Capital Vol: II

Chapter 21: Accumulation and Reproduction on an Extended Scale

Part 1

It has been shown in Book I how accumulation works in the case of the individual capitalist. By the conversion of the commodity-capital into money the surplus-product, in which the surplus-value is represented, is also turned into money. The capitalist reconverts the so metamorphosed surplus-value into additional natural elements of his productive capital. In the next cycle of production the increased capital furnishes an increased product. But what happens in the case of the individual capital must also show in the annual reproduction as a whole, just as we have seen it happen on analysing simple reproduction, namely, that the successive precipitation – in the case of individual capital – of its used-up fixed component parts in money which is being hoarded, also finds expression in the annual reproduction of society. If a certain individual capital is equal to 400 c + l00 v, and the annual surplus-value is equal to 100, then the commodity-product amounts to 400 c + 100 v + 100 s. These 600 are converted into money. Of this money, again, 400 c are converted into the natural form of constant capital, 100 v into labour-power, and – provided the entire surplus-value is being accumulated – 100 s are converted besides into additional constant capital by transformation into natural elements of the productive capital. It is assumed in this case: 1) that this amount is sufficient under the given technical conditions either to expand the functioning constant capital or to establish a new industrial business. But it may also happen that surplus-value must be converted into money and this money hoarded for a much longer time before this process, i.e., before real accumulation, expansion of production, can take place; 2) that production on an extended scale has actually been in process previously. For in order that the money (the surplus-value hoarded in money-form) may be converted into elements of productive capital, one must be able to buy these elements on the market as commodities. It makes no difference if they are not bought as finished products but made to order. They are not paid for until they are in existence and at any rate not until actual reproduction on an extended scale, an expansion of hitherto normal production, has taken place so far as they are concerned. They had to exist potentially, i.e., in their elements, as it requires only the impulse of an order, that is, the purchase of commodities before they actually exist and their anticipated sale, for their production really to take place. The money on the one side then calls forth extended reproduction on the other, because the possibility of it exists without money. For money in itself is not an element of real reproduction.

For instance capitalist A, who sells during one year or during a number of years certain quantities of commodities successively produced by him, thereby converts into money also that portion of the commodities which is the vehicle of surplus-value – the surplus-product – or in other words the very surplus-value produced by him in commodity-form, accumulates it gradually, and thus forms for himself new potential money-capital – potential because of its capacity and mission to be converted into elements of productive capital. But in actual fact he only engages in simple hoarding, which is not an element of actual reproduction. His activity at first consists only in successively withdrawing circulating money out of the circulation. Of course it is not impossible that the circulating money thus kept under lock and key by him was itself, before it entered into circulation, a portion of some other hoard. This hoard of A, which is potentially new money-capital, is not additional social wealth, any more than it would be if it were spent in articles of consumption. But money withdrawn from circulation, which therefore previously existed in circulation, may have been stored up at some prior time as a component part of a hoard, may have been the money-form of wages, may have converted means of production or other commodities into money or may have circulated portions of constant capital or the revenue of some capitalist. It is no more new wealth than money, considered from the standpoint of the simple circulation of commodities, is the vehicle not only of its actual value but also of its ten-fold value, because it was turned over ten times a day, realised ten different commodity-values. The commodities exist without it, and it itself remains what it is (or becomes even less by depreciation) whether in one turnover or in ten. Only in the production of gold – inasmuch as the gold product contains a surplus-product, a depository of surplus-value – is new wealth (potential money) created, and it increases the money material of new potential money-capitals only so far as the entire money-product enters into circulation.

Although this surplus-value hoarded in the form of money is not additional new social wealth, it represents new potential money-capital, on account of the function for which it is hoarded. (We shall see later that new money-capital may arise also in a way other than the gradual conversion of surplus-value into money.)

Money is withdrawn from circulation and stored up as a hoard by selling commodities without subsequent buying. If this operation is therefore conceived as a general process, it seems inexplicable where the buyers are to come from, since in that process everybody would want to sell in order to hoard, and none would want to buy. And it must be conceived generally, since every individual capital may be in the process of accumulation.

If we were to conceive the process of circulation between the various parts of the annual reproduction as taking place in a straight line-which would be wrong as it always consists with a few exceptions of mutually opposite movements-then we should have to start from the producer of gold (or silver) who buys without selling, and to assume that all others sell to him. In that case the entire yearly social surplus-product (the bearer of the entire surplus-value) would pass into his hands, and all the other capitalists would distribute among themselves pro rata his surplus-product, which naturally exists in the form of money, the natural embodiment in gold of his surplus-value. For that portion of the product of the gold producer which has to make good his active capital is already tied up and disposed of. The surplus-value of the gold producer, created in the form of gold, would then be the sole fund from which all other capitalists would draw the material for the conversion of their annual surplus-product into money. The magnitude of its value would then have to be equal to the entire annual surplus-value of society, which must first assume the guise of a hoard. Absurd as these assumptions would be, they would do nothing more than explain the possibility of a universal simultaneous formation of a hoard, and would not get reproduction itself one step further, except on the part of the gold producer.

Before we resolve this seeming difficulty we must distinguish between the accumulation in department I (production of means of production) and in department II (production of articles of consumption). We shall start with I.

I. Accumulation in Department I

1. The Formation of a Hoard

It is evident that both the investments of capital in the numerous lines of industry constituting class I and the different individual investments of capital within each of these lines of industry, according to their age, i.e., the space of time during which they already have functioned, quite aside from their volumes, technical conditions, market conditions, etc., are in different stages of the process of successive transformation from surplus-value into potential money-capital, whether this money-capital is to serve for the expansion of the active capital or for the establishment of new industrial enterprises – the two forms of expansion of production. One part of the capitalists is continually converting its potential money-capital, grown to an appropriate size, into productive capital, i.e., with the money hoarded by the conversion of surplus-value into money they buy means of production, additional elements of constant capital. Another part of the capitalists is meanwhile still engaged in hoarding its potential money-capital. Capitalists belonging to these two categories confront each other: some as buyers, the others as sellers, and each one of the two exclusively in one of these roles.

For instance, let A sell 600 (equal to 400 c + 100 v + 100 s ) to B (who may represent more than one buyer). A sells 600 in commodities for 600 in money, of which 100 are surplus-value which he withdraws from circulation and hoards in the form of money. But these 100 in money are but the money-form of the surplus-product, which was the bearer of a value of 100. The formation of a hoard is no production at all, hence not an increment of production, either. The action of the capitalist consists here merely in withdrawing from circulation the 100 in money he grabbed by the sale of his surplus-product, holding on to it and impounding it. This operation is carried on not alone by A, but at numerous points along the periphery of circulation by other capitalists, A’, A”, A”’, all of them working with equal zeal at this sort of hoard formation. These numerous points at which money is withdrawn from circulation and accumulated in numerous individual hoards or potential money-capitals appear as so many obstacles to circulation, because they immobilise the money and deprive it of its capacity to circulate for a certain length of time. But it must be borne in mind that hoarding takes place in the simple circulation of commodities long before this is based on capitalist commodity production. The quantity of money existing in society is always greater than the part of it in actual circulation, although this swells or subsides according to circumstances. We find here again the same hoards, and the same formation of hoards, but now as an element immanent in the capitalist process of production.

One can understand the pleasure experienced when all these potential capitals within the credit system, by their concentration in the hands of banks, etc., become disposable, “loanable capital,” money-capital, which indeed is no longer passive and music of the future, but active capital growing rank.

However, A accomplishes the formation of a hoard only to the extent that he acts only as a seller, so far as his surplus-product is concerned, and not afterward as a buyer. His successive production of surplus-products, the vehicles of his surplus-value to be converted into money, is therefore the premise of his forming a hoard. In the present case, where we are examining only the circulation within category I, the bodily form of the surplus-product, as that of the total product of which it is a part, is the bodily form of an element of constant capital I, that is to say, it belongs in the category of means of production creating means of production. We shall see presently what becomes of it, what function it performs, in the hands of buyers B, B’, B”, etc.

