yet here, too, the additional means of production alone are not much use; to make them operate, additional labour power is needed. Assuming again that the previous composition of capital has been maintained, with a ratio of 2 to 1 as regards constant and variable capital, additional labour to the tune of 50 is required to work the additional 100 means of production. This additional labour, however, needs additional consumer goods to the amount of its wages, which are in fact supplied by Department II itself. This department must therefore produce, in addition to the 100 additional consumer goods for the new workers of Department I and the goods for the consumption of its own workers, a further amount of consumer goods to the tune of 50 as part of its aggregate product. Department II therefore starts on enlarged reproduction at a rate of _1,600c + 800v_.

Now the aggregate product of Department I (6,000) has been absorbed completely. 5,500 were necessary for renewing the old and used-up means of production in both departments, and the remaining 500 for the expansion of production: 400 in Department I and 100 in Department II. As regards the aggregate product of Department II (3,000), 1,900 have been used for the increased labour force in the two departments, and the 1,100 consumer goods which remain serve the capitalists for their personal consumption, the consumption of their surplus value. 500 are consumed in Department I, and 600 in Department II where, out of a surplus value of 700, only 150 had been capitalised (100 being expended on means of production and 50 on wages).

Enlarged reproduction can now proceed on its course. If we maintain our rate of exploitation at 100 per cent, as in the case of the original capital, the next period will give the following results:

I. _4,400c + 1,100v + 1,100s = 6,600_

II. _1,600c + 800v + 800s = 3,200_
-----
Total: 9,800

The aggregate product of society has grown from 9,000 to 9,800, the surplus value of Department I from 1,000 to 1,100, and of Department II from 750 to 800. The object of the capitalist expansion of production, the increased production of surplus value, has been gained. At the same time, the material composition of the aggregate social product again shows a surplus of 600 as regards the means of production (6,600) over and above those which are actually needed (4,400 + 1,600), and also a deficit in consumer goods as against the sum total made up by the wages previously paid (_1,100v + 800v_) and the surplus value that has been created (_1,100s + 800s_). And thus we again have the material possibility as well as the necessity to use part of the surplus value, not for consumption by the capitalist class, but for a new expansion of production.

The second enlargement of production, and increased production of surplus value, thus follows from the first as a matter of course and with mathematical precision. The accumulation of capital, once it has started, automatically leads farther and farther beyond itself. The circle has become a spiral which winds itself higher and higher as if compelled by a natural law in the guise of mathematical terms. Assuming that in the following years there is always capitalisation of half the surplus value, while the composition of the capital and the rate of exploitation remain unchanged, the reproduction of capital will result in the following progression:

_2nd year:_ I. _4,840c + 1,210v + 1,210s = 7,260_
II. _1,760c + 880v + 880s = 3,520_
------
Total: 10,780

_3rd year:_ I. _5,324c + 1,331v + 1,331s = 7,986_
II. _1,936c + 968v + 968s = 3,872_
------
Total: 11,858

_4th year:_ I. _5,856c + 1,464v + 1,464s = 8,784_
II. _2,129c + 1,065v + 1,065s = 4,259_
------
Total: 13,043

_5th year:_ I. _6,442c + 1,610v + 1,610s = 9,662_
II. _2,342c + 1,172v + 1,172s = 4,686_
------
Total: 14,348