Capital Vol: II

XI. Replacement of the Fixed Capital

In the analysis of the exchanges of the annual reproduction the following presents great difficulty. If we take the simplest form in which the matter may be presented, we get:

I) 4,000_c + 1,000_v + l,000_s +
II) 2,000_c + 500_v + 500_s = 9,000.

This resolves itself finally into:

4,000 I_c + 2,000 II_c + 1,000 I_v + 500 II_v + l,000 I_s + 500 II_s
= 6,000_c + 1,500_v + 1,500_s = 9,000

One portion of the value of the constant capital, which consists of instruments of labour in the strict meaning of the term (as a distinct section of the means of production) is transferred from the instruments of labour to the product of labour (the commodity); these instruments of labour continue to function as elements of the productive capital, doing so in their old bodily form. It is their wear and tear, the depreciation gradually experienced by them during their continual functioning for a definite period which re-appears as an element of value of the commodities produced by means of them, which is transferred from the instrument of labour to the product of labour. With regard to the annual reproduction therefore only such component parts of fixed capital will from the first be given consideration as last longer than a year. If they are completely worn out within the year they must be completely replaced and renewed by the annual reproduction, and the point at issue does not concern them at all. It may happen in the case of machines and other more durable forms of fixed capital — and it frequently does happen — that certain parts of them must be replaced lock, stock and barrel within one year, although the building or machine in its entirety lasts much longer. These parts belong in one category with the elements of fixed capital which are to be replaced within one year.

This element of the value of commodities must not be confused with the costs of repair. If a commodity is sold, this value-element is turned into money, the same as all others. But after it has been turned into money, its difference from the other elements of value becomes apparent. The raw and auxiliary materials consumed in the production of commodities must be replaced in kind in order that the reproduction of commodities may begin (or that the process of production of commodities in general may be continuous). The labour-power spent on them must also be renewed by fresh labour-power. Consequently the money realised on the commodities must be continually reconverted into these elements of the productive capital, from the money-form into the commodity-form. It does not alter the matter if raw and auxiliary materials for instance are bought at certain intervals in larger quantities — so that they constitute productive supplies — and need not be bought anew during certain periods; and therefore — as long as they last — the money coming in through the sale of commodities, inasmuch as it is meant for this purpose, may accumulate and this portion of constant capital thus appears temporarily as money-capital whose active function has been suspended. It is not a revenue-capital; it is productive capital suspended in the form of money. The renewal of the means of production must go on all the time, although the form of this renewal — with reference to the circulation — may vary. The new purchases, the circulation operation by which they are renewed or replaced, may take place at more or at less prolonged intervals: then a large amount may be invested at one stroke, compensated by a corresponding productive supply. Or the intervals between purchases may be small: then follows a rapid succession of money expenditures in small doses, of small productive supplies. This does not alter the matter itself. The same applies to labour-power. Where production is carried on continuously throughout the year on the same scale — continuous replacement of consumed labour-power by new. Where work is seasonable, or different portions of labour are applied at different periods, as in agriculture — corresponding purchases of labour-power, now in small, now in large amounts. But the money proceeds realised from the sale of commodities, so far as they turn into money that part of the commodity-value which is equal to the wear and tear of fixed capital, are not re-converted into that component part of the productive capital whose diminution in value they cover. They settle down beside the productive capital and persist in the form of money. This precipitation of money is repeated, until the period of reproduction consisting of great or small numbers of years has elapsed, during which the fixed element of constant capital continues to function in the process of production in its old bodily form. As soon as the fixed element, such as buildings, machinery, etc., has been worn out, and can no longer function in the process of production, its value exists alongside it fully replaced by money, by the sum of money precipitations, the values which had been gradually transferred from the fixed capital to the commodities in whose production it participated and which had assumed the form of money as a result of the sale of these commodities. This money then serves to replace the fixed capital (or its elements, since its various elements have different durabilities) in kind and thus really to renew this component part of the productive capital. This money is therefore the money-form of a part of the constant capital-value, namely of its fixed part. The formation of this hoard is thus itself an element of the capitalist process of reproduction; it is the reproduction and storing up — in the form of money — of the value of fixed capital, or its several elements, until the fixed capital has ceased to live and in consequence has given off its full value to the commodities produced and must now be replaced in kind. But this money loses only its form of a hoard and hence resumes its activity in the process of reproduction of capital brought about by the circulation as soon as it is reconverted into new elements of fixed capital to replace those that died off.

Just as simple commodity circulation is in no way identical with a bare exchange of products, the conversion of the annual commodity-product can in no way resolve itself into a mere unmediated mutual exchange of its various components. Money plays a specific role in it, which finds expression particularly in the manner in which the value of the fixed capital is reproduced. (How different the matter would present itself if production were collective and no longer possessed the form of commodity production is left to a later analysis.)

Should we now return to our fundamental scheme, we shall get the following for class II: 2,000_c + 500_v + 500_s. All the articles of consumption produced in the course of the year are in that case equal in value to 3,000; and every one of the different commodity elements in the total sum of the commodities is composed, so far as its value is concerned, of ⅔_c + 1/6_v + 1/6_s, or, in percentages, 66⅔_c + 16⅔_v + 16⅔_s. The various kinds of commodities of class II may contain different proportions of constant capital. Likewise the fixed portion of the constant capital may be different. The duration of the parts of the fixed capital and hence the annual wear and tear, or that portion of value which they transfer pro rata to the commodities in the production of which they participate, may also differ. But that is immaterial here. As to the process of social reproduction, it is only a question of exchange between classes II and I. These two classes here confront each other only in their social, mass relations. Therefore the proportional magnitude of part c of the value of commodity-product II (the only one of consequence in the question now being discussed) gives the average proportion if all the branches of production classed under II are embraced.

Every kind of commodity (and they are largely the same kinds) whose aggregate value is classed under 2,000_c + 500_v + 500_s is therefore equal in value to 66⅔%_c + 16⅔%_v + 16⅔%_s. This applies to every 100 of the commodities, whether classed under c, v or s.

The commodities in which the 2,000_c are incorporated may be further divided, in value, into:

1) 1,333⅓_c + 333⅓_v + 333⅓_s = 2,000_c;
similarly 500_v may be divided into:
2) 333⅓_c + 83⅓_v + 83⅓_s = 500_v;
and finally 500_s may be divided into:
3) 333⅓_c + 83⅓_v + 83⅓_s = 500_s

Now, if we add the c’s in 1), 2), and 3) we get 1,333⅓_c + 333⅓_c + 333⅓_c = 2,000. Furthermore 333⅓_v + 83⅓_v + 83⅓_v = 500.

And the same in the case of s. The addition gives the same total value of 3,000, as above.

The entire constant capital-value contained in the commodity mass II representing a value of 3,000 is therefore comprised in 2,000_c, and neither 500_v nor 500_s hold an atom of it. The same is true of v and s respectively.

In other words, the entire share of commodity mass II that represents constant capital-value and therefore is reconvertible either into its bodily or its money-form, exists in 2,000_c. Everything referring to the exchange of the constant value of commodities II is therefore confined to the movement of 2,000 II_c. And this exchange can be made only with I (1,000_v + 1,000_s).

Similarly, as regards class I, everything that bears in the exchange of the constant capital-value of that class is to be confined to a consideration of 4,000 I_c.

1. Replacement of the Wear and Tear Portion of the Value in the Form of Money

Now, if to start with we take

I. 4,000c +	1,000v + 1,000s
II. . . . . . . .	2,000c + 500v + 500s,

the exchange of the commodities 2,000 II_c for commodities of the same value I (1,000_v + 1,000_s) would presuppose that the entire 2,000 II_c are reconverted in kind into the natural elements of the constant capital of II, produced by I. But the commodity-value of 2,000, in which the latter exists, contains an element making good the depreciation in value of the fixed capital, which is not to be replaced immediately in kind but converted into money, which gradually accumulates into a sum total until the time for the renewal of the fixed capital in its bodily form arrives. Every year registers the demise of fixed capital which must be replaced in this or that individual business, or in this or that branch of industry. In the case of one and the same individual capital, this or that portion of its fixed capital must be replaced, since its different parts have different durabilities. On examining annual reproduction, even on a simple scale, i.e., disregarding all accumulation, we do not begin ab ovo. The year which we study is one in the course of many; it is not the first year after the birth of capitalist production. The various capitals invested in the manifold lines of production of class II therefore differ in age. Just as people functioning in these lines of production die annually, so a host of fixed capitals expire annually and must be renewed in kind out of the accumulated money-fund. Therefore the exchange of 2,000 II_c for 2,000 I_{(v + s)} includes a conversion of 2,000 II_c from its commodity-form (articles of consumption) into natural elements which consist not only of raw and auxiliary materials but also of natural elements of fixed capital, such as machinery, tools, buildings, etc. The wear and tear, which must be replaced in money in the value of 2,000 II_c, therefore by no means corresponds to the amount of the functioning fixed capital, since a portion of this must be replaced in kind every year. But this assumes that the money necessary for this replacement was accumulated in former years by the capitalists of class II. However that very condition holds good in the same measure for the current year as for the preceding ones.