It must be noted at this point first and foremost that although withdrawing money to the amount of his surplus-value from circulation and hoarding it, A on the other hand throws commodities into it without withdrawing other commodities in return. The capitalists B, B’, B”, etc., are thereby enabled to throw money into circulation and withdraw only commodities from it. In the present case these commodities, according to their bodily form and their destination, enter into the constant capital of B, B’, etc., as fixed or circulating element. We shall hear more about this anon when we deal with the buyer of the surplus-product, with B, B’, etc.

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Let us note by the way: Once more we find here, as we did in the case of simple reproduction, that the exchange of the various component parts of the annual product, i.e., their circulation (which must comprise at the same time the reproduction of the capital, and indeed its restoration in its various determinations, such as constant, variable, fixed, circulating, money- and commodity-capital) does not by any means presuppose mere purchase of commodities supplemented by a subsequent sale, or a sale supplemented by a subsequent purchase, so that there would actually be a bare exchange of commodity for commodity, as Political Economy assumes, especially the free-trade school since the physiocrats and Adam Smith. We know that the fixed capital, once the expenditure for it is made, is not replaced during the entire period of its function, but continues to act in its old form, while its value is gradually precipitated in the form of money. Now we have seen that the periodical renewal of fixed capital II (the entire capital-value II being converted into elements worth I_(v+s) ) presupposes on the one hand the mere purchase of the fixed part of II c, reconverted from the form of money into its bodily form, to which corresponds the mere sale of I s ; and presupposes on the other hand the mere sale on the part of II c, the sale of its fixed (depreciation) part of the value precipitated in money, to which corresponds the mere purchase of I,. In order that the exchange may take place normally in this case, it must be assumed that the mere purchase on the part of II c is equal in magnitude of value to the mere sale on the part of II c, and that in the same way the mere sale of I s to II c, section 1, is equal to its mere purchase from II c, section 2. Otherwise simple reproduction is disturbed. Mere purchase here must be offset by a mere sale there. It must likewise be assumed in this case that the mere sale of that portion of I s which forms the hoards of A, A’, A” is balanced by the mere purchase of that portion of I s which converts the hoards of B, B’, and B” into elements of additional productive capital.

So far as the balance is restored by the fact that the buyer acts later on as a seller to the same amount of value, and vice versa, the money returns to the side that advanced it on purchasing, and which sold before it bought again. But the actual balance, so far as the exchange of commodities itself, the exchange of the various portions of the annual product is concerned, demands that the values of the commodities exchanged for one another be equal.

But inasmuch as only one-sided exchanges are made, a number of mere purchases on the one hand, a number of mere sales on the other – and we have seen that the normal exchange of the annual product on the basis of capitalism necessitates such one-sided metamorphoses – the balance can be maintained only on the assumption that in amount the value of the one-sided purchases and that of the one-sided sales tally. The fact that the production of commodities is the general form of capitalist production implies the role which money is playing in it not only as a medium of circulation, but also as money-capital, and engenders certain conditions of normal exchange peculiar to this mode of production and therefore of the normal course of reproduction, whether it be on a simple or on an extended scale – conditions which change into so many conditions of abnormal movement, into so many possibilities of crises, since a balance is itself an accident owing to the spontaneous nature of this production.

We have also seen that in the exchange of I v for a corresponding amount of value of II c, there takes place in the end, precisely for II c, a replacement of commodities II by an equivalent commodity-value I, that therefore on the part of aggregate capitalist II the sale of his own commodities is subsequently supplemented by the purchase of commodities from I of the same amount of value. This replacement takes place. But what does not take place is an exchange between capitalists I and II of their respective goods. II sells its commodities to working-class I. The latter confronts it one-sidedly, as a buyer of commodities, and it confronts that class one-sidedly as a seller of commodities. With the money proceeds so obtained II c confronts aggregate capitalist I one-sidedly as a buyer of commodities, and aggregate capitalist I confronts it one-sidedly as a seller of commodities up to the amount of I v. It is only by means of this sale of commodities that I finally reproduces its variable capital in the form of money-capital. If capital I faces that of II one-sidedly as a seller of commodities to the amount of I v, it faces working-class I as a buyer of commodities purchasing their labour-power. And if working-class I faces capitalist II one-sidedly as a buyer of commodities (namely, as a buyer of means of subsistence), it faces capitalist I one-sidedly as a seller of commodities, namely, as a seller of its labour-power.

The constant supply of labour-power on the part of working-class I, the reconversion of a portion of commodity-capital I into the money-form of variable capital, the replacement of a portion of commodity-capital II by natural elements of constant capital II c – all these necessary premises demand one another, but they are brought about by a very complicated process, including three processes of circulation which occur independently of one another but intermingle. This process is so complicated that it offers ever so many occasions for running abnormally.

2. The Additional Constant Capital

The surplus-product, the bearer of surplus-value, does not cost its appropriators, capitalists I, anything. They are by no manner of means obliged to advance any money or commodities in order to obtain it. Even among the physiocrats an advance was the general form of value embodied in elements of productive capital. Hence what capitalists I advance is nothing but their constant and variable capital. The labourer not only preserves by his labour their constant capital; he not only replaces the value of their variable capital by a corresponding newly created portion of value in the form of commodities; by his surplus-labour he supplies them with a surplus-value existing in the form of surplus-product. By the successive sale of this surplus-product they form a hoard, additional potential money-capital. In the case under consideration, this surplus-product consists from the outset of means of production of means of production. It is only when it reaches the hands of B, B’, B”, etc. (I) that this surplus-product functions as additional constant capital. But it is this virtualiter even before it is sold, even in the hands of the accumulators of hoards, A, A’, A” (I). If we consider merely the amount of value of the reproduction on the part of I, we are still moving within the bounds of simple reproduction, for no additional capital has been set in motion to create this virtualiter additional constant capital (the surplus-product), nor has any greater amount of surplus-labour been expended than that on the basis of simple reproduction. The difference is here only in the form of the surplus-labour performed, in the concrete nature of its particular useful character. It has been expended in means of production for I c instead of II c, in means of production of means of production instead of means of production of articles of consumption. In the case of simple reproduction it was assumed that the entire surplus-value I is spent as revenue, hence in commodities II. Hence the surplus-value consisted only of such means of production as have to replace constant capital II in its bodily form. In order that the transition from simple to extended reproduction may take place, production in department I must be in a position to fabricate fewer elements of constant capital for II and so many the more for I. This transition, which does not always take place without difficulties, is facilitated by the fact that some of the products of I may serve as means of production in either department.

It follows, then, that, considering the matter merely from the angle of volume of values, the material substratum of extended reproduction is produced within simple reproduction. It is simply surplus-labour of working-class I expended directly in the production of means of production, in the creation of virtual additional capital I. The formation of virtual additional money-capital on the part of A, A’ and A” (1) – by the successive sale of their surplus-product which was formed without any capitalist expenditure of money – is therefore simply the money-form of additionally produced means of production 1.

Consequently production of virtual additional capital expresses in our case (we shall see that it may also be formed in a quite different way) nothing but a phenomenon of the process of production itself, production, in a particular form, of elements of productive capital.

The production of additional virtual money-capital on a large scale, at numerous points of the periphery of circulation, is therefore but a result and expression of multifarious production of virtually additional productive capital, whose rise does not itself require additional expenditure of money on the part of the industrial capitalist. The successive transformation of this virtually additional productive capital into virtual money-capital (hoard) on the part of A, A’, A”, etc. (I), occasioned by the successive sale of their surplus-product – hence by repeated one-sided sale of commodities without a supplementing purchase – is accomplished by a repeated withdrawal of money from circulation and a corresponding formation of a hoard. Except in the case where the buyer is a gold producer, this hoarding does not in any way imply additional wealth in precious metals, but only a change in the function of money previously circulating. A while ago it functioned as a medium of circulation, now it functions as a hoard, as virtually new money-capital in the process of formation. Thus the formation of additional money-capital and the quantity of the precious metals existing in a country are not in any causal relation to each other.

