This is the eleventh set of notes for a reading group on Marx’s Capital, and normally includes a Volume I refresher for further reading of Volume II. There are links to earlier posts and texts that may be useful, and there's some sections repeated from prior postings to allow others to catch up.
This update includes Volume II, chapter 21
As we review Volumes I and II, we can appreciate the metabolic nature of the material universe and the rifts that take place beyond naturalistic analogies. There might be more than 17 particles that characterize such a universe especially a hypothetical “fourth" flavor of neutrino. Such neutronic(sic) analogies in social science reveal reciprocity and cause/effect issues like agency/structure especially when considering the relation of private property to alienation.
In the development of Italian science and the history of neutrinos, it remains fascinating to see how long it survived under fascism.
Fascism outwardly transformed Italian society, as evident in the creation of a one-party state, which claimed to penetrate all facets of life, whether the economy, education, leisure pursuits, or the family and private life.
Apart from mathematics and mathematical physics, Italian science was rather poorly developed. For the most part chemists, physicists, biologists and medical researchers were not on a level comparable with that attained by mathematicians. In fact, a notable decline had taken place since preunification times, when Italy could boast important physicists and chemists such as Luigi Galvani, Alessandro Volta, Amedeo Avogadro and Stanislao Cannizzaro.
A rare exception was Camillo Golgi (1843-1926), the 1906 Nobel laurate for Medicine. Other Italian scientists around1900 include the physicists Antonio Pacinotti (1841-1912),Augusto Righi (1850-1920) and Quirino Majorana (1871-1957), the electrical engineer Galileo Ferraris (1847-1897), and the engineer-inventor Guglielmo Marconi (1874-1937),a 1909 Nobel laureate for Physics and the “official face” of Italian science in the Fascist period.
The destinies of Italian physics will suddenly change with the appearance on the scene of Enrico Fermi (1901-1954).
When Mussolini takes over, Italian science is largely dominated by mathematicians. Vito Volterra, who had become a full professor at the age of 23 and a senator at age 46 (in1906) is known worldwide as Mr. Italian Science. In 1923 Volterra establishes the CNR. Together with the UMI (founded a year earlier by Pincherle), these two institutions will play an important role during the 1930s in the fascistization of Italian science, after Volterra’s dismissal.
By 1922 the Rome science faculty includes Volterra, Castelnuovo, Enriques, Levi-Civita and Francesco Severi (1879-1961), a former student of Segre and a leading algebraic geometer. Another prominent mathematician, the analyst Mauro Picone(1885-1977), will move from Naples to Rome in 1932. There he will build up the INAC, the first research center in the world devoted to computational mathematics.
Rome University, as one of the main centers of mathematical activity, attracts foreign students and post-docs including people of the caliber of Oscar Zariski (1899-1986), Dirk Struik (1894-2000), and many others. In 1927, at age 26, Enrico Fermi, supported by the Roman mathematicians (especially Castelnuovo and Levi-Civita) becomes a full professor at the university of Rome and almost immediately proceeds to build the famous but short-lived school of via Panisperna.
At this time, early signs of anti-semitism begin to appear within the scientific community, in part due to resentment for the power wielded by the tightly knit group of Roman mathematicians. Advised by Enriques, around 1925 Ascher Zaritsky changes his name to Oscar Zariski.
The impact of anti-Semitic law is even worse on Italian Physics and Biology, which are devastated. Of Fermi’s collaborators, only Edoardo Amaldi decides to stay. By 1939 Fermi (whose wife Laura was Jewish), Emilio Segr`e (Nobel Prize 1959), Franco Rasetti, Bruno Rossi, Eugenio Fubini, Ugo Fano, Giulio Racah, Leo Pincherle, Sergio De Benedetti and Bruno Pontecorvo have left Italy. Also, Ettore Majorana mysteriously disappears in 1938.
During WWII Fermi, Segr`e and Rossi work at Los Alamos on the atom bomb, as part of the Manhattan Project. Among biologists, Italy loses two future Nobel prizes: Salvatore Luria and Rita Levi Montalcini, both students of Giuseppe Levi (the father of the writer Natalia Ginzburg )in Turin.