In the exchange between I (1,000_v + 1,000_s) and 2,000 II_c it must be first noted that the sum of values I_{(v + s)} does not contain any constant element of value, hence also no element of value to replace wear and tear, i.e., value that has been transmitted from the fixed component of the constant capital to the commodities in whose bodily form v + s exist. On the other hand this element exists in II_c, and it is precisely a part of this value-element that owes its existence to fixed capital which is not to be converted immediately from the money-form into its bodily form, but has first to persist in the form of money. The exchange between I (1,000_v + 1,000_s) and 2,000 II_c, therefore, at once presents the difficulty that the means of production of I, in whose bodily form the 2,000_{(v + s)} exist, are to be exchanged to the full value of 2,000 for an equivalent in articles of consumption II, while on the other hand the 2,000 II_c of articles of consumption cannot be exchanged at their full value for means of production I (1,000_v + 1,000_s) because an aliquot part of their value — equal to the wear and tear, or the value depreciation of the fixed capital that is to be replaced — must first be precipitated in the form of money that will not function any more as a medium of circulation during the current period of annual reproduction, which alone we are examining. But the money paying for this element of wear and tear incorporated in the commodity-value 2,000 II_c can come only from department I, since II cannot pay for itself but effects payment precisely by selling its goods, and since presumably I_{(v + s)} buys the whole of the commodities 2,000 II_c. Hence class I must by means of this purchase convert that wear and tear into money for II. But according to the law previously evolved, money advanced to the circulation returns to the capitalist producer who later on throws an equal amount of commodities into circulation. It is evident that in buying II_c, I cannot give II commodities worth 2,000 and a surplus amount of money on top of that once and for all (without any return of the same by way of the operation of exchange). Otherwise I would buy the commodity mass II above its value. If II actually exchanges its 2,000_c for I (1,000_v + 1,000_s), it has no further claims on I, and the money circulating in this exchange returns to either I or II, depending on which of them threw it into circulation, i.e., which of them acted first as buyer. At the same time II would have reconverted the entire value of its commodity-capital into the bodily form of means of production, while our assumption is that after its sale it would not reconvert an aliquot portion of it during the current period of annual reproduction from money into the bodily form of fixed components of its constant capital. A money balance in favour of II could arise only if it sold 2,000 worth to I and bought less than 2,000 from I, say only 1,800. In that case I would have to make good the debit balance by 200 in money, which would not flow back to it, because it would not have withdrawn from circulation the money it had advanced to it by throwing into it commodities equal to 200. In such an event we would have a money-fund for II, placed to the credit of the wear and tear of its fixed capital. But then we would have an over-production of means of production in the amount of 200 on the other side, the side of I, and the basis of our scheme would be destroyed, namely reproduction on the same scale, where complete proportionality between the various systems of production is assumed. We would only have done away with one difficulty in order to create another one much worse.

As this problem offers peculiar difficulties and has hitherto not been treated at all by the political economists, we shall examine seriatim all possible (at least seemingly possible) solutions, or rather formulations of the problem.

In the first place, we have just assumed that II sells commodities of the value of 2,000 to I, but buys from it only 1,800 worth. The commodity-value 2,000 II_c contains 200 for replacement of wear and tear, which must be stored up in the form of money. The value of 2,000 II_c would thus be divided into 1,800, to be exchanged for means of production I, and 200, to replace wear and tear, which are to be kept in the form of money (after the sale of the 2,000_c to I). Expressed in terms of value, 2,000 II_c equals 1,800_c + 200_c(d), this d standing for déchet. [Wear and tear. — Ed.]

We would then have to study

Exchange I. 1,000_v + 1,000_s
II. 1,800_c + 200_c(d).

I buys with £1,000, which has gone to the labourers in wages for their labour-power, 1,000 II_c of articles of consumption. II buys with the same £1,000 means of production 1,000 I_v. Capitalists I thus recover their variable capital in the form of money and can employ it next year in the purchase of labour power to the same amount, i.e., they can replace the variable portion of their productive capital in kind.

Furthermore, II buys with advanced £400 means of production I_s, and I_s buys with the same £400 articles of consumption II_c. The £400 advanced to the circulation by the capitalists of II have thus returned to them, but only as an equivalent for sold commodities. I now buys articles of consumption for advanced £400; II buys from I £400 worth of means of production, whereupon these £400 flow back to I. So far, then, the account is as follows:

I throws into circulation l,000_v + 800_s in commodities; it furthermore throws into circulation, in money, £1,000 in wages and £400 for exchange with II. After the exchange has been made, I has 1,000_v in money, 800_s exchanged for 800 II_c (articles of consumption) and £400 in money.

II throws into circulation 1,800_c in commodities (articles of consumption) and £400 in money. On the completion of the exchange it has 1,800 in commodities I (means of production) and £400 in money.

There still remain, on the side of I, 200_s (in means of production) and, on the side of II, 200_c(d) (in articles of consumption).

According to our assumption I buys with £200 the articles of consumption c (d) of the value of 200. But II holds on to these £200 since 200 c (d) represent wear and tear, and are not to be immediately reconverted into means of production. Therefore 200 I_s cannot be sold. One-fifth of the surplus-value I to be replaced cannot be realised, or converted, from its bodily form of means of production into that of articles of consumption.

This not only contradicts our assumption of reproduction on a simple scale; it is by itself not a hypothesis which would explain the transformation of 200_c(d) into money. It means rather that it cannot be explained. Since it cannot be demonstrated in what manner 200_c(d) can be converted into money, it is assumed that I is obliging enough to do the conversion just because it is not able to convert its own remainder of 200_s into money. To conceive this as a normal operation of the exchange mechanism is tantamount to the notion that £200 fall every year from the clouds in order regularly to convert 200_c(d) into money.

But the absurdity of such a hypothesis does not strike one at once if I_s, instead of appearing, as it does in this case, in its primitive mode of existence — namely as a component part of the value of means of production, hence as a component part of the value of commodities which their capitalist producers must convert into money by sale — appears in the hands of the partners of the capitalists, for instance as ground-rent in the hands of landowners or as interest in the bands of moneylenders. But if that portion of the surplus-value of commodities which the industrial capitalist has to yield as ground-rent or interest to other co-owners of the surplus-value cannot be realised for a long time by the sale of the commodities, then there is also an end to the payment of rent and interest, and the landowners or recipients of interest cannot therefore serve as dei ex machina to convert at pleasure definite portions of the annual reproduction into money by spending rent and interest. The same is true of the expenditures of all so-called unproductive labourers — government officials, physicians, lawyers, etc., and others who as members of the “general public” “serve” the political economists by explaining what they left unexplained.

Nor does it improve matters if instead of direct exchange between I and II — between the two major departments of capitalist producers — the merchant is drawn in as mediator and helps to overcome all difficulties with his “money.” In the present case for instance 200 I_s must be definitively disposed of to the industrial capitalists of II. It may pass through the hands of a number of merchants, but the last of them will find himself, according to the hypothesis, in the same predicament, vis- à-vis II, in which the capitalist producers of I were at the outset, i.e., they cannot sell the 200 I_s to II. And this stalled purchase sum cannot renew the same process with I.

We see here that, aside from our real purpose, it is absolutely necessary to view the process of reproduction in its basic form — in which obscuring minor circumstances have been eliminated — in order to get rid of the false subterfuges which furnish the semblance of “scientific” analysis when the process of social reproduction is immediately made the subject of the analysis in its complicated concrete form.

The law that when reproduction proceeds normally (whether it be on a simple or on an extended scale) the money advanced by the capitalist producer to the circulation must return to its point of departure (whether the money is his own or borrowed) excludes once and for all the hypothesis that 200 II_c(d) is converted into money by means of money advanced by I.

2. Replacement of Fixed Capital in Kind

Having disposed of the hypothesis considered above, only such possibilities remain as, besides replacing the wear-and-tear portion in money, include also the replacement in kind of the wholly defunct fixed capital.

We assumed hitherto

a) that £1,000 paid in wages by I are spent by the labourers for II_c to the same amount, i.e., that they buy articles of consumption with them. It is merely a statement of fact that these £1,000 are advanced by I in money. Wages must be paid in money by the respective capitalist producers. This money is then spent by the labourers for articles of consumption and serves the sellers of the articles of consumption as a medium of circulation in the conversion of their constant capital from commodity-capital into productive capital. True, it passes through many channels (shopkeepers, house owners, tax collectors, unproductive labourers, such as physicians, etc., who are needed by the labourer himself) and hence it flows only in part directly from the hands of labourers I into those of capitalist class II. Its flow may be retarded more or less and the capitalist may therefore require a new money-reserve. All this does not come under consideration in this basic form.

b) We assumed that at one time I advances another £400 in money for purchases from II and that this money returns to it, while at some other time II advances £400 for purchases from I and likewise recovers this money. This assumption must be made, for it would be arbitrary to presuppose the contrary, that capitalist class I or II should one-sidedly advance to the circulation of the money necessary for the exchange of their commodities. Since we have shown under subtitle 1 that one should reject as absurd the hypothesis that I would throw additional money into the circulation in order to turn 200 II_c(d) into money, it would appear that there was left only the seemingly still more absurd hypothesis that II itself was throwing the money into circulation, by which that constituent portion of the value of its commodities is converted into money which has to compensate the wear and tear of its fixed capital. For instance that portion of value which is lost by the spinning-machine of Mr. X in the process of production re-appears as a portion of the value of the yarn. The loss which his spinning-machine suffers in value, i.e., in wear and tear, on the one hand, should accumulate in his hands as money on the other. Now supposing that X buys £200 worth of cotton from Y and thus advances to the circulation £200 in money. Y then buys from him £200 worth of yarn, and these £200 now serve X as a fund to compensate the wear and tear of his machine. The thing would simply come down to this — that X, aside from his production, its product, and the sale of this product, keeps £200 in petto to make good to himself the depreciation of his spinning-machine, i.e., that in addition to losing £200 through the depreciation of his machine, he must also put up another £200 in money every year out of his own pocket in order to be able eventually to buy a new spinning-machine.