Hence it follows furthermore: The greater the productive capital already functioning in a country (including the labour-power, the producer of the surplus-product, incorporated in it), the more developed the productive power of labour and thereby also the technical means for the rapid expansion of the production of means of production – the greater therefore the quantity of the surplus-product both as to its value and as to the quantity of use-values in which it is represented – so much the greater is

1) the virtually additional productive capital in the form of surplus-product in the hands of A, A’, A”, etc., and

2) the quantity of this surplus-product transformed into money, and hence that of the virtually additional money-capital in the hands of A, A’, A”. The fact that Fullarton for instance does not want to hear of over-production in the ordinary sense but only of the over-production of capital, meaning money-capital, again shows how extremely little of the mechanism of their own system even the best bourgeois economists understand.

Whereas the surplus-product, directly produced and appropriated by the capitalists A, A’, A” (I), is the real basis of the accumulation of capital, i.e., of extended reproduction, although it does not actually function in this capacity until it reaches the hands of B, B’, B”, etc. (I), it is on the contrary absolutely unproductive in its chrysalis stage of money – as a hoard and virtual money-capital in process of gradual formation – runs parallel with the process of production in this form, but lies outside of it. It is a dead weight of capitalist production. The eagerness to utilise this surplus-value accumulating as virtual money-capital for the purpose of deriving profits or revenue from it finds its object accomplished in the credit system and “papers.” Money-capital thereby gains in another form an enormous influence on the course and the stupendous development of the capitalist system of production. The surplus-product converted into virtual money-capital will grow so much more in volume, the greater was the total amount of already functioning capital whose functioning brought it into being. With the absolute increase of the volume of the annually reproduced virtual money-capital its segmentation also becomes easier, so that it is more rapidly invested in any particular business, either in the hands of the same capitalist or in those of others (for instance members of the family, in the case of a partition of inherited property, etc.). By segmentation of money-capital is meant here that it is wholly detached from the parent stock in order to be invested as a new money-capital in a new and independent business.

While the sellers of the surplus-product, A, A’, A”, etc. (I), have obtained it as a direct outcome of the process of production, which does not envisage any additional acts of circulation except the advance of constant and variable capital required also in simple reproduction; and while they thereby construct the real basis for reproduction on an extended scale, and in actual fact manufacture virtually additional capital, the attitude of B, B’, B”, etc. (I), is different. 1) Not until it reaches the hands of B, B’, B”, etc. (I), will the surplus-product of A, A’, A”, etc., actually function as additional constant capital (we leave out of consideration for the present the other element of productive capital, the additional labour-power, in other words, the additional variable capital).

2) In order that that surplus-product may reach their hands an act of circulation is wanted – they must buy it.

In regard to point 1 it should be noted here that a large portion of the surplus-product (virtually additional constant capital), although produced by A, A’, A” (I) in a given year, may not function as industrial capital in the hands of B, B’, B” (I) until the following year or still later. With reference to point 2, the question arises: Whence comes the money needed for the process of circulation?

Since the products created by B, B’, B”, etc. (I), re-enter in kind into their own process, it goes without saying that pro tanto a portion of their own surplus-product is transferred directly (without any intervention of circulation) to their productive capital and becomes an additional element of constant capital. And pro tanto they do not effect the conversion of the surplus-product of A, A’, etc. (I), into money. Aside from this, where does the money come from? We know that B, B’, B”, etc. (I) have formed their hoard in the same way as A, A’, etc., by the sale of their respective surplus-products. Now they have arrived at the point where their hoarded, only virtual, money-capital is to function effectively as additional money-capital. But this is merely going round in circles. The question still remains: Where does the money come from which the B’s (I) before withdrew from circulation and accumulated? We know from the analysis of simple reproduction that capitalists I and II must have a certain amount of money at hand in order to be able to exchange their surplus-product. In that case the money which served only as revenue to be spent for articles of consumption returned to the capitalists in the same measure in which they had advanced it for the exchange of their respective commodities. Here the same money re-appears, but performing a different function. The A’s and B’s (I) supply one another alternately with the money for converting surplus-product into additional virtual money-capital, and throw the newly formed money-capital alternately back into circulation as a means of purchase. The only assumption made in this case is that the amount of money in the country in question (the velocity of circulation, etc., being constant) should suffice for both the active circulation and the reserve hoard. As we have seen this is the same assumption as had to be made in the case of the simple circulation of commodities. Only the function of the hoards is different in the present case. Furthermore, the available amount of money must be larger, first, because under capitalist production all the products (with the exception of newly produced precious metals and the few products consumed by the producer himself) are created as commodities and must therefore pass through the pupation stage of money; secondly, because on a capitalist basis the quantity of the commodity-capital and the magnitude of its value is not only absolutely greater but also grows with incomparably greater rapidity; thirdly, because an ever expanding variable capital must always be converted into money-capital; fourthly, because the formation of new money-capitals keeps pace with the extension of production, so that the material for corresponding hoard formation must be available.

This is generally true of the first phase of capitalist production, in which even the credit system is mostly accompanied by metallic circulation, and it applies to the most developed phase of the credit system as well, to the extent that metallic circulation remains its basis. On the one hand an additional production of precious metals, being alternately abundant or scarce, may here exert a disturbing influence on the prices of commodities not only at long, but also at very short intervals. On the other hand the entire credit mechanism is continually occupied in reducing the actual metallic circulation to a relatively more and more decreasing minimum by means of sundry operations, methods, and technical devices. The artificiality of the entire machinery and the possibility of disturbing its normal course increase to the same extent.

The different B’s, B”s, B”’s, etc. (I), whose virtual new money-capital enters upon its function as active capital, may have to buy their products (portions of their surplus-product) from one another, or to sell them to one another. Pro tanto the money advanced by them for the circulation of their surplus-product flows back under normal conditions to the different B’s in the same proportion in which they had advanced it for the circulation of their respective commodities. If the money circulates as a means of payment, then only balances are to be squared so far as the mutual purchases and sales do not cover one another. But it is important first and foremost to assume here, as everywhere, metallic circulation in its simplest, most primitive form, because then the flux and reflux, the squaring of balances, in short all elements appearing under the credit system as consciously regulated processes present themselves as existing independently of the credit system, and the matter appears in primitive form instead of the later, reflected form.

3. The Additional Variable Capital

Hitherto we have been dealing only with additional constant capital. Now we must direct our attention to a consideration of the additional variable capital.

We have explained at great length in Book I that labour-power is always available under the capitalist system of production, and that more labour can be rendered fluent, if necessary, without increasing the number of labourers or the quantity of labour-power employed. We therefore need not go into this any further, but shall rather assume that the portion of the newly created money-capital capable of being converted into variable capital will always find at hand the labour-power into which it is to transform itself. It has also been explained in Book I that a given capital may expand its volume of production within certain limits without any accumulation. But here we are dealing with the accumulation of capital in its specific meaning, so that the expansion of production implies the conversion of surplus-value into additional capital, and thus also an expansion of the capital forming the basis of production.

The gold producer can accumulate a portion of his golden surplus- value as virtual money-capital. As soon as it becomes sufficient in amount, he can transform it directly into new variable capital, without first having to sell his surplus-product. He can likewise convert it into elements of the constant capital. But in the latter case he must find at hand the material elements of his constant capital. It is immaterial whether, as was assumed in our presentation hitherto, each producer works to stock up and then brings his finished product to the market or fills orders. The actual expansion of production, i.e., the surplus-product, is assumed in either case, in the one case as actually available, in the other as virtually available, capable of delivery.

II. Accumulation in Department II

We have hitherto assumed that A, A’, A” (I) sell their surplus-product to B, B’, B”, etc., who belong to the same department I. But supposing A (I) converts his surplus-product into money by selling it to one B in department II. This can be done only by A (I) selling means of production to B (II) without subsequently buying articles of consumption, i.e., only by a one-sided sale on A’s part. Now whereas II c cannot be converted from the commodity-capital form into the bodily form of productive constant capital unless not only I but also at least a portion of I, is exchanged for a portion of II c, which II exists in the form of articles of consumption; but now A converts his I into money by not making this exchange but rather withdrawing from circulation the money obtained from II on the sale of his I s instead of exchanging it in the purchase of articles of consumption II c – then what we have on the part of A (I) is indeed a formation of additional virtual money-capital, but on the other hand a portion of the constant capital of B (II) of equal magnitude of value is tied up in the form of commodity-capital, unable to transform itself into the bodily form of productive, constant capital. In other words, a portion of the commodities of B (II), and indeed primo facie a portion without the sale of which he cannot reconvert his constant capital entirely into its productive form, has become unsaleable. As far as this portion is concerned there is therefore an over-production, which, likewise as far as the same portion is concerned, clogs reproduction, even on the same scale.