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NOTES:
Outline of Marx’s Analysis
– in capitalism, social labor produces surplus-value
– early on: formal subsumption of labor produces absolute surplus-value by extending the working day
– later: real subsumption of labor produces relative surplus-value by reducing necessary labor
– but the means for reducing necessary labor also can increase absolute surplus-value – amount of potential surplus labor – Ricardo: saw labor productivity as source of profit
– Mill: affirms source of profits in productivity of labor against mercantilist focus on exchange
– by making the working day longer
– determined by natural conditions of labor – determined by requirements of life
- – need to master nature leads to development of social division of labor
- – where needs are few, a great deal of surplus labor can be imposed
Commentary
In this, the first of the three chapters that take us from analyses in terms of value, to those of the monetary form of the value of labor-power, Marx reminds us of the distinction between absolute and relative surplus-value, of how they are produced and of the relationship between the two. Absolute surplus-value emerges early when capitalists only command or subsume the labor of others formally, that is to say, without taking over and transforming tools and how they are used. Under those circumstances, their only available strategy for increasing the extraction of surplus-value involves getting people to work longer. Because workers control their tools and the rhythm of their work, capitalists have little leverage to extract more surplus-value via the intensification of labor. Relative surplus-value emerges as capitalists do obtain that leverage, by gaining control over tools and organizing them in factories that facilitate oversight and control. Protected by new property laws, they reshape both tools and their use to raise productivity and increase surplus-value—both by reducing the labor time necessary to produce each unit and by increasing the intensity of labor.
Given the increasing centrality of productivity, he also reminds us of how the conditions and meaning of productive labor depends upon the context. At the level of the individual, a productive worker is simply one who produces some product directly, using mind, hands and tools to transform raw materials. That was the generic concept he set out in the first section of Chapter 7. But as human society developed most labor became social, such that individuals came to collaborate in the production of ever more things and in so doing formed a collective worker with a division of labor—that he analyzed in some detail in Chapter 14. With the rise of various kinds of class society, including capitalism, antagonistic relationships develop as some are able to impose surplus work on others and appropriate the resulting surplus product. Within capitalism that surplus product takes the form of surplus-value, so that from the point of view of the appropriating capitalists the only productive workers, i.e., the only workers whose labor makes it possible to impose more work, are those who produce surplus-value, i.e., surplus labor whose products can be used to impose more work in the future. As a result, there is a clear distinction between the vernacular, everyday sense of being productive, i.e., being able to produce something, and the only kind of productivity that matters to capitalists. This is consistent with the emphasis we saw in Chapter 1 between use-value and exchange-value/value. Use-values and the ease with which we can obtain them preoccupy those of us who work; the exchange-value of the surplus production preoccupies those who put us to work.
In illustrating the capitalist case, Marx draws a parallel between those industries that produce things and those that produce services.
. . . a schoolmaster is a productive worker when, in addition to belaboring the heads of his pupils, he works himself into the ground to enrich the owner of the school. That the latter has laid out his capital in a teaching factory, instead of a sausage factory, makes no difference to the relation.
Given that such “productivity” involves exploitation, he adds that, “To be a productive worker is therefore not a piece of luck, but a misfortune.” (1)
Marx then goes on to remind us of the connections that he demonstrated in Chapter 15 between absolute and relative surplus-value. Namely, how the methods used to produce relative surplus-value, i.e., introducing new machines and new technology, also made possible the prolongation of the working day and the intensification of work, both of which added surplus-alue by extracting more work from those subject to the new methods. What he does not remind us of here, is how the shift to relative surplus-value strategies was the result of the success of workers’ struggles to shorten the working day and by so doing undermine absolute surplus-value. (2) Nor does he reiterate his previous analysis of how new machines are designed and new technologies are chosen with the objective of undermining those struggles through the reorganization of the labor process. (3)
la.utexas.edu/…
Outline of Marx’s Analysis
Relative magnitudes of surplus value, S, and price of labor-power, LP, are a function of:1. When only the productivity of labor varies:2. When only intensity of labor varies:3. When only the length of the working day varies:4. With simultaneous variations:
- – length of the working day
– intensity of labor
– the productivity of labor
- – total value remains the same
– value of LP and S vary inversely
– although their variation is inverse, the proportionate changes may differ
– variation in magnitude of S always a consequence of change in value of LP
– amount of reduction in price of LP depends on struggle over fruits of the increase in productivity
– increasing productivity can result in both workers and capitalists getting more
– so, both constant and falling prices of LP can be accompanied by rise in real standard of living
- – greater intensity means more output, but also more value, no change in value per unit
– increased intensity of labor means workers get tired faster, increasing cost of maintaining the same quality of LP
– so, rise in price of labor-power may not fully compensate for deterioration
- – if shortened and value of LP remains the same, S is reduced– if lengthened and value of LP remains the same, S is increased, both absolutely and relatively
– but both price of LP and S can increase, the proportion depends on struggle
– lengthening depletes workers’ LP, so value of labor-power rises; wage increases may compensate but as in the case of increased intensity, not completely
- – shortening may follow or precede an increase in productivity
- Two important cases:
- (a) decline in productivity, increase in working day(b) shortening of working day but increasing intensity and productivity
- – increase in working day can compensate for negative impact on S of a decline in productivity
– 1799–1815 fall in real wages (standard of living)
– West and Ricardo were wrong that declining productivity lowered S
– S rose because of increased hours of work and increased intensity of labor
- – the more a working day is intensified, and productivity increased, the greater the shortening possible
– capitalism limits shortening because of its need for S
– capitalism squanders LP and MP on socially superfluous functions
– as necessary labor declines, potential free time expands
– end of capitalism will make possible:
- – end of leisure for some at the expense of work by others
– universality of labor, but more leisure for all
Commentary
The title of this chapter announces a transition from value analysis to money by making clear that the value of labor-power will be discussed in terms of its price. Price, as we saw in Chapter 1, is the money expression of the value of a commodity, in this case of the value of labor-power. In this chapter, Marx reiterates his analysis of past chapters in terms of changes in both the value and the price of labor-power and notes how changes in price may differ from changes in value. In passing from analysis in terms of value to one in terms of money, Marx must, and does, take into account changes in the real value of money wages, e.g., caused by a change in the price of consumer goods. Therefore, the price of labor-power may not equal its value.