But the absurdity is only apparent. Class II consists of capitalists whose fixed capital is in the most diverse stages of its reproduction. In the case of some of them it has arrived at the stage where it must be entirely replaced in kind. In the case of the others it is more or less remote from that stage. All the members of the latter group have this in common, that their fixed capital is not actually reproduced, i.e., is not renewed in natura by a new specimen of the same kind, but that its value is successively accumulated in money. The first group is in quite the same (or almost the same, it does not matter here) position as when it started in business, when it came on the market with its money-capital in order to convert it into constant (fixed and circulating) capital on the one hand and into labour-power, into variable capital, on the other. They have once more to advance this money-capital to the circulation, i.e., the value of constant fixed capital as well as that of the circulating and variable capital.

Hence, if we assume that half of the £400 thrown into circulation by capitalist class II for exchange with I comes from those capitalists of II who have to renew not only by means of their commodities their means of production pertaining to the circulating capital, but also, by means of their money, their fixed capital in kind, while the other half of capitalists II replaces in kind with its money only the circulating portion of its constant capital, but does not renew in kind its fixed capital, then there is no contradiction in the statement that these returning £400 (returning as soon as I buys articles of consumption for it) are variously distributed among these two sections of II. They return to class II, but they do not come back into the same hands and are distributed variously within this class, passing from one of its sections to another.

One section of II has, besides the part of the means of production covered in the long run by its commodities, converted £200 in money into new elements of fixed capital in kind. As was the case at the start of the business the money thus spent returns to this section from the circulation only gradually over a number of years as the wear-and-tear portion of the value of the commodities to be produced by this fixed capital.

The other section of II however did not get any commodities from I for £200. But I pays it with the money which the first section of II spent for elements of its fixed capital. The first section of II has its fixed capital-value once more in renewed bodily form, while the second section is still engaged in accumulating it in money-form for the subsequent replacement of its fixed capital in kind.

The basis on which we now have to proceed after the previous exchanges is the remainder of the commodities still to be exchanged by both sides: 400_s on the part of I, and 400_c on the part of II. ^[44] We assume that II advances 400 in money for the exchange of these commodities amounting to 800. One half of the 400 (equal to 200) must be laid out under all circumstances by that section of II_c which has accumulated 200 in money as the wear-and-tear value and which has to reconvert this money into the bodily form of its fixed capital.

Just as constant capital-value, variable capital-value, and surplus-value — into which the value of commodity-capital II as well as I is divisible — may be represented by special proportional shares of commodities II and I respectively, so may, within the value of the constant capital itself, that portion of the value which is not yet to be converted into the bodily form of the fixed capital, but is rather to be accumulated for the time being in the form of money. A certain quantity of commodities II (in the present case therefore one half of the remainder, or 200) is here only a vehicle of this wear-and-tear value, which has to be precipitated in money by means of exchange. (The first section of capitalists II, which renews fixed capital in kind, may already have realised in this way — with the wear-and-tear part of the mass of commodities of which here only the rest still figures — a part of its wear-and-tear value, but it still has to realise 200 in money.)

As for the second half (equal to 200) of the £400 thrown into circulation by II in this final operation, it buys circulating components of constant capital from I. A portion of these £200 may be thrown into circulation by both sections of II, or only by the one which does not renew its fixed component of value in kind.

With these £400 there is thus extracted from I: 1) commodities amounting to £200, consisting only of elements of fixed capital; 2) commodities amounting to £200, replacing only natural elements of the circulating portion of the constant capital of II. So I has sold its entire annual product, so far as it is to be sold to II; but the value of one-fifth of it, £400, is now held by I in the form of money. This money however is surplus-value converted into money which must be spent as revenue for articles of consumption. Thus I buys with its £400 II’s entire commodity-value equal to 400; hence this money flows back to II by setting its commodities in motion.

We shall now suppose three cases, in which we shall call the section of capitalists II which replaces its fixed capital in kind “section 1,” and that section which stores up depreciation-value from fixed capital in money-form, “section 2.” The three cases are the following: a) that a share of the 400 still existing with II as a remnant in the shape of commodities must replace certain shares of the circulating parts of the constant capital for sections 1 and 2 (say, one half for each); b) that section 1 has already sold all its commodities, while section 2 still has to sell 400; c) that section 2 has sold all but the 200 which are the bearers of the depreciation value.

Then we have the following distributions:

a) Of the commodity-value 400_c, still in the hands of II, section 1 holds 100 and section 2 — 300; 200 out of the 300 represent depreciation. In that case section 1 originally laid out 300 of the £400 in money now returned by I to get commodities from II, namely 200 in money, for which it secured elements of fixed capital in kind from I, and 100 in money for the promotion of its exchange of commodities with I. Section 2 on the other hand advanced only ¼ of the 400, i.e., 100, likewise for the promotion of its commodity-exchange with I.

Section 1, then, advanced 300, and section 2 — 100 of the 400 in money.

Of these 400 there return however:

To section 1 — 100 i.e., only one-third of the money advanced by it. But it has in place of the other ⅔ a renewed fixed capital to the value of 200. Section l has given money to I for this element of fixed capital to the value of 200, but no subsequent commodities. So far as the 200 in money are concerned, section 1 confronts department I only as buyer, but not later on as seller. This money cannot therefore return to section 1; otherwise it would have received the elements of fixed capital from I as a gift.

With reference to the last third of the money advanced by it, section 1 first acted as a buyer of circulating constituent parts of its constant capital. With the same money I buys from it the remainder of its commodities worth 100. This money, then, flows back to it (section 1 of department II) because it acts as a vendor of commodities directly after having acted as a buyer. If this money did not return, then II (section 1) would have given to I, for commodities amounting to 100, first 100 in money, and then into the bargain, 100 in commodities, i.e., II would have given away its commodities to I as a present.

On the other hand section 2, which laid out 100 in money receives back 300 in money: 100 because first as a buyer it threw 100 in money into circulation, and receives them back as a seller; 200, because it functions only as a seller of commodities to that amount, but not as a buyer. Hence the money cannot flow back to I. The fixed capital depreciation is thus balanced by the money thrown into circulation by II (section 1) in the purchase of elements of fixed capital. But it reaches the hands of section 2 not as money of section 1, but as money belonging to class I.

b) On this assumption the remainder of II is so distributed that section 1 has 200 in money and section 2 has 400 in commodities.

Section 1 has sold all of its commodities, but 200 in money are a transformed shape of the fixed component part of its constant capital which it has to renew in kind. Hence it acts here only as a buyer and receives instead of its money commodity I to the same value in natural elements of its fixed capital. Section 2 has to throw only £200 into circulation, as a maximum (if I does not advance any money for commodity-exchange between I and II), since for half of its commodity-value it is only a seller to I, not a buyer from I.

There return to section 2 from the circulation £400: 200, because it has advanced them as a buyer and receives them back as a seller of 200 in commodities; 200, because it sells commodities to the value of 200 to I without obtaining an equivalent in commodities from I.

c) Section 1 has 200 in money and 200 in commodities. Section 2 has 200 c (d) in commodities.

On this supposition section 2 does not have any advance to make in money, because vis-à-vis I it no longer acts at all as buyer but only as seller, hence has to wait until someone buys from it.

Section 1 advances £400 in money: 200 for mutual commodity-exchange with I, 200 as mere buyer from I. With the last £200 in money it purchases the elements of fixed capital.

With £200 in money I buys from section 1 commodities for 200, so that the latter thus recovers the £200 in money it had advanced for this commodity-exchange. And I buys with the other £200, which it has likewise received from section 1, commodities to the value of 200 from section 2, whereby the latter’s wear and tear of fixed capital is precipitated in the form of money.

The matter is not altered in the least if it is assumed that, in case c), class I instead of II (section 1) advances the 200 in money to promote the exchange of the existing commodities. If I buys in that event first 200 in commodities from II, section 2, on the assumption that this section has only this commodity remnant left to sell — then the £200 do not return to I, since II, section 2, does not act again as buyer. But II, section 1, has in that case £200 in money to spend in buying and 200 in commodities for exchange purposes, thus making a total of 400 for trading with I, £200 in money then return to I from II, section 1. If I again lays them out in the purchase of 200 in commodities from II, section 1, they return to I as soon as II, section 1, takes the second half of the 400 in commodities off I’s hands. Section 1 (II) has spent £200 in money as a mere buyer of elements of fixed capital; they therefore do not return to it, but serve to turn the 200_c, the commodity remnant of II, section 2, into money, while the £200, the money laid out by I for the exchange of commodities, return to I via II, section 1, not via II, section 2. In the place of its commodities of 400 there has returned to it a commodity equivalent amounting to 400; the £200 in money advanced by it for the exchange of 800 in commodities have likewise returned to it. Everything is therefore all right.

---

The difficulty encountered in the exchange

was reduced to the difficulty on exchanging remainders:

I. …………400_s.
II. (1) 200 in money + 200_c in commodities + (2) 200_c in
commodities. Or, to make the matter still clearer:
I. 200_s + 200_s.
II. (1) 200 in money + 200_c in commodities + (2) 200_c in commodities.