In this case the additional virtual money-capital on the side of A (I) is indeed a moneyed form of surplus-product (surplus-value), but the surplus-product (surplus-value) considered as such is here a phenomenon of simple reproduction, not yet of reproduction on an extended scale. I_(v+s) for which this is true at all events of one portion of s, must ultimately be exchanged for II c, in order that the reproduction of II c may take place on the same scale. By the sale of his surplus-product to B(II), A(I) has supplied to the latter a corresponding portion of the value of constant capital in its bodily form. But at the same time he has rendered an equivalent portion of the commodities of B (II) unsaleable by withdrawing the money from circulation – by failing to complement his sale through subsequent purchase. Hence, if we survey the entire social reproduction, which comprises the capitalists of both I and II, the conversion of the surplus-product of A (I) into virtual money-capital expresses the impossibility of reconverting commodity-capital of B (II) representing an equal amount of value into productive (constant) capital; hence not virtual production on an extended scale but an obstruction of simple reproduction, and so a deficit in simple reproduction. As the formation and sale of the surplus-product of A (I) are normal phenomena of simple reproduction, we have here even on the basis of simple reproduction the following interdependent phenomena: Formation of virtual additional money-capital in class I (hence under-consumption from the view-point of II); piling up of commodity-supplies in class II which cannot be reconverted into productive capital (hence relative over-production in II); surplus of money-capital in I and reproduction deficit in II.

Without pausing any longer at this point, we simply remark that we had assumed in the analysis of simple reproduction that the entire surplus-value of I and II is spent as revenue. As a matter of fact however one portion of the surplus-value is spent as revenue, and the other is converted into capital. Actual accumulation can take place only on this assumption. That accumulation should take place at the expense of consumption is, couched in such general terms, an illusion contradicting the nature of capitalist production. For it takes for granted that the aim and compelling motive of capitalist production is consumption, and not the snatching of surplus-value and its capitalisation, i.e., accumulation.

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Let us now take a closer look at the accumulation in department II.

The first difficulty with reference to II c, i.e., its reconversion from a component part of commodity-capital II into the bodily form of constant capital II, concerns simple reproduction. Let us take the former scheme: (1,000 v + 1,000 s) I are exchanged for 2,000 II c.

Now, if for instance one half of the surplus-product of I, hence 1,000/2 s or 500 I s is reincorporated in department I as constant capital, then this portion of the surplus-product, being detained in I, cannot replace any part of II c. Instead of being converted into articles of consumption (and here in this section of the circulation between I and II the exchange is actually mutual, that is, there is a double change of position of the commodities, unlike the replacement of 1,000 II c by 1,000 I v effected by the labourers of I), it is made to serve as an additional means of production in I itself. It cannot perform this function simultaneously in I and II. The capitalist cannot spend the value of his surplus-product for articles of consumption and at the same time consume the surplus-product itself productively, i.e., incorporate it in his productive capital. Instead of 2,000 I_(v+s), only 1,500, namely (1,000 v + 500 s) I, are therefore exchangeable for 2,000 II c ; 500 II c cannot be reconverted from the commodity-form into productive (constant) capital

II. Hence there would be an over-production in II, exactly equal in volume to the expansion of production in I. This over-production in II might react to such an extent on I that even the reflux of the 1,000 spent by the labourers of I for articles of consumption of II might take place but partially, so that these 1,000 would not return to the hands of capitalists I in the form of variable money-capital. These capitalists would thus find themselves hampered even in reproduction on an unchanging scale, and this by the bare attempt to expand it. And in this connection it must be taken into consideration that in I only simple reproduction had actually taken place and that its elements, as represented in our scheme, are only differently grouped with a view to expansion in the future, say, next year.

One might attempt to circumvent this difficulty in the following way: Far from being over-production, the 500 II c which are kept in stock by the capitalists and cannot be immediately converted into productive capital represent, on the contrary, a necessary element of reproduction, which we have so far neglected. We have seen that a money-supply must be accumulated at many points, hence money must be withdrawn from circulation, partly for the purpose of making it possible to form new money-capital in I, and partly to hold fast temporarily the value of the gradually depreciating fixed capital in the form of money. But since we placed all money and commodities from the very start exclusively into the hands of capitalists I and II when we drew up our scheme and since neither merchants, nor money-changers, nor bankers, nor merely consuming and not directly producing classes exist here, it follows that the constant formation of commodity stores in the hands of their respective producers is here indispensable to keep the machinery of reproduction going. The 500 II c held in stock by capitalists II therefore represent the commodity-supply of articles of consumption which ensures the continuity of the process of consumption implied in reproduction, here meaning the passage of one year to the next. The consumption-fund, which is as yet in the hands of its sellers who are at the same time its producers, cannot fall one year to the point of zero in order to begin the next with zero, any more than such a thing can take place in the transition from today to tomorrow. Since such supplies of commodities must constantly be built up anew, though varying in volume, our capitalist producers II must have a reserve money-capital, which enables them to continue their process of production although one portion of their productive capital is temporarily tied up in the shape of commodities. Our assumption is that they combine the whole business of trading with that of producing. Hence they must also have at their disposal the additional money-capital, which is in the hands of the merchants when the individual functions in the process of reproduction are separated and distributed among the various kinds of capitalists.

To this one may object:

1) That the forming of such supplies and the necessity of doing so applies to all capitalists, those of I as well as of II. Considered as mere sellers of commodities, they differ only in that they sell different kinds of commodities. A supply of commodities II implies a previous supply of commodities I. If we neglect this supply on one side, we must also do so on the other. But if we take them into account on both sides, the problem is not altered in any way.

2) Just as a certain year closes on the part of II with a supply of commodities for the following year, so it was opened with a supply of commodities on the same part, taken over from the preceding year. In an analysis of annual reproduction, reduced to its most abstract form, we must therefore strike it out in both cases. If we leave to the given year its entire production, including the commodity-supply to be yielded up for next year, and simultaneously take from it the supply of commodities transferred to it from the preceding year, we have before us the actual aggregate product of an average year as the subject of our analysis.

3) The simple circumstance that in the analysis of simple reproduction we did not stumble across the difficulty which is now to be surmounted proves that we are confronted by a specific phenomenon due solely to the different grouping (with reference to reproduction) of elements I, a changed grouping without which reproduction on an extended scale cannot take place at all.

III. Schematic Presentation of Accumulation

We shall now study reproduction according to the following scheme.

Scheme a)	I. 4,000c + 1,000v + 1,000s	= 6,000
	II. 1,500c + 376v + 376s	= 2,252
	= 8,252 Total

We note in the first place that the sum total of the annual social product, or 8,252, is smaller than that of the first scheme, where it was 9,000. We might just as well assume a much larger sum, for instance one ten times larger. We have chosen a smaller sum than in our scheme I in order to make it conspicuously clear that reproduction on an enlarged scale (which is here regarded merely as production carried on with a larger investment of capital) has nothing to do with the absolute volume of the product, that for a given quantity of commodities it implies merely a different arrangement or a different definition of the functions of the various elements of a given product, so that it is but a simple reproduction so far as the value of the product is concerned. It is not the quantity but the qualitative determination of the given elements of simple reproduction which is changed, and this change is the material premise of a subsequent reproduction on an extended scale. ^[1]

We might vary the scheme by changing the ratio between the variable and constant capital. For instance as follows:

Scheme b)	I. 4,000c + 875v + 875s	= 5,750
	II. 1,750c + 376v + 376s	= 2,502
	= 8,252 Total

This scheme seems arranged for reproduction on a simple scale, the surplus-value being entirely consumed as revenue and not accumulated. In either case, both a) and b), we have an annual product of the same magnitude of value, only under b) functionally its elements are grouped in such a way that reproduction is resumed on the same scale, while under a) the functional grouping forms the material basis of reproduction on an extended scale. Under b) (875_v + 875_s) I, or 1,750 I_{(v + s)}, are exchanged without any surplus for 1,750 II_c while under a) the exchange of (1,000_v + 1,000_s) I, equal to 2,000 I_{(v + s)}, for 1,000 II_c leaves a surplus of 500 I_s for accumulation in class I.