Throughout this analysis, the price of labor-power can be assumed to be wages, in as much as money wages were predominant over other expressions of the value of labor-power in the period in which Marx was writing. (As opposed to wages in kind, salaries, commissions or government payments to the unemployed or the poor.)
la.utexas.edu/...
A full online copy of Marx's Capital Volume 1 can be found here: https://www.marxists.org/archive/marx…
Reading Marx’s Capital Volume 1 with David Harvey – 2019 Edition
This chapter, along with the one which follows, follows logically from the preceding analyses of this volume and of volume 1.
The object of analysis of volume 1 was the immediate process of production, the P in M–C ... P ... C′–M′: ‘[t]he immediate production process of capital is its process of labour and valorisation, the result of this process being the commodity product’,1 i.e., volume 1 considered capitalist production abstracted from its total process or reproduction, specifically from its process of circulation. This has been the subject of volume 2: precisely the process of circulation of capital, or, more exactly, the place of this circulation in its reproduction. We began, in part 1, by tracing the cyclical movement of capital at the scale of the individual capital and its individual cyclical movement. Then, in part 2, we considered this cycle as a periodic one, and the implications of this periodicity. Now, since ‘the circuits [cycles] of individual capitals [...] presuppose one another’,2 we are going to consider the movement of the total social capital: ‘[t]he movement of the social capital is made up of the totality of movements of these autonomous fractions, the turnovers of the individual capitals.’3 Given the length of the chapter, and the fact that it was compiled from different manuscripts written over a period of some years,4 I have broken it down into three more easily digestible parts.
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This first part deals with the question of simple reproduction as such, and introduces the notion of the two departments of production and that of the mechanisms and conditions of exchange between them;
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in the second part, Marx explicitly directs his critical attention to the concepts of classical political economy in general and Adam Smith in particular; and
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in the third, Marx addresses the specific question of the reproduction of fixed capital (and consequently both changes the abstracting assumptions adopted during the rest of the chapter and more directly anticipates the subject matter of the following one, i.e. expanded reproduction).
This first part incorporates the first six sections of the chapter;5 Part 1: Simple Reproduction and the Exchange between the Two Departments of Production
the second deals with sections seven, eight, nine, ten, twelve and thirteen;
the third, dealing with the question of fixed capital, summarises section eleven.6
(Remembering that the same quantity of money can mediate more than one exchange, according to the formula: quantity of money functioning as the circulating medium = the sum of prices of commodities number of times coins of the same denomination are turned over . Cf. C1, pp. 217-20)
VOLUME II, Part Three: The Reproduction and Circulation of the Total Social Capital
The new object is developed: individual capital as part of total social capital.
1. Formulation of the Problem
469:2 “The immediate form in which the problem presents itself is this. How is the capital consumed in production replaced in its value out of the annual product, and how is the movement of this replacement intertwined with the consumption of surplus-value by the capitalists and of wages by the workers?”
The question and the scheme to answer it are developed: commodity capital in each year must suffice to replace capital in value and material terms, otherwise there is no simple reproduction.
2. The Two Departments of Social Production
The distinction between capitals based on what they produce is introduced. department I produces means of production for c and department II produces means of subsistence for v and s.
3. Exchange Between the Two Departments: I(v+c) against IIc
First new law: constant capital of department II must equal the sum of the v and s components of department I: Iv+s=IIc.
4. Exchange Within Department II. Necessary Means of Subsistence and Luxury Items
Second new law: the realisation of the value components v and s of department II must happen within that department. The class opposition which restricts workers to necessary means of subsistence necessitates a conceptual distinction of capitals which produce ordinary means of subsistence (IIa) and those which produce luxury items (IIb).
The consumption of luxury items by capitalists from department IIa is the condition for the reproduction of workers in department IIb.
The realisation of surplus-value of department IIa is also determined by this relationship.