Since in II, section 1, 200_c in commodities are exchanged for 200 I_s (in commodities) and since all the money circulating in this exchange of 400 in commodities between I and II returns to him who advanced it, I or II, this money, being an element of the exchange between I and II, is actually not an element of the problem which is troubling us here. Or, to present it differently: Supposing in the exchange between 200 I_s (commodities) and 200 II_c (commodities of II, section 1) the money functions as a means of payment, not as a means of purchase and therefore also not as a “medium of circulation,” in the strictest sense of the words. It is then clear, since the commodities 200 I_s and 200 II_c (section 1) are equal in magnitude of value, that means of production worth 200 are exchanged for articles of consumption worth 200, that money functions here only ideally, and that neither side really has to throw any money into the circulation for the payment of any balance. Hence the problem presents itself in its pure form only when we strike off on both sides, I and II, the commodities 200 I_s and their equivalent, the commodities 200 II_c (section 1).

After the elimination of these two amounts of commodities of equal value (I and II), which balance each other, there is left for exchange a remainder in which the problem evinces its pure form, namely,

I. 200_s in commodities.

II. (1) 200_c in money plus (2) 200_c in commodities.

It is evident here that II, section 1, buys with 200 in money the component parts of its fixed capital, 200 I_s. The fixed capital of II, section 1, is thereby renewed in kind and the surplus-value of I, worth 200, is converted from the commodity-form (means of production, or, more precisely, elements of fixed capital) into the money-form. With this money I buys articles of consumption from II, section 2, and the result for II is that for section I a fixed component part of its constant capital has been renewed in kind, and that for section 2 another component part (which compensates for the depreciation of its fixed capital) has been precipitated in money-form. And this continues every year until this last component part, too, has to be renewed in kind.

The condition precedent is here evidently that this fixed component part of constant capital II, which is reconverted into money to the full extent of its value and therefore must be renewed in kind each year (section 1), should be equal to the annual depreciation of the other fixed component part of constant capital II, which continues to function in its old bodily form and whose wear and tear, depreciation in value, which it transfers to the commodities in whose production it is engaged, is first to be compensated in money. Such a balance would seem to be a law of reproduction on the same scale. This is equivalent to saying that in class I, which puts out the means of production, the proportional division of labour must remain unchanged, since it produces on the one hand circulating and on the other fixed component parts of the constant capital of department II.

Before we analyse this more closely we must see what turn the matter takes if the remainder of II_c (1) is not equal to the remainder of II_c (2), and may be larger or smaller. Let us study the two cases one after the other.

First Case

I. 200_s.

II. (1) 220_c (in money) plus (2) 200_c (in commodities).

In this case II_c (1) buys with £200 in money the commodities 200 I_s, and I buys with the same money the commodities 200 II_c (2), i.e., that portion of the fixed capital which is to be precipitated in money. This portion is thus converted into money. But 20 II_c (1) in money cannot be reconverted into fixed capital in kind.

It seems this misfortune can be remedied by setting the remainder of I_s at 220 instead of at 200, so that only 1,780 instead of 1,800 of the 2,000 I would be disposed of by former exchange. We should then have:

I. 220_s.

II. (1) 220_c (in money) plus (2) 200_c (in commodities).

II_c, section 1, buys with £220 in money the 220 I_s and I buys then with £200 the 200 II_c (2) in commodities. But now £20 in money remain on the side of I, a portion of surplus-value which it can hold on to only in the form of money, without being able to spend it for articles of consumption. The difficulty is thus merely transferred from II_c, section 1, to I_s.

Let us now assume on the other hand that II_c, section 1, is smaller than II_c, section 2: then we have the

Second Case

I. 200_s (in commodities).

I. (1) 180_c (in money) plus (2) 200_c (in commodities).

With £180 in money II (section 1) buys commodities, 180 I_s. With this money I buys commodities of the same value from II (section 2), hence 180 II_c (2). There remain 20 I_s unsaleable on one side, and also 20 II_c (2) on the other — commodities worth 40, not convertible into money.

It would not help us to make the remainder of I equal to 180. True, no surplus would then be left in 1, but now as before a surplus of 20 would remain in II_c (section 2), unsaleable, inconvertible into money. In the first case, where II (1) is greater than II (2), there remains on the side of II_c (1) a surplus in money-form not reconvertible into fixed capital; or, if the remainder I_s is assumed to be equal to II_c (1), there remains on the side of I_s the same surplus in money-form, not convertible into articles of consumption.

In the second case, where II_c (1) is smaller than II_c (2), there remains a money deficit on the side of 200 I_s and II_c (2), and an equal surplus of commodities on both sides, or, if the remainder of I_s is assumed to be equal to II_c (1), there remains a money deficit and a surplus of commodities on the side of II_c (2).

If we assume the remainders of I, always to be equal to II_c (1) — since production is determined by orders and reproduction is not altered in any way if one year there is a greater output of fixed component parts and the next a greater output of circulating component part of constant capitals II and I — then in the first case I_s can be reconverted into articles of consumption only if I buys with it a portion of the surplus-value of II and II accumulates it in money instead of consuming it; and in the second case matters can be remedied only if I spends the money itself, an assumption we have already rejected.

If II_c (1) is greater than II_c (2), foreign commodities must be imported to realise the money-surplus in I_s. If, conversely, II_c (1) is smaller than II_c (2), commodities II (articles of consumption) will have to be exported to realise the depreciation part of II_c in means of production. Consequently in either case foreign trade is necessary.

Even granted that for a study of reproduction on an unchanging scale it is to be supposed that the productivity of all lines of industry, hence also the proportional value-relations of their commodities, remain constant, the two last-named cases, in which II_c (1) is either greater or smaller than II_c (2), will nevertheless always be of interest for production on an enlarged scale where these cases may infallibly be encountered.

3. Results

The following is to be noted with reference to replacement of fixed capital:

If — all other things, and not only the scale of production, but above all the productivity of labour, remaining the same — a greater part of the fixed element of II_c expires than did the year before, and hence a greater part must be renewed in kind, then that part of the fixed capital which is as yet only on the way to its demise and is to be replaced meanwhile in money until its day of expiry, must shrink in the same proportion, inasmuch as it was assumed that the sum (and the sum of the value) of the fixed part of capital functioning in II remains the same. This however brings with it the following circumstances. First: If the greater part of commodity-capital I consists of elements of the fixed capital of II_c, then a correspondingly smaller portion consists of circulating component parts of II_c, because the total production of I for II_c remains unchanged. If one of these parts increases the other decreases, and vice versa. On the other hand the total production of class II also retains the same volume. But how is this possible if its raw materials, semi-finished products, and auxiliary materials (i.e., the circulating elements of constant capital II) decrease? Second: the greater part of fixed capital II_c, restored in its money-form, flows to I to be reconverted from its money-form into its bodily form. So there is a greater flow of money to I, aside from the money circulating between I and II merely for the exchange of their commodities; more money which is not instrumental in effecting mutual commodity exchange, but acts only one-sidedly in the function of a means of purchase. But then the mass of commodities of II_c, which is the bearer of the wear-and-tear equivalent — and thus the mass of commodities II that must only be exchanged for money I and not for commodities I — would also shrink proportionately. More money would have flown from II to I as mere means of purchase, and there would be fewer commodities II in relation to which I would have to function as a mere buyer. A greater portion of I_s — for I_v is already converted into commodities II — would not therefore be convertible into commodities II, but would persist in the form of money.

The opposite 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, needs no further discussion.

There would be a crisis — a crisis of over-production — in spite of reproduction on an unchanging scale.

In short, if under simple reproduction and other unchanged conditions — particularly under unchanged productive power, total volume and intensity of labour — no constant proportion is assumed between expiring fixed capital (to be renewed) and fixed capital still continuing to function in its old bodily form (merely adding to the products value in compensation of its depreciation), then, in the one case the mass of circulating component parts to be reproduced would remain the same while the mass of fixed component parts to be reproduced would be increased. Therefore the total production I would have to grow or, even aside from money-relations, there would be a deficit in reproduction.

In the other case, if the size of fixed capital II to be reproduced in kind should proportionately decrease and hence the component part of fixed capital II, which must now be replaced only in money, should increase in the same ratio, then the quantity of the circulating component parts of constant capital II reproduced by I would remain unchanged, while that of the fixed component parts to be reproduced would decrease. Hence either decrease in aggregate production of I, or surplus (as previously deficit) and surplus that is not to be converted into money.

True, the same labour can, in the first case, turn out a greater product through increasing productivity, extension or intensity, and the deficit could thus be covered in that case. But such a change would not take place without a shifting of capital and labour from one line of production of I to another, and every such shift would call forth momentary disturbances. Furthermore (in so far as extension and intensification of labour would mount), I would have for exchange more of its own value for less of II’s value. Hence there would be a depreciation of the product of I.

The reverse would take place in the second case, where I must curtail its production, which implies a crisis for its labourers and capitalists, or produce a surplus, which again spells crisis. Such surplus is not an evil in itself, but an advantage; however it is an evil under capitalist production.

Foreign trade could help out in either case: in the first case in order to convert commodities I held in the form of money into articles of consumption, and in the second case to dispose of the commodity surplus. But since foreign trade does not merely replace certain elements (also with regard to value), it only transfers the contradictions to a wider sphere and gives them greater latitude.