Now let us analyse scheme a) more closely. Let us suppose that both I and II accumulate one half of their surplus-value, that is to say, convert it into an element of additional capital, instead of spending it as revenue. As one half of 1,000 I_s, or 500, are to be accumulated in one form or another, invested as additional money-capital, i.e., converted into additional productive capital, only (l,000_v + 500_s) I are spent as revenue. Hence only 1,500 figures here as the normal size of II_c. We need not further examine the exchange between 1,500 I_{(v + s)} and 1,500 II_c, because this has already been done under the head of process of simple reproduction. Nor does 4,000 I_c require any attention, since its re-arrangement for the newly commencing reproduction (which this time will occur on an extended scale) was likewise discussed as a process of simple reproduction.

The only thing that remains to be examined by us is 500 I_s and (376_v + 376_s) II, inasmuch as it is a matter on the one hand of the internal relations of both I and II and on the other of the movement between them. Since we have assumed that in II likewise one half of the surplus-value is to be accumulated, 188 are to be converted here into capital, of which one-fifth, or 47, or, to round it off, 48, are to be variable capital, so that 140 remain to be converted into constant capital.

Here we come across a new problem, whose very existence must appear strange to the current view that commodities of one kind are exchanged for commodities of another kind, or commodities for money and the same money again for commodities of another kind. The 140 II_s can be converted into productive capital only by replacing them with commodities of I_s of the same value. It is a matter of course that that portion of I_s which must be exchanged for II_s must consist of means of production, which may enter either into the production of both I and II, or exclusively into that of II. This replacement can be made feasible only by means of a one-sided purchase on the part of II, as the entire surplus-product of 500 I_s, which we still have to examine, is to serve the purposes of accumulation within I, hence cannot be exchanged for commodities II; in other words, it cannot be simultaneously accumulated and consumed by I. Therefore II must buy 140 I_s for cash without recovering this money by a subsequent sale of its commodities to I. And this is a process which is continually repeating itself in every new annual production, so far as it is reproduction on an extended scale. Where in II is the source of the money for this?

It would rather seem that II is a very unprofitable field for the formation of new money-capital which accompanies actual accumulation and necessitates it under capitalist production, and which at first actually presents itself as simple hoarding.

We have first 376 II_v. The money-capital of 376, advanced in labour-power, continually returns through the purchase of commodities II as variable capital in money-form to capitalist II. This constant repetition of departure from and return to the starting-point, the pocket of the capitalist, does not add in any way to the money roving over this circuit. This, then, is not a source of the accumulation of money. Nor can this money be withdrawn from circulation in order to form hoarded, virtually new, money-capital.

But stop! Isn’t there a chance here to make a little profit?

We must not forget that class II has this advantage over class I, that its labourers have to buy back from it the commodities produced by themselves. Class II is a buyer of labour-power and at the same time a seller of the commodities to the owners of the labour-power employed by it. Class II can therefore:

1) — and this it shares with the capitalists of class I — simply depress wages below their normal average level. By this means a portion of the money functioning as the money-form of variable capital is released, and if this process is continually repeated, it might become a normal source of hoarding, and thus of virtually additional money-capital in class II. Of course we are not referring to a casual swindle profit here, since we are treating of a normal formation of capital. But it must not be forgotten that the normal wages actually paid (which ceteris paribus determine the magnitude of the variable capital) are not paid by the capitalists but of the goodness of their hearts, but must he paid under given relations. This eliminates the above method of explanation. If we assume that 376_v is the variable capital to be laid out by class II, we have no right suddenly to sneak in the hypothesis that it may pay only 350_v instead of 376_v, merely to elucidate a problem that has newly arisen.

2) On the other hand class II, taken as a whole, has the above-mentioned advantage over I that it is at the same time a buyer of labour-power and a seller of its commodities to its own labourers. Every industrial country (for instance Britain and the U.S.A.) furnishes the most tangible proofs of the way in which this advantage may be exploited — by paying nominally the normal wages but grabbing, alias stealing, back part of them without an equivalent in commodities; by accomplishing the same thing either through the truck system or through a falsification of the medium of circulation (perhaps in a way too elusive for the law). (Take this opportunity to expatiate on this idea with some appropriate examples.) This is the same operation as under 1), only disguised and carried out by a detour. Therefore it must likewise be rejected, the same as the other. We are dealing here with actually paid, not nominally paid wages.

We see that in an objective analysis of the mechanism of capitalism certain stains still sticking to it with extraordinary tenacity cannot be used as a subterfuge to get over some theoretical difficulties. But strange to say, the great majority of my bourgeois critics upbraid me as though I have wronged the capitalists by assuming, for instance in Book I of Capital, that the capitalist pays labour-power at its real value, a thing which he mostly does not do! (Here, exercising some of the magnanimity attributed to me, it would be appropriate to quote Schäffle.)

So with the 376 II_v we cannot get any nearer the goal we have mentioned.

But the 376 II_v seem to be in a still more precarious position. Here only capitalists of the same class, mutually buying and selling the articles of consumption they produced, confront one another. The money required for these transactions functions only as a medium of circulation and in the normal course of things must flow back to the interested parties in the same portion in which they advanced it to the circulation, in order to cover the same route over and over again.

There seem to be only two ways by which this money can be withdrawn from circulation to form virtually additional money-capital. Either one part of capitalists II cheats the other and thus robs them of their money. We know that no preliminary expansion of the circulating medium is necessary for the formation of new money-capital. All that is necessary is that the money should be withdrawn from circulation by certain parties and hoarded. It would not alter the case if this money were stolen, so that the formation of additional money-capital by one part of capitalists II would entail a positive loss of money by another part. The cheated capitalists II would have to live a little less gaily, that would be all.

Or a part of II represented by necessities of life is directly converted into new variable capital within department II. How that is done we shall examine at the close of this chapter (under No. IV).

1. First Illustration

A. Scheme of Simple Reproduction
I. 4,000c + 1,000v + 1,000s	= 6,000
II. 2,000c + 500v + 500s	=3,000
	= 9,000 Total

B. Initial Scheme for Reproduction on an Extended Scale
I. 4,000c + 1,000v + 1,000s	= 6,000
II. 1,500c + 750v + 750s	= 3,000
	= 9,000 Total

Assuming that in scheme B one half of surplus-value I, i.e., 500, is accumulated, we first receive (1,000_v + 500_s) I, or 1,500 I_{(v + s)} to be replaced by 1,500 II_c. There then remains in I:4,000_c and 500_s, the latter having to be accumulated. The replacement of (1,000_v + 500_s) I by 1,500 II_c is a process of simple reproduction, which has been examined previously.

Let us now assume that 400 of the 500 I_s are to be converted into constant capital, and 100 into variable capital. The exchange within I of the 400_s, which are thus to be capitalised, has already been discussed. They can therefore be annexed to I_c, without more ado and in that case we get for I:

4,400_c + 1,000_v + 100_s (the latter to be converted into 100_v).

II in turn buys from I for the purpose of accumulation the 100 I_s (existing in means of production) which now form additional constant capital II, while the 100 in money which it pays for them are converted into the money-form of the additional variable capital of I. We then have for I a capital of 4,400_c + 1,100_v (the latter in money), equaling 5,500.