Once the capitalist form of reproduction is abolished, it is only a matter of the volume of the expiring portion — expiring and therefore to be reproduced in kind — of fixed capital (the capital which in our illustration functions in the production of articles of consumption) varying in various successive years. If it is very large in a certain year (in excess of the average mortality, as is the case with human beings), then it is certainly so much smaller in the next year. The quantity of raw materials, semi-finished products, and auxiliary materials required for the annual production of the articles of consumption — provided other things remain equal — does not decrease in consequence. Hence the aggregate production of means of production would have to increase in the one case and decrease in the other. This can be remedied only by a continuous relative over-production. There must be on the one hand a certain quantity of fixed capital produced in excess of that which is directly required; on the other hand, and particularly, there must be a supply of raw materials, etc., in excess of the direct annual requirements (this applies especially to means of subsistence). This sort of over-production is tantamount to control by society over the material means of its own reproduction. But within capitalist society it is an element of anarchy.

This illustration of fixed capital, on the basis of an unchanged scale of reproduction, is striking. A disproportion of 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.

Notes

44. These figures again do not coincide with those previously assumed. But this is immaterial since it is merely a question of proportions. — F.E.

XII. The Reproduction of the Money Material

One factor has so far been entirely disregarded, namely the annual reproduction of gold and silver. As mere material for articles of luxury, gilding, etc., there is as little occasion for special mention of them as there is of mentioning any other products. But they play an important role as money material and hence as potential money. For the sake of simplicity we here regard only gold as material for money.

According to older data the entire annual production of gold amounted to 800,000-900,000 lbs., equal roundly to 1,100 or 1,250 million marks. But according to Soetbeers it amounted to only 170,675 kilograms, valued at roundly 476 million marks, based on the average for 1871 to 1875. Of this amount Australia supplied roundly 167, the United States 166, and Russia 93 million marks. The remainder is distributed over various countries in amounts of less than 10 million marks each. During the same period, the annual production of silver amounted to somewhat less than 2 million kilograms, valued at 354½ million marks. Of this amount, Mexico supplied roundly 108, the United States 102, South America 67, Germany 26 million, etc.

Among the countries with predominantly capitalist production only the United States is a producer of gold and silver. The capitalist countries of Europe obtain almost all their gold, and by far the greater part of their silver, from Australia, the United States, Mexico, South America, and Russia.

But we take it that the gold mines are in a country with capitalist production whose annual reproduction we are here analysing, and for the following reasons:

Capitalist production does not exist at all without foreign commerce. But when one assumes normal annual reproduction on a given scale one also assumes that foreign commerce only replaces home products by articles of other use or bodily form, without affecting value-relations, hence without affecting either the value-relations in which the two categories “means of production” and “articles of consumption” mutually exchange, or the relations between constant capital, variable capital, and surplus-value, into which the value of the product of each of these categories may be divided. The involvement of foreign commerce in analysing the annually reproduced value of products can therefore only confuse without contributing any new element of the problem, or of its solution. For this reason it must be entirely discarded. And consequently gold too is to be treated here as a direct element of annual reproduction and not as a commodity element imported from abroad by means of exchange.

The production of gold, like that of metals generally, belongs in class I, the category which embraces the production of means of production. Supposing the annual production of gold is equal to 30 (for convenience’s sake; actually the figure is much too high compared to the other figures of our scheme). Let this value be divisible into 20_c + 5_v + 5_s; 20_c is to be exchanged for other elements of I_c and this is to be studied later; but the 5_v + 5_s (I) are to be exchanged for elements of II_c, i.e., articles of consumption.

As for the 5_v, every gold-producing establishment begins by buying labour-power. This is done not with gold produced by this particular enterprise, but with a portion of the money-supply in the land. The labourers buy with this 5_v articles of consumption from II, and that buys with this money means of production from I. Let II buy gold from I to the amount of 2 as commodity material, etc. (component part of its constant capital), then 2_v flow back to gold producers I in money which has already belonged to the circulation. If II does not buy any more material from I, then I buys from II by throwing its gold into circulation as money, since gold can buy any commodity. The difference is only that I does not act here as a seller, but only as a buyer. Gold miners I can always get rid of their commodity; it is always in a directly exchangeable form.

Let us assume that some producer of yarn has paid 5_v to his labourers, who create for him in return — aside from the surplus-value — a yarn product equal to 5. For 5 the labourers buy from II_c, and the latter buys yarn from I for 5 in money, and thus 5 flows back in money to the spinner of yarn. Now in the case assumed I g (as we shall designate the producers of gold) advances to its labourers 5_v in money which previously belonged to the circulation. The labourers spend it for articles of consumption, but only 2 of the 5 return from II to I g. However I g can begin the process of reproduction anew, just as well as the producer of yarn. For his labourers have supplied him with 5 in gold, 2 of which he sold and 3 of which he still has, so that he has but to coin ^[45] them, or turn them into bank-notes to have his entire variable capital again directly in his hands in money-form, without the further intervention of II.

Even this first process of annual reproduction has wrought a change in the quantity of money actually or virtually belonging to the circulation. We assumed that II_c bought 2_v (I g) as material, and that I g has again laid out 3 — as the money-form of its variable capital — within II. Hence 3 of the mass of money supplied by the new gold production remained within II and did not return to I. According to our assumption II has satisfied its requirements in gold material. The 3 remain in its hands as a gold hoard. Since they cannot constitute any element of its constant capital, and since II had previously enough money-capital for the purchase of labour-power; since furthermore these additional 3 g, with the exception of the depreciation element, have no function to perform within II_c, for a portion of which they were exchanged (they could only serve to cover the depreciation element pro tanto, if II_c (1) should be smaller than II_c (2), which would be accidental); on the other hand, however, namely with the exception of the depreciation element, the entire commodity-product II_c, must be exchanged for means of production I_{(v + s)} — this money must be transferred in its entirety from II_c to II_s, no matter whether it exists in necessities of life or articles of luxury, and vice versa corresponding commodity-value must be transferred from II_s to II_c. Result: A portion of the surplus-value is stored up as a money-hoard.

In the second year of reproduction, provided the same proportion of annually produced gold continues to be used as material, 2 will again flow back to I g, and 3 will be replaced in kind, i.e., will be released again in II as a hoard, etc.

With reference to the variable capital in general: The capitalist I g, like every other capitalist, must continually advance this capital in money for the purchase of labour-power. But so far as this v is concerned, it is not he but his labourers who have to buy from II. It can therefore never happen that he should act as a buyer, throwing gold into II without the initiative of II. But to the extent that II buys material from him, and must convert constant capital II c into gold material, a portion of (I g)_v flows back to him from II in the same way that it does to other capitalists of I. And so far as this is not the case, he replaces his v in gold directly from his product. But to the extent that the v advanced in money does not flow back to him from II, a portion of the already available means of circulation (received from I and not returned to I) is converted in II into a hoard and for that reason a portion of its surplus-value is not expended for articles of consumption. Since new gold-mines are continually opened or old ones re-opened, a certain portion of the money to be laid out by I g in v is always part of the money existing prior to the new gold production; it is thrown by I g through its labourers into II, and unless it returns from II to I g it forms there an element of hoard formation.

But as for (I g)_s, I g can always act here as buyer. He throws his s in the shape of gold into circulation and withdraws from it in return articles of consumption II_c. In II the gold is used in part as material, and thus functions as a real element of the constant constituent portion c of the productive capital. When this is not the case it becomes once more an element of hoard formation as a part of II_s persisting in the form of money. We see, then, aside from I_c which we reserve for a later analysis, ^[46] that even simple reproduction, excluding accumulation proper, namely reproduction on an extended scale, necessarily includes the storing up, or hoarding, of money. And as this is annually repeated, it explains the assumption from which we started in the analysis of capitalist production, namely, that at the beginning of the reproduction a supply of money corresponding to the exchange of commodities is in the hands of capitalist classes I and II. Such an accumulation takes place even after deducting the amount of gold being lost through the depreciation of money in circulation.

It goes without saying that the more advanced capitalist production, the more money is accumulated in all hands, and therefore the smaller the quantity annually added to this hoard by the production of new gold, although the absolute quantity thus added may be considerable. We revert once more in general terms to the objection raised against Tooke; how is it possible that every capitalist draws a surplus-value in money out of the annual product, i.e., draws more money out of the circulation than he throws into it, since in the long run the capitalist class itself must be regarded as the source of all the money thrown into circulation?

We reply by summarising the ideas developed previously (in Chapter XVII):

1) The only assumption essential here, namely, that in general there is money enough for the exchange of the various elements of the mass of the annual reproduction, is not affected in any way by the fact that a portion of the commodity-value consists of surplus-value. Supposing that the entire production belonged to the labourers themselves and that their surplus-labour were therefore only surplus-labour for themselves, not for the capitalists, then the quantity of circulating commodity-values would be the same and, other things being equal, would require the same amount of money for their circulation. The question in either case is therefore only: Where does the money come from to make possible the exchange of this total of commodity-values? It is not at all: where does the money come from to turn the surplus-value into money? It is true, to revert to it once more, that every individual commodity consists of c + v + s, and the circulation of the entire quantity of commodities therefore requires on the one hand a definite sum of money for the circulation of the capital c + v and on the other hand another sum for the circulation of the revenue of the capitalists, the surplus-value s. For the individual capitalist, as well as for the entire capitalist class; the money in which they advance capital is different from the money in which they spend their revenue. Where does the latter money come from? Simply from the mass of money in the hands of the capitalist class, hence by and large from the total mass of money in society, a portion of which circulates the revenue of the capitalists. We have seen above that every capitalist establishing a new business recoups the money which he spent for his maintenance in articles of consumption as money serving to convert his surplus-value into money, once his business is fairly under way. But generally speaking the whole difficulty has two sources:

In the first place, if we analyse only the circulation and the turnover of capital, thus regarding the capitalist merely as a personification of capital, not as a capitalist consumer and man about town, we see indeed that he is continually throwing surplus-value into circulation as a component part of his commodity-capital, but we never see money as a form of revenue in his hands. We never see him throwing money into circulation for the consumption of his surplus-value.