II has now 1,600_c for its constant capital. In order to put them to work, it must advance a further 50_v in money for the purchase of new labour-power, so that its variable capital grows from 750 to 800. This expansion of the constant and variable capital of II by a total of 150 is supplied out of its surplus-value. Hence only 600_s of the 750 II_s remain as a consumption-fund for capitalists II, whose annual product is now distributed as follows:

II. 1,600_c + 800_v + 600_s (consumption-fund), equal to 3,000.

The 150_s produced in articles of consumption, which have been converted here into (100_c + 50_v) II, go entirely in their bodily form for the consumption of the labourers, 100 being consumed by the labourers of I (100 I_v), and 50 by the labourers of II (50 II_v), as explained above. As a matter of fact in II, where its total product is prepared in a form suitable for accumulation, a part greater by 100 of the surplus-value in the form of necessary articles of consumption must be reproduced. If reproduction really starts on an extended scale, then the 100 of variable money-capital I flow back through the hands of its working-class to II, while II transfers 100_s in commodity-supply to I and at the same time 50 in commodity-supply to its own working-class.

The arrangement changed for the purpose of accumulation is now as follows:

I. 4,400c + 1,100s + 500 consumption-fund	= 6,000
II. 1,600c + 800v + 600 consumption-fund	= 3,000
	= 9,000 Total, as before

Of these amounts, the following are capital:

I. 4,400c + 1,100v (money)	= 5,500
II. 1,600c + 800v (money)	= 2,400
	= 7,900

while production started out with

I. 4,000c + 1,000v	= 5,000
II. 1,500c + 750v	= 2,250
	= 7,250

Now, if actual accumulation takes place on this basis, that is to say, if production really goes on with this augmented capital, we obtain at the end of the following year:

I. 4,400c + 1,100v + 1,100s	= 6,600
II. 1,600c + 800v + 800v	= 3,200
	= 9,800

Then let accumulation in I continue in the same proportion, so that 550_s are spent as revenue and 550_s accumulated. In that case 1,100 I_v are first replaced by 1,100 II_c, and 550 I_s must be realised in an equal amount of commodities of II, making a total of 1,650 I_{(v + s)}. But the constant capital II, which is to be replaced, is equal to only 1,600; hence the remaining 50 must be supplemented out of 800 II_s. Leaving aside the money aspect for the present, we have as a result of this transaction:

I. 4,400_c + 550_s (to be capitalised); furthermore, realised in commodities II_c, the consumption-fund of the capitalists and labourers 1,650_{(v + s)}.

II. 1,650_c (50 added from II_s as indicated above) + 800_v + 750_s (consumption-fund of the capitalists).

But if the old ratio of v:s is maintained in II, then additional 25_v must be laid out for 50_c, and these are to be taken from the 750_s. Then we have

II. 1,650_c + 825_v + 725_s.

In I, 550_s must be capitalised. If the former ratio is maintained, 440 of this amount form constant capital and 110 variable capital. These 110 might be taken out of the 725 II_s, i.e., articles of consumption to the value of 110 are consumed by labourers I instead of capitalists II, so that the latter are compelled to capitalise these 110_s which they cannot consume. This leaves 615 II_s of the 725 II_s. But if II thus converts these 110 into additional constant capital, it requires an additional variable capital of 55. This again must be supplied by its surplus-value. Subtracting this amount from 615 II_s leaves 560 for the consumption of capitalists II, and we now obtain the following capital-value after accomplishing all actual and potential transfers:

I. (4,400_c + 440_c) + (1,100_v + 110_v) = 4,840_c + 1,210_v = 6,050
II. (1,600_c + 50_c + 110_c) + (800_v + 25_v + 55_v)
= 1760_c + 880_v = 2,640/8,690

If things are to proceed normally, accumulation in II must take place more rapidly than in I, because otherwise the portion I_{(v + s)} which must be converted into commodities II will grow more rapidly than II_c, for which alone it can be exchanged.

If reproduction is continued on this basis and conditions otherwise remain unchanged we obtain at the end of the succeeding year:

I. 4,840c + 1,210v + 1,210s	= 7,260
II. 1,760c + 880v + 880s	= 3,520
	= 10,780

If the rate of division of the surplus-value remains unchanged, there is first to be expended as revenue by I: 1,210_v and one half of s, or 605, a total of 1,815. This consumption-fund is again larger than II_c by 55. These 55 must be deducted from 880_s, leaving 825. Furthermore, the conversion of 55 II_s into II implies another deduction from II_s for a corresponding variable capital of 27½, leaving for consumption 797½ II_s.

I has now to capitalise 605_s. Of these 484 are constant and 121 variable. The last named are to be deducted from II_s, which is still equal to 797½, leaving 676½ II_s. II, then, converts another 121 into constant capital and requires another variable capital of 60½ for it, which likewise comes out of 676½, leaving 616 for consumption.

Then we have the following capitals:

I.	Constant:	4,840 + 484 = 5,324
	Variable:	1,210 + 121 = 1,331
II.	Constant:	1,760 + 55 + 121 = 1,936
	Variable:	880 + 27½ + 60½ = 968

Totals:	I. 5,324c + 1,331v	= 6,655
	II. 1,936s + 968v	= 2,904
	= 9,559

And at the end of the year the product is

I. 5,324c + 1,331v + 1,331s	= 7,986
II. 1,936c + 968v + 968s	= 3,872
	= 11,858

Repeating the same calculation and rounding off the fractions, we get at the end of the succeeding year the following product:

I. 5,856c + 1,464v + 1,464s	= 8,784
II. 2,129c + 1,065v + 1,065c	= 4,259
	= 13,043

And at the end of the next succeeding year:

I. 6, 442c + 1,610v + 1,610s	= 9,662
II. 2,342c + 1,172v + 1,172s	= 4,686
	= 14,348

In the course of five years of reproduction on an extended scale the aggregate capital of I and II has risen from 5,500_c + 1,750_v = 7,250 to 8,784_c + 2,782_v = 11,566; in other words in the ratio of 100:160. The total surplus-value was originally 1,750; it is now 2,782. The consumed surplus-value was originally 500 for I and 600 for II, a total of 1,100. The previous year it was 732 for I and 745 for II, a total of 1,477. It has therefore grown in the ratio of 100:134.

2. Second Illustration

Now take the annual product of 9,000, which is altogether a commodity-capital in the hands of the class of industrial capitalists in a form in which the general average ratio of the variable to the constant capital is that of 1:5. This presupposes a considerable development of capitalist production and accordingly of the productivity of social labour, a considerable previous increase in the scale of production, and finally a development of all the circumstances which produce a relative surplus-population among the working-class. The annual product will then be divided as follows, after rounding off the various fractions:

I. 5,000c + 1,000v + 1,000s	= 7,000
II. 1,430c + 285v + 285s	= 2,000
	= 9,000

Now take it that capitalist class I consumes one half of its surplus-value, or 500, and accumulates the other half. In that case (1,000_v + 500_s) I, or 1,500, would have to be converted into 1,500 II_c. Since II_c here amounts to only 1,430, it is necessary to add 70 from the surplus-value. Subtracting this sum from 285 II_s leaves 215 II_s. Then we have:

I. 5,000_c + 500_s (to be capitalised) + l,500_{(v + s)}

in the consumption-fund of the capitalists and labourers.

II. 1,430_c + 70_s (to be capitalised) + 285_v + 215_s.

As 70 II_s are directly annexed here to II_c, a variable capital of 70/5, or 14, is required to set this additional constant capital in motion. These 14 must also come out of the 215 II_s, so that 201 II_s remain, and we have:

II. (1,430_c + 70_c) + (285_v + l4_v) + 201_s.

The exchange of 1,500 I_{(v + ½s)} for 1,500 II_c is a process of simple reproduction, and nothing further need be said about it. However a few peculiarities remain to be noted here, which arise from the fact that in accumulating reproduction I_{(v + ½s)} is not replaced solely by II_c, but by II_c plus a portion of II_s.

It goes without saying that as soon as we assume accumulation, I_{(v + s)} is greater than II_c, not equal to II_c, as in simple reproduction. For in the first place, I incorporates a portion of its surplus-product in its own productive capital and converts five-sixths of it into constant capital, therefore cannot replace these five-sixths simultaneously by articles of consumption II. In the second place I has to supply out of its surplus-product the material for the constant capital required for accumulation within II, just as II has to supply I with the material for the variable capital, which is to set in motion the portion of I’s surplus-product employed by I itself as additional constant capital. We know that the actual, and therefore also the additional, variable capital consists of labour-power. It is not capitalist I who buys from II a supply of necessities of life or accumulates them for the additional labour-power to be employed by him, as the slaveholder had to do. It is the labourers themselves who trade with II. But this does not prevent the articles of consumption of his additional labour-power from being viewed by the capitalist as only so many means of production and maintenance of his eventual additional labour-power, hence as the bodily form of his variable capital. His own immediate operation, in the present case that of I, consists in merely storing up the new money-capital required for the purchase of additional labour-power. As soon as he has incorporated this in his capital, the money becomes a means of purchase of commodities II for this labour-power, which must find these articles of consumption at hand.