In the second place, if the capitalist class throws a certain amount of money into circulation in the shape of revenue, it looks as if it were paying an equivalent for this portion of the total annual product, and this portion thereby ceases to represent surplus-value. But the surplus-product in which the surplus-value is represented does not cost the capitalist class anything. As a class, the capitalists possess and enjoy it gratuitously, and the circulation of money cannot alter this fact. The alteration brought about by this circulation consists merely in the fact that every capitalist, instead of consuming his surplus-product in kind, a thing which is generally impossible, draws commodities of all sorts up to the amount of the surplus-value he has appropriated out of the general stock of the annual surplus-product of society and appropriates them. But the mechanism of the circulation has shown that while the capitalist class throws money into circulation for the purpose of spending its revenue, it also withdraws this money from the circulation, and can continue the same process over and over again; so that, considered as a class, capitalists remain as before in possession of the amount of money necessary for the conversion of surplus-value into money. Hence, if the capitalist not only withdraws his surplus-value from the commodity-market in the form of commodities for his consumption-fund, but at the same time gets back the money with which he has paid for these commodities, he has evidently withdrawn the commodities from circulation without paying an equivalent for them. They do not cost him anything, although he pays money for them. If I buy commodities for one pound sterling and the seller of the commodities gives me the pound back for surplus-product which I got for nothing, it is obvious that I received the commodities gratis. The constant repetition of this operation does not alter the fact that I constantly withdraw commodities and constantly remain in possession of the pound, although I part with it temporarily to purchase commodities. The capitalist constantly gets this money back as a money equivalent of surplus-value that has not cost him anything.

We have seen that with Adam Smith the entire value of the social product resolves itself into revenue, into v + s, so that the constant capital-value is set down as zero. It follows necessarily that the money required for the circulation of the yearly revenue must also suffice for the circulation of the entire annual product, that therefore in our illustration the money required for the circulation of the articles of consumption worth 3,000 also suffices for the circulation of the entire annual product worth 9,000. This is indeed the opinion of Adam Smith, and it is repeated by Th. Tooke. This erroneous conception of the ratio of the quantity of money required for the realisation of revenue to the quantity of money required to circulate the entire social product is the necessary result of the uncomprehended, thoughtlessly conceived manner in which the various elements of material and value of the total annual product are reproduced and annually replaced. It has therefore already been refuted.

Let us listen to Smith and Tooke themselves.

Smith says in Book II, Ch. 2:

“The circulation of every country may be considered as divided into two different branches: the circulation of the dealers with one another, and the circulation between the dealers and the consumers. Though the same pieces of money, whether paper or metal, may be employed sometimes in the one circulation and sometimes in the other; yet as both are constantly going on at the same time, each requires a certain stock of money of one kind or another, to carry it on. The value of the goods circulated between the different dealers, never can exceed the value of those circulated between the dealers and the consumers; whatever is bought by the dealers, being ultimately destined to be sold to the consumers. The circulation between the dealers, as it is carried on by wholesale, requires generally a pretty large sum for every particular transaction. That between the dealers and the consumers, on the contrary, as it is generally carried on by retail, frequently requires but very small ones, a shilling, or even a halfpenny, being often sufficient. But small sums circulate much faster than large ones… Though the annual purchases of all the consumers, therefore, are at least” [this “at least” is rich] “equal in value to those of all the dealers, they can generally be transacted with a much smaller quantity of money;” etc.

Th. Tooke remarks to this passage from Adam Smith (in An Inquiry into the Currency Principle, London, 1844, pp. 34 to 36 passim):

“There can be no doubt that the distinction here made is substantially correct … the interchange between dealers and consumers including the payment of wages, which constitute the principal means of the consumers… All the transactions between dealers and dealers, by which are to be understood all sales from the producer or importer, through all the stages of intermediate processes of manufacture or otherwise to the retail dealer or the exporting merchant, are resolvable into movements or transfers of capital. Now transfers of capital do not necessarily suppose, nor do actually as a matter of fact entail, in the great majority of transactions, a passing of money, that is, bank-notes or coin — I mean bodily, and not by fiction — at the time of transfer… The total amount of the transactions between dealers and dealers must, in the last resort, be determined and limited by the amount of those between dealers and consumers.”

If this last sentence stood by itself, one might think Tooke simply stated the fact that there was a ratio between the exchanges among dealers and those among dealers and consumers, in other words, between the value of the total annual revenue and the value of the capital with which it is produced. But this is not the case. He explicitly endorses the view of Adam Smith. A special criticism of his theory of circulation is therefore superfluous.

2) Every industrial capital, on beginning its career, throws at one fling money into circulation for its entire fixed constituent part, which it recovers but gradually, in the course of years, by the sale of its annual products. Thus it throws at first more money into circulation than it draws from it. This is repeated at every renewal of the entire capital in kind. It is repeated every year for a certain number of enterprises whose fixed capital is to be renewed in kind. It is repeated piecemeal at every repair, every only partial renewal of the fixed capital. While, then, on the one hand more money is withdrawn from circulation than is thrown into it, the opposite takes place on the other hand.

In all lines of industry whose production period — as distinguished from its working period — extends over a long term, money is continually thrown into circulation during this period by the capitalist producers, partly in payment for labour-power employed, partly in the purchase of means of production to be consumed. Means of production are thus directly withdrawn from the commodity-market, and articles of consumption, partly indirectly, by the labourers spending their wages, and partly directly, by the capitalists, who do not by any means suspend their consumption, although they do not simultaneously throw any equivalent in commodities on the market. During this period the money thrown by them into circulation serves to convert commodity value, including the surplus-value embodied in it, into money. This factor becomes very important in an advanced stage of capitalist production in the case of long-drawn out enterprises, such as are undertaken by stock companies, etc., for instance the construction of railways, canals, docks, large municipal buildings, iron shipbuilding, large-scale drainage of land, etc.

3) While the other capitalists, aside from the investment in fixed capital, draw more money out of the circulation than they threw into it on purchasing the labour-power and the circulating elements, the gold- and silver-producing capitalists throw only money into the circulation, aside from the precious metal which serves as raw material, while they withdraw only commodities from it. The constant capital, with the exception of the depreciated portion, the greater portion of the variable capital and the entire surplus-value, save the hoard which may be accumulating in their own hands, are all thrown into circulation as money.

4) On the one hand all kinds of things circulate as commodities which were not produced during the given year, such as land lots, houses, etc.; furthermore goods whose period of production exceeds one year, such as cattle, timber, wine, etc. For this and other phenomena it is important to establish that aside from the quantity of money required for the immediate circulation there is always a certain quantity in a latent non-functioning state which may start functioning if the impulse is given. Furthermore, the value of such products circulates often piecemeal and gradually, like the value of houses in the rents over a number of years.

On the other hand not all movements of the process of reproduction are effected through the circulation of money. The entire process of production, once its elements have been procured, is excluded from circulation. All products which the producer himself consumes directly, whether individually or productively, are also excluded. Under this head comes also the feeding of agricultural labourers in kind.

Therefore the quantity of money which circulates the annual product, exists in society, having been gradually accumulated. It does not belong to the value produced during the given year, except perhaps the gold used to make good the loss of depreciated coins.

This exposition presupposes the exclusive circulation of precious metals as money, and in this circulation the simplest form of cash purchases and sales; although money can function also as a means of payment, and has actually done so in the course of history, even on the basis of circulating plain metal coin, and though a credit system and certain aspects of its mechanism have developed upon that basis. This assumption is not made from mere considerations of method, although these are important enough, as demonstrated by the fact that Tooke and his school, as well as their opponents, were continually compelled in their controversies concerning the circulation of bank-notes to revert to the hypothesis of a purely metallic circulation. They were forced to do so post festum and did so very superficially, which was unavoidable, because the point of departure in their analysis thus played merely the role of an incidental point.

But the simplest study of money — circulation presented in its primitive form — and this is here an immanent element of the process of annual reproduction — demonstrates:

a) Advanced capitalist production, and hence the domination of the wage system, being assumed, money-capital obviously plays a prominent role, since it is the form in which the variable capital is advanced. In step with the development of the wage system, all products are transformed into commodities and must therefore — with a few important exceptions — pass in their entirety through the transformation into money as one phase of their movement. The quantity of circulating money must suffice for this conversion of commodities into money, and the greater part of this mass is furnished in the form of wages, of the money advanced by the industrial capitalists as the money-form of the variable capital in payment for labour-power, and which functions in the hands of the labourers, generally speaking, only as a medium of circulation (means of purchase). It is quite the opposite of natural economy such as is predominant under every form of bondage (including serfdom), and still more so in more or less primitive communities, whether or not they are attended by conditions of bondage or slavery.

In the slave system, the money-capital invested in the purchase of labour-power plays the role of the money-form of the fixed capital, which is but gradually replaced as the active period of the slave’s life expires. Among the Athenians therefore, the gain realised by a slave owner directly through the industrial employment of his slave, or indirectly by hiring him out to other industrial employers (e.g., for mining), was regarded merely as interest (plus depreciation allowance) on the advanced money-capital, just as the industrial capitalist under capitalist production places a portion of the surplus-value plus the depreciation of his fixed capital to the account of interest and replacement of his fixed capital. This is also the rule with capitalists offering fixed capital (houses, machinery, etc.) for rent. Mere household slaves, whether they perform necessary services or are kept as luxuries for show, are not considered here. They correspond to the modern servant class. But the slave system too — so long as it is the dominant form of productive labour in agriculture, manufacture, navigation, etc., as it was in the advanced states of Greece and Rome — preserves an element of natural economy. The slave market maintains its supply of the commodity labour-power by war, piracy, etc., and this rapine is not promoted by a process of circulation, but by the actual appropriation of the labour-power of others by direct physical compulsion. Even in the United States, after the conversion of the buffer territory between the wage-labour states of the North and the slavery states of the South into a slave-breeding region for the South, where the slave thrown on the market thus became himself an element of the annual reproduction, this did not suffice for a long time, so that the African slave trade was continued as long as possible to satisfy the market.

b) The fluxes and refluxes of money taking place spontaneously on the basis of capitalist production in the exchange of the annual products; the one-time advances of fixed capitals to the full extent of their value and the successive extraction of this value from the circulation in the course of years, in other words, their gradual reconstitution in money-form by the annual formation of hoards, a hoarding which is essentially different from the parallel accumulation of hoards based on the annual production of new gold; the different lengths of time for which, depending on the duration of the production period of the commodities, money must be advanced, and consequently always hoarded anew before it can be recovered from the circulation by the sale of the commodities; the different lengths of time for which money must be advanced, if only resulting from the different distances of the places of production from their markets; furthermore the differences in the magnitude and period of the reflux according to the condition or relative size of the productive supplies in the various lines of business and in the individual businesses of the same line, and hence the lengths of periods for which the elements of constant capital are bought, and all this during the year of reproduction — all these different aspects of spontaneous movement had only to be noted, and made conspicuous, through experience, in order to give rise to a methodical use of the mechanical appliances of the credit system and to a real fishing out of available loanable capitals.

To this must be added the difference between those lines of business whose production proceeds under otherwise normal conditions continuously on the same scale, and those which apply varying quantities of labour-power in different periods of the year, such as agriculture.

XIII. Destutt De Tracy’s Theory of Reproduction

Let us illustrate the confused and at the same time boastful thoughtlessness of political economists analysing social reproduction, with the example of the great logician Destutt de Tracy (Vol. 1, Ch. V, Note), whom even Ricardo took seriously and called a very distinguished writer. (Principles, p. 333.)

This “distinguished writer” gives the following explanations concerning the entire process of social reproduction and circulation:

“I shall be asked how these industrial entrepreneurs can make such large profits and out of whom they can draw them. I reply that they do so by selling everything which they produce for more than it has cost to produce; and that they sell:

“1) to one another for the entire portion of their consumption intended for the satisfaction of their needs, which they pay with a portion of their profits;

“2) to the wage-labourers, both those whom they pay and those whom the idle capitalists pay; from these wage-labourers they thus extract their entire wages except perhaps their small savings;

“3) to the idle capitalists who pay them with the portion of their revenue which they have not yet given to the wage-labourers employed by them directly; so that the entire rent which they pay them annually flows back to them in this way or the other.” (Destutt de Tracy, Traité de la volonté et de ses effets, Paris, 1826, p. 239.)

In other words, the capitalists enrich themselves by mutually getting the best of one another in the exchange of that portion of their surplus-value which they set apart for their individual consumption or consume as revenue. For instance, if this portion of their surplus-value or of their profits is equal to £400, this sum of £400 is supposed to grow to, say, £500 by each stockholder of the £400 selling his share to another 25 per cent in excess. But since all do the same, the result will be the same as if they had sold to one another at the real values. They merely need £500 in money for the circulation of commodities worth £400, and this would seem to be rather a method of impoverishing than of enriching themselves since it compels them to keep a large portion of their total wealth unproductively in the useless form of circulation media. The whole thing boils down to this, that despite the all-round nominal rise in the price of their commodities the capitalist class has only £400 worth of commodities to divide among themselves for their individual consumption, but that they do one another the favour of circulating £400 worth of commodities by means of a quantity of money which is required to circulate £500 worth of commodities.

And this quite aside from the fact that a “portion of their profits,” and therefore in general a supply of commodities in which there exist profits, is here assumed. But Destutt undertook precisely to tell us where those profits come from. The quantity of money required to circulate the profit is a very subordinate question. The quantity of commodities in which the profit is represented seems to have its origin in the circumstance that the capitalists not only sell these commodities to one another, although even this much is quite fine and profound, but sell them to one another at prices which are too high. So we now know one source of the enrichment of the capitalists. It is on a par with the secret of the “Entspektor Bräsig”” ^[47] that the great poverty is due to the great “pauvreté.”

2) The same capitalists furthermore sell

“to the wage-labourers, both those whom they pay and those whom the idle capitalists pay; from these wage-labourers they thus recover their entire wages, except perhaps their small savings.”

According to Monsieur Destutt, then, the reflux of the money-capital, the form in which the capitalists have advanced wages to the labourers, is the second source of the enrichment of these capitalists. If therefore the capitalists paid for instance £100 to their labourers as wages and if these same labourers then buy from the same capitalists commodities of this same value, of £100, so that the sum of £100 which the capitalists had advanced as buyers of labour-power returns to the capitalists when they sell to the labourers £100 worth of commodities, the capitalists get richer thereby. It would appear to anyone endowed with ordinary common sense that they only find themselves once more in possession of their £100, which they owned before this procedure. At the beginning of the procedure they have £100 in money. For these £100 they buy labour-power. The labour bought produces for these £100 in money commodities of a value which, so far as we now know, amounts to £100. By selling the £100 worth of commodities to their labourers the capitalists recover £100 in money. The capitalists then have once more £100 in money, and the labourers have £100 worth of commodities which they have themselves produced. It is hard to understand how that can make the capitalists any richer. If the £100 in money did not flow back to them they would first have to pay to the labourers £100 in money for their labour and secondly to give them the product of this labour, £100 worth of articles of consumption, for nothing. The reflux of this money might therefore at best explain why the capitalists do not get poorer by this transaction, but by no means why they get richer by it.

To be sure it is another question how the capitalists came into possession of the £100 and why the labourers, instead of producing commodities for their own account, are compelled to exchange their labour-power for these £100. But this, for a thinker of Destutt’s calibre, is self-explanatory.

Destutt himself is not quite satisfied with the solution. After all, he did not tell us that one gets richer by spending a sum of money, a hundred pounds, and then taking in again a sum of money amounting to £100; hence, by the reflux of £100 in money, which merely shows why the £100 in money do not get lost. He tells us that the capitalists get richer

“by selling everything which they produce for more than it has cost to produce.”

Consequently the capitalists must get richer also in their transactions with the labourers by selling to them too dear. Very well!

“They pay wages … and all this flows back to them through the expenditures of all these people who pay them more” [for the products] “than they cost them [the capitalists] in wages.” (Ibid., p. 240.)

In other words, the capitalists pay £100 in wages to the labourers, and then they sell to these labourers their own product at £120, so that they not only recover their £100 but also gain £20? That is impossible. The labourers can pay only with the money which they have received in the form of wages. If they get £100 in wages from the capitalists they can buy only £100 worth, not £120 worth. So this will not work. But there is still another way. The labourers buy from the capitalists commodities for £100, but actually receive commodities worth only £80. Then they are absolutely cheated out of £20. And the capitalist has absolutely gained £20, because he actually paid for the labour-power 20 per cent less than its value, or cut nominal wages 20 per cent by a circuitous route.

The capitalist class would accomplish the same end if it paid the labourers at the start only £80 in wages and afterwards gave them for these £80 in money actually £80 worth of commodities. This seems to be the normal way, considering the class of capitalists as a whole, for according to Monsieur Destutt himself the labouring class must receive a “sufficient wage” (p. 219), since their wages must at least be adequate to maintain their existence and capacity to work,“”to procure the barest subsistence.” (p. 180). If the labourers do not receive such sufficient wages, that means, according to the same Destutt, “the death of industry” (p. 208), which does not seem therefore to be a way in which the capitalists can get richer. But whatever may be the scale of wages paid by the capitalists to the working-class, they have a definite value, e.g., £80. If the capitalist class pays the labourers £80, then it has to supply them with commodities worth £80 for these £80 and the reflux of the £80 does not enrich it. If it pays them £100 in money, and sells them £80 worth of commodities for £100 it pays them in money 25 per cent more than their normal wage and supplies them in return with 25 per cent less in commodities.

In other words, the fund from which the capitalist class in general derives its profits is supposedly made up of deductions from the normal wages by paying less than its value for labour-power, i.e., less than the value of the means of subsistence required for their normal reproduction as wage-labourers. If therefore normal wages were paid, which is supposed to be the case according to Destutt, there could be no profit fund for either the industrial or the idle capitalists.

Hence Destutt should have reduced the entire secret of how the capitalist class gets richer to the following: by a deduction from wages. In that case the other surplus-value funds, which he mentions under 1) and 3), would not exist.