By the by. The capitalist, as well as his press, is often dissatisfied with the way in which the labour-power spends its money and with the commodities II in which it realises this money. On such occasions he philosophises, babbles of culture, and dabbles in philanthropical talk, for instance after the manner of Mr. Drummond, the Secretary of the British Embassy in Washington. According to him, The Nation (a journal) carried last October 1879, an interesting article, which contained among other things the following passages:

“The working-people have not kept up in culture with the growth of invention, and they have had things showered on them which they do not know how to use, and thus make no market for.” [Every capitalist naturally wants the labourer to buy his commodities.] “There is no reason why the working man should not desire as many comforts as the minister, lawyer, and doctor, who is earning the same amount as himself.” [This class of lawyers, ministers and doctors have indeed to be satisfied with the mere desire of many comforts!] “He does not do so, however. The problem remains, how to raise him as a consumer by rational and healthful processes, not an easy one, as his ambition does not go beyond a diminution of his hours of labour, the demagogues rather inciting him to this than to raising his condition by the improvement of his mental and moral powers.” (Reports of H. M.’s Secretaries of Embassy and Legation on the Manufactures, Commerce, etc., of the Countries in which they reside. London, 1879, p. 404.)

Long hours of labour seem to be the secret of the rational and healthful processes, which are to raise the condition of the labourer by an improvement of his mental and moral powers and to make a rational consumer of him. In order to become a rational consumer of the commodities of the capitalist, he should above all begin to let his own capitalist consume his labour-power irrationally and unhealthfully — but the demagogue prevents him! What the capitalist means by a rational consumption is evident wherever he is condescending enough to engage directly in the trade with his own labourers, in the truck system, which includes also the supplying of homes to the labourers, so that the capitalist is at the same time a landlord for them — a branch of business among many others.

The same Drummond, whose beautiful soul is enamoured of the capitalist attempts to uplift the working-class, tells in the same report among other things of the cotton goods manufacture of the Lowell and Lawrence Mills. The boarding and lodging houses for the factory girls belong to the corporation or company owning the mills. The stewardesses of these houses are in the employ of the same company which prescribes them rules of conduct. No girl is permitted to stay out after 10 p.m. Then comes a gem: a special police patrol the grounds for the purpose of guarding against an infringement of those rules. After 10 p. m. no girl can leave or enter. No girl may live anywhere but on the premises of the company, and every house on it brings the company about 10 dollars per week in rent. And now we see the rational consumer in his full glory:

“As the ever present piano is however to be found in many of the best appointed working girls’ boarding houses, music, song, and dance come in for a considerable share of the operatives’ attention at least among those who, after 10 hours’ steady work at the looms, need more relief from monotony than actual rest.” (p. 412.)

But the main secret of making a rational consumer out of the labourer is yet to be told. Mr. Drummond visits the cutlery works of Turner’s Falls (Connecticut River), and Mr. Oakman, the treasurer of the concern, after telling him that especially American table cutlery beat the English in quality, continues:

“The time is coming that we will beat England as to prices also, we are ahead in quality now, that is acknowledged, but we must have lower prices, and shall have it the moment we get our steel at lower prices and have our labour down.” (p. 427.)

A reduction of wages and long hours of labour — that is the essence of the rational and healthful processes which are to uplift the labourer to the dignity of a rational consumer, so that “they make a market for things showered upon them” by culture and growth of invention.

---

Consequently, just as I has to supply the additional constant capital of II out of its surplus-product, so II likewise supplies the additional variable capital for I. II accumulates for I and for itself, so far as the variable capital is concerned, by reproducing a greater portion of its total product, and hence especially of its surplus-product, in the shape of necessary articles of consumption.

In production on the basis of increasing capital, I_{(v + s)} must be equal to II plus that portion of the surplus-product which is re-incorporated as capital, plus the additional portion of constant capital required for the expansion of the production in II; and the minimum of this expansion is that without which real accumulation, i.e., a real expansion of production in I itself, is unfeasible.

Reverting now to the case which we examined last, we find in it the peculiarity that II is smaller than I_{(v + ½s)}, than that portion of product I which is spent as revenue for articles of consumption, so that on exchanging the 1,500 I_{(v + s)} a portion of surplus-product II, equal to 70, is at once realised. As for II_c, equal to 1,430, it must, all other conditions remaining the same, be replaced by an equal magnitude of value out of I_{(v + s)}, in order that simple reproduction may take place in II, and to that extent we need not pay any more attention to it here. It is different with the additional 70 II_s. What for I is merely a replacement of revenue by articles of consumption, merely commodity-exchange meant for consumption, is for II not a mere reconversion of its constant capital from the form of commodity-capital into its bodily form, as it is in simple reproduction, but a direct process of accumulation, a transformation of a part of its surplus-product from the form of articles of consumption into that of constant capital. If with £70 in money (money-reserve for the conversion of surplus-value) I buys the 70 II_s, and if II does not buy in exchange 70 I_s, but accumulates the £70 as money-capital, then the latter is indeed always an expression of additional product (precisely of the surplus-product of II, of which it is an aliquot part), although this is not a product which re-enters production; but in that case this accumulation of money on the part of II would at the same time express that 70 I_s in means of production are unsaleable. There would be a relative overproduction in I, corresponding to the simultaneous non-expansion of reproduction on the part of II.

But apart from this: Until the 70 in money, which came from I, return to it, wholly or in part, through the purchase of 70 I_s by II, this 70 in money figures wholly or in part as additional virtual money-capital in the hands of II. This is true of every exchange between I and II, until the mutual replacement of their respective commodities has effected the return of the money to its starting-point. But in the normal course of things the money figures here only transiently in this role. In the credit system, however, where all temporarily released additional money is supposed to function at once actively as an additional money-capital, such only temporarily released money-capital may be enthralled, for instance, serve in new enterprises of I, while it should have to realise surplus-products held there in other enterprises. It must also be noted that the annexation of 70 I_s to constant capital II requires at the same time an expansion of variable capital II by 14. This implies — about the way it did in I, in the direct incorporation of surplus-product I_s in capital I_c — that the reproduction in II is already in process with a tendency toward further capitalisation; in other words, it implies expansion of that portion of the surplus-product which consists of necessary means of subsistence.

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The product of 9,000 in the second illustration must, as we have seen, be distributed in the following manner for the purpose of reproduction, if 500 I_s is to be capitalised. In doing so we merely consider the commodities and neglect the money-circulation.

I. 5,000_c + 500_s (to be capitalised) + 1,500_{(v + s)} consumption-fund equals 7,000 in commodities.

II. 1,500_c + 299_v + 201_s equals 2,000 in commodities. Grand total, 9,000 in commodities.

Capitalisation takes place in the following manner:

In I the 500_s which are being capitalised divide into five-sixths, or 417_c plus one-sixth, or 83_v. The 83_v draw an equal amount out of II_s, which buys elements of constant capital and adds them to II_c. An increase of II_c by 83 implies an increase of II_v by one-fifth of 83, or 17.

We have, then, after this exchange

I. (5,000_c + 417_s)_c + (1,000_v + 83_s)_v = 5,417_c + 1,083_v = 6,500
II. (1,500_c + 83_s)_c + (299_v + 17_s)_v = 1,583_c + 316_v = 1,899
Total… 8,399.

The capital in I has grown from 6,000 to 6,500, or by 1/12. That of II has grown from 1,715 to 1,899, or by not quite 1/9.

The reproduction on this basis in the second year brings the capital at the end of that year to

I. (5,417_c + 452_s)_c + (1,083_v + 90_s)_v = 5,869_c + 1,173_v = 7,042
II. (1,583_c + 42_s + 90_s)_c + (316_v + 8_s + 18_s)_v = 1,715_c + 342_v
= 2,057.