Hence in all countries, in which the money wages of the labourers should be reduced to the value of the articles of consumption necessary for their subsistence as a class, there would be no consumption-fund and no accumulation-fund for the capitalists, and hence also no existence-fund for the capitalist class, and hence also no capitalist class. And, according to Destutt, this should be the case in all wealthy and developed countries with an old civilisation, for in them,

“in our ancient societies, the fund for the maintenance of wage-labourers is … an almost constant magnitude.” (Ibid., p. 202.)

Even with a deduction from the wages, the capitalist does not enrich himself by first paying the labourer £100 in money and then supplying him with £80 worth of commodities for these £100, thus actually circulating £80 worth of commodities by means of £100, an excess of 25 per cent. The capitalist gets richer by appropriating, besides the surplus-value — that portion of the product in which surplus-value is represented — 25 per cent of that portion of the product which the labourer should receive in the form of wages. The capitalist class would not gain anything by the silly method Destutt conceived. It pays £100 in wages and gives back to the labourer for these £100 £80 worth of his own product. But in the next transaction it must again advance £100 for the same procedure. It would thus be indulging in the useless sport of advancing £100 in money and giving in exchange £80 in commodities, instead of advancing £80 in money and supplying in exchange for it £80 in commodities. That is to say, it would be continually advancing to no purpose a money-capital which is 25 per cent in excess of that required for the circulation of its variable capital, which is a very peculiar method of getting rich.

3) Finally the capitalist class sells

“to the idle capitalists, who pay them with the portion of their revenue which they have not yet given to the wage-labourers employed by them directly; so that the entire rent, which they pay them (the idle ones) annually, flows back to them in this way or the other.”

We have seen above that the industrial capitalists

“pay with a portion of their profits the entire portion of their consumption intended for the satisfaction of their needs.”

Take it, then, that their profits are equal to £200. And let them use up, say, £100 of this in their individual consumption. But the other half, or £100, does not belong to them; it belongs to the idle capitalists, i.e., to those who receive the ground-rent, and to capitalists who lend money on interest. So they have to pay £100 to these gentry. Let us assume that these gentry need £80 of this money for their individual consumption, and £20 for the hire of servants, etc. With those £80 they buy articles of consumption from the industrial capitalists. Thus while these capitalists part with commodities to the value of £80, they receive back £80 in money, or four-fifths of the £100 paid by them to the idle capitalists under the name of rent, interest, etc.

Furthermore the servant class, the direct wage-labourers of the idle capitalists, have received £20 from their masters. These servants likewise buy articles of consumption from the industrial capitalists to the amount of £20. In this way, while parting with commodities worth £20, these capitalists have £20 in money flow back to them, the last fifth of the £100 which they paid to the idle capitalists for rent, interest, etc. At the close of the transaction the industrial capitalists have recovered in money the £100 which they remitted to the idle capitalists in payment of rent, interest, etc. But one half of their surplus-product, equal to £100, passed meanwhile from their hands into the consumption-fund of the idle capitalists.

It is evidently quite superfluous for the question now under discussion to bring in somehow or other the division of the £100 between the idle capitalists and their direct wage-labourers. The matter is simple: their rent, interest, in short, their share in the surplus-value equal to £200, is paid to them by the industrial capitalists in money to the amount of £100. With these £100 they buy directly or indirectly articles of consumption from the industrial capitalists. Thus they pay back to them the £100 in money and take from them articles of consumption worth £100.

This completes the reflux of the £100 paid by the industrial capitalists in money to the idle capitalists. Is this reflux of money a means of enriching the industrial capitalists, as Destutt imagines? Before the transaction they had a sum of values amounting to £200, 100 being money and 100 articles of consumption. After the transaction they have only one half of the original sum of values. They have once more the £100 in money, but they have lost the £100 in articles of consumption which have passed into the hands of the idle capitalists. Hence they are poorer by £100 instead of richer by £100. If instead of taking the circuitous route of first paying out £100 in money and then receiving this £100 in money back in payment of articles of consumption worth £100, they had paid rent, interest, etc., directly in the bodily form of their products, there would be no £100 in money flowing back to them from the circulation, because they would not have thrown that amount of money into the circulation. Via payment in kind the matter would simply have taken this course: they would keep one half of the surplus-product worth £200 for themselves and give the other half to the idle capitalists without any equivalent in return. Even Destutt would not have been tempted to declare this a means of getting richer. Of course the land and capital borrowed by the industrial capitalists from the idle capitalists and for which they have to pay a portion of their surplus-value in the form of ground-rent, interest, etc., are profitable for them, for this constitutes one of the conditions of production of commodities in general and of that portion of the product which constitutes surplus-product or in which surplus-value is represented. This profit accrues from the use of the borrowed land and capital, not from the price paid for them. This price rather constitutes a deduction from it. Otherwise one would have to contend that the industrial capitalists would not get richer but poorer, if they were able to keep the other half of their surplus-value for themselves instead of having to give it away. This is the confusion which results from mixing up such phenomena of circulation as a reflux of money with the distribution of the product, which is merely promoted by these phenomena of circulation.

And yet the same Destutt is shrewd enough to remark:

“Whence come the revenues of these idle gentry? Do the revenues not come out of the rent paid to them out of their profits by those who put the capitals of the former to work, i.e., by those who pay with the funds of the former a labour which produces more than it costs, in a word, the industrial capitalists? It is always necessary to hark back to them to find the source of all wealth. It is they who in reality feed the wage-labourers employed by the former.” (p. 246.)

So now the payment of this rent, etc., is a deduction from the profit of the industrial capitalists. Before it was a means wherewith they could enrich themselves.

But at least one consolation is left to our Destutt. These good industrialists handle the idle capitalists the same way they have been handling one another and the labourers. They sell them all commodities too dear, for instance, by 20 per cent. Now there are two possibilities. The idle capitalists either have other money resources aside from the £100 which they receive annually from the industrial capitalists, or they have not. In the first case the industrial capitalists sell them commodities worth £100 at a price of, say, £120. Consequently on selling their commodities they recover not only the £100 paid to the idlers but £20 besides, which constitute really new value for them. How does the account look now? They have given away £100 in commodities for nothing, because the £100 in money that they were paid in part for their commodities were their own money. Thus their own commodities have been paid with their own money. Hence they have lost £100. But they have also received an excess of £20 in the price of their commodities over and above their value, which makes £20 to the good. Balance this against the loss of £100, and you still have a loss of £80. Never a plus, always a minus. The cheating practised against the idle capitalists has reduced the loss of the industrial capitalists, but for all that it has not transformed a diminution of their wealth into a means of enrichment. But this method cannot go on indefinitely, for the idle capitalists cannot possibly pay year after year £120 in money if they take in only £100 in money year after year.

There remains the other approach: The industrial capitalists sell commodities worth £80 in exchange for the £100 in money they paid to the idle capitalists. In this case, the same as before, they still give away £80 for nothing, in the form of rent, interest, etc. By this fraudulent means the industrial capitalists have reduced their tribute to the idlers, but it still exists nevertheless and the idlers are in a position — according to the same theory proclaiming that prices depend on the good will of the sellers — to demand in the future £120 instead of £100, as formerly, for rent, interest, etc., on their land and capital.

This brilliant analysis is quite worthy of that deep thinker who copies on the one hand from Adam Smith that

“labour is the source of all wealth” (p. 242)

that the industrial capitalists

“employ their capital to pay for labour that reproduces it with a profit” (p. 246)

and who concludes on the other hand that these industrial capitalists

“feed all the other people, are the only ones who increase the public wealth, and create all our means of enjoyment” (p. 242)

that it is not the capitalists who are fed by the labourers, but the labourers who are fed by the capitalists, for the brilliant reason that the money with which the labourers are paid does not remain in their hands, but continually returns to the capitalists in payment of the commodities produced by the labourers.

“All they do is receive with one hand and return with the other. Their consumption must therefore be regarded as engendered by those who hire them.” (p. 235.)

After this exhaustive analysis of social reproduction and consumption, as being brought about by the circulation of money, Destutt continues:

“This is what perfects this perpetuum mobile of wealth, a movement which, though badly understood” (mal connu, I should say so!), “has justly been named circulation. For it is indeed a circuit and always returns to its point of departure. This is the point where production is consummated.” (pp. 239 and 240.)

Destutt, that very distinguished writer, membre de l’Institut de France et de la Société Philosophique de Philadelphie, and in fact to a certain extent a luminary among the vulgar economists, finally requests his readers to admire the wonderful lucidity with which he has presented the course of social process, the flood of light which he has poured over the matter, and is even condescending enough to communicate to his readers, where all this light comes from. This must be read in the original:

“It will be noted, I hope, how much this manner of viewing the consummation of our wealth is in accord with all we have been saying concerning its production and distribution, and at the same time how much light it throws on the entire course of society. Whence this accord and this lucidity? From the fact that we have met truth face to face. This recalls the effect of those mirrors in which things are reflected accurately and in their true proportions when correctly focussed, but in which everything appears confused and disjointed when one is too close or too far away from them.” (pp. 242 and 243.)

Voilà le crétinisme bourgeois dans toute sa béatitude! [There you have the bourgeois idiocy in all its beatitude!]

Notes

45. “A considerable quantity of gold bullion … is taken direct to the mint at San Francisco by the owners.” Reports of H. M. Secretaries of Embassy and Legation, 1879, Part III, p. 337.

46. The study of the exchange of newly produced gold within the constant capital of department I is not contained in the manuscript. — F.E.

47. A character in a number of works by the German humorist Fritz Reuter (1810-74). — Ed.