And at the end of the third year, we have a product of

I. 5,869_c + 1,173_v + 1,173_s
II. 1,715_c + 342_v + 342_s.

If I accumulates one half of its surplus-value, as before, we find that I_{(v + ½s)} yields 1,173_v + 587_(½s), equal to 1,760, more than the entire 1,715 II_c, an excess of 45. This must again be balanced by transferring an equal amount of means of production to II_c, which thus grows by 45, necessitating an addition of one-fifth, or 9, to II_v. Furthermore, the capitalised 587 I_s divide into five-sixths and one-sixth, i.e., 489_c and 98_v. The 98 imply in II a new addition of 98 to the constant capital, and this again an increase of variable capital II by one-fifth, or 20. Then we have:

I. (5,869_c + 489_s)_c + (1,173_v + 98_s)_v = 6,358_s + 1,271_v = 7,629
II. (1,715_c + 45_s + 98_s)_c + (342_v + 9_s + 20_s)_v = 1,858_c + 371_v = 2,229
Total capital = 9,858.

In three years of growing reproduction the total capital of I has increased from 6,000 to 7,629 and that of II from 1,715 to 2,229, the aggregate social capital from 7,715 to 9,858.

3. Replacement of II_c in Accumulation

In the exchange of I_{(v + s)} for II_c we thus meet with various cases. In simple reproduction both of them must be equal and replace one another, since otherwise simple reproduction cannot proceed without disturbance, as we have seen above.

In accumulation it is above all the rate of accumulation that must be considered. In the preceding cases we assumed that the rate of accumulation in I was equal to ½s I, and also that it remained constant from year to year. We changed only the proportion in which this accumulated capital was divided into variable and constant capital. We then had three cases:

1) I_{(v + ½s)} equals II_c, which is therefore smaller than I_{(v + s)}. This must always be so, otherwise I does not accumulate.

2) I_{(v + ½s)} is greater than II_c. In this case the replacement is effected by adding a corresponding portion of II_s to II_c, so that this sum becomes equal to I_{(v + ½s)}. Here the replacement for II is not a simple reproduction of its constant capital, but accumulation, an augmentation of its constant capital by that portion of its surplus-product which it exchanges for means of production of I. This augmentation implies at the same time a corresponding addition to variable capital II out of its own surplus-product.

3) I_{(v + ½s)} is smaller than II_c. In this case II does not fully reproduce its constant capital by means of exchange and must make good the deficit by purchase from I. But this does not entail any further accumulation of variable capital II, since its constant capital is fully reproduced only by this operation. On the other hand that part of capitalists I who accumulate only additional money-capital, have already accomplished a portion of this accumulation by this transaction.

The premise of simple reproduction, that I_{(v + s)} is equal to II_c, is not only incompatible with capitalist production, although this does not exclude the possibility that in an industrial cycle of 10-11 years some year may show a smaller total production than the preceding year, so that not even simple reproduction takes place compared to the preceding year. Besides that, considering the natural annual increase in population simple reproduction could take place only to the extent that a correspondingly larger number of unproductive servants would partake of the 1,500 representing the aggregate surplus-value. But accumulation of capital, real capitalist production, would be impossible under such circumstances. The fact of capitalist accumulation therefore excludes the possibility of II_c being equal to I_{(v + s)}. Nevertheless it might occur even with capitalist accumulation that in consequence of the course taken by the processes of accumulation during a preceding series of periods of production II_c might become not only equal but even bigger than I_{(v + s)}. This would mean an over-production in II and could not be adjusted in any other way than by a great crash, in consequence of which some capital of II would get transferred to I.

Nor does it alter the relation of I_{(v + s)} to II_c if a portion of constant capital II reproduces itself, as happens for instance in the use of home-grown seeds in agriculture. This portion of II_c is no more to be taken into consideration in the exchange between I and II than is I_c. Nor does it change matters if a part of the products of II is capable of entering into I as means of production. It is covered by a part of the means of production supplied by I, and this portion must be deducted on both sides at the outset, if we wish to examine in pure and unobscured form the exchange between the two large classes of social production, the producers of means of production and the producers of articles of consumption.

Hence under capitalist production I_{(v + s)} cannot be equal to II_c, in other words, the two cannot balance in mutual exchange. On the other hand, if I_(s/x) is taken as that portion of I_s which is spent by capitalists I as revenue, I_{(v + s/x)} may be equal to, larger, or smaller than, II_c. But I_{(v + s/x)} must always be smaller than II_{(c + s)} by as much as that portion of II_s which must be consumed under all circumstances by capitalist class II.

It must be noted that in this exposition of accumulation the value of the constant capital is not presented accurately so far as that capital is a part of the value of the commodity-capital it helped to produce. The fixed portion of the newly accumulated constant capital enters into the commodity-capital only gradually and periodically, according to the different natures of these fixed elements. Therefore whenever raw materials, semi-finished goods, etc., enter in huge quantities into the production of commodities, the commodity-capital consists for the most part of replacements of the circulating constant components and of the variable capital. (On account of the specific turnover of the circulating component parts this way of presenting the matter may nevertheless be adopted. It is then assumed that the circulating portion together with the portion of value of the fixed capital transferred to it is turned over so often during the year that the aggregate sum of the commodities supplied is equal in value to all the capital entering into the annual production.) But wherever only auxiliary materials are used for mechanical industry, and no raw material, there the labour element, equal to v, must reappear in the commodity-capital as its larger constituent. While in the calculation of the rate of profit the surplus-value is figured on the total capital, regardless of whether the fixed components periodically transfer much or little value to the product, the fixed portion of constant capital is to be included in the calculation of the value of any periodically created commodity-capital only to the extent that on an average it yields value to the product on account of wear and tear.

IV. Supplementary Remarks

The original source of the money for II is v + s of the gold industry I exchanged for a part of II_c. The v + s of the producer of gold does not enter into II only to the extent that he accumulates surplus-value or converts it into means of production I, i.e., to the extent that he expands his production. On the other hand, since the accumulation of money on the part of the gold producer himself leads ultimately to reproduction on an extended scale, a portion of the surplus-value of gold production not spent as revenue passes as additional variable capital of the gold producer into II, promotes here the formation of new hoards or supplies new means with which to buy from I without selling to it direct. From the money derived from this I_{(v + s)} of the production of gold that portion of the gold must be deducted which certain branches of production II need as raw material, etc., in short as an element for the replacement of their constant capital. An element for the preliminary formation of hoards — for the purpose of future extended reproduction — exists in the exchange between I and II: for I only if part of I_s is sold one-sidedly, without a balancing purchase, to II and serves there as additional constant capital II; for II, when the same is the case on the part of I for additional variable capital; furthermore, if a part of the surplus-value spent by I as revenue is not covered by II_c, hence a part of II_s is bought with it and thus converted into money. If I_{(v + s/x)} is greater than II_c, then II_c need not for its simple reproduction replace in commodities from I what I consumed out of II_s. The question arises to what extent hoarding can take place within the sphere of exchange of capitalists II among themselves, an exchange which can consist only of a mutual exchange of II_s. We know that direct accumulation takes place within II by the direct conversion of a portion of II s into variable capital (just as in I a portion of I_s is directly converted into constant capital). In the various age categories of accumulation within the various lines of business of II, and for the individual capitalists in each line of business, the matter is explained mutatis mutandis in the same way as in I. Some are still in the stage of hoarding, and sell without buying; the others are on the point of actual expansion of reproduction, and buy without selling. The additional variable money-capital is, true enough, first invested in additional labour-power, but this buys means of subsistence from the hoarding owners of the additional articles of consumption entering into the consumption of the labourers. From these owners, pro rata to their hoard formation, the money does not return to its point of departure. They hoard it.

Notes

1. This puts an end, once and for all, to the feud over the accumulation of capital between James Mill and S. Bailey, which we have discussed from another point of view in Book I, Ch. XXIV, 5, Note, namely, the feud concerning the possibility of extending the operation of industrial capital without changing its magnitude. We shall revert to this later.