5. The Mediation of t he Exchanges by Monetary Circulation
Rejections, relationships and a third law. Money returns to its origin: capitalists are paid with money they themselves throw into circulation (partially mediated by wage payments) either as an advance or as personal spending.
The reciprocal value realisation of the departments is dependent on money expenditures which happen before value realisation. Capitalists speculating on their success and their positive verdict about the course of business is a necessary condition for this success.
6. The Constant Capital in Department I
No new problem for the material and value reproduction of constant capital of producers of means of production. Constant capital in department I is realised and reproduced within this department.
7. Variable Capital and Surplus-Value in the Two Departments, 8. The Constant Capital in Both Departments, 9. A Look Back at Adam Smith, Storch and Ramsay
A riddle which concerned economists, a solution and critique of ideology. It can look like Smith had a point when he said all values decompose into revenue if you consider that IIc+v+s can be considered as Iv+s + IIv+s because IIc=Iv+s
501:2 On the premise of simple reproduction, therefore, the total value of the means of consumption annually produced is equal to the annual value product, i.e. equal to the total value produced by the labour of the society in the course of the year, and the reason why this must be the case is that with simple reproduction this entire value is consumed.
However, this equality in magnitudes is not the same as the equivalence in substance. Both departments produce fresh value and the value of constant capital reappears in their products. Expressed for department I:
509:1 Socially considered, however, the portion of the social working day that produces means of production, both adding new value to them and transferring to them the value of the means of production consumed while they were being produced, produces nothing but new constant capital, destined to replace that consumed in the form of the old means of production, the constant capital consumed in both departments I and II.
10. Capital and Revenue: Variable Capital and Wages
It is wrong to say that what is capital for one is revenue for another, as this
(a) identifies the value of the product with the value product and (b) confuses what becomes of money after it left the circuit of capital with the function of value within the circuit.
A cause for potential frictions: while the working class lives hand to mouth, the capitalist class can indulge in luxury spending or save up. This might assert itself against the necessary relationship of exchanges between the departments.
11. Replacement of the Fixed Capital
A fourth law: simple reproduction can only happen if department II wants to buy new machinery to the same extend as it hoards in order to buy fixed capital later. That is, for there to be a part of department II that only buys means of production without selling an equivalent in this year (section 1), there must be an equally big part of department II that sells without buying means of production (section 2).
Such a balance would have to exist in every year which is unlikely due to the anarchy of the market. If every year the same is produced in terms of value and material then this means crisis. Simple reproduction only exists under constant overproduction, i.e. expanded reproduction, which means accumulation must take place. This is the transition to the next chapter.
12. The Reproduction of the Money Material
Money material is replaced and the possibility of hoarding without disturbing the reproduction process exists.
13. Destutt de Tracy’s Theory of Reproduction
Destutt de Tracy held that profits are the result of uneven exchange i.e. that surplus was generated in the distribution of the annual product. While this might account for individual capitalists getting richer at the expense of each other or the workers they sell to, it cannot explain the presence of increased wealth in the whole of society.
The general result of this chapter: accumulation presupposes accumulation.
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Capitals which hoard in order to expand in the future are dependent on capitals which are expanding now, i.e. those which already successfully hoarded.
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Accumulation in department I is dependent on accumulation in department II and vice versa. This way capitals produce the material and value conditions for accumulation.
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This accumulation includes simple reproduction.
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Means of subsistence producing capitals must expand in anticipation of expansion elsewhere and must produce commodity hoards which are only realised by workers yet to be hired by department I.
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The presentation of the circulation or the process of reproduction of capital not only shows how capital produces, but also how capital is produced.
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The laws developed in Chapters 20 and 21 present themselves as possibilities and limits (up to interruptions) of accumulation or even simple reproduction.
The drive to accumulation determines capitalist production. Capital makes simple reproduction dependent on the success of accumulation. If an individual capital is successful with this or not depends on if it fits into the unity of production and circulation process of total social capital. A unity which is re-produced by individual capitals — or not. Capital must fix this new criterion for the capitalist purpose to the commodity, the link between production and circulation. This is how the next volume starts.
readingcapital.github.io/...
Part 1: Simple Reproduction and the Exchange between the Two Departments of Production
1: Formulation of the problem
The question to be investigated is ‘how the reproduction of the social capital proceeds’,7 in other words, ‘[h]ow [...]the capital consumed in production [is] replaced in its value out of the annual product, and how [...] the movement of this replacement [is] intertwined with the consumption of surplus-value by the capitalists and of wages by theworkers.’8
Given that ‘the overall process of reproduction [...] includes the consumption process mediated by circulation’,9 we therefore need to consider the process of reproduction by analysing the circuit of commodity capital,10 viz.:
With regard to the other cycles of industrial capital we considered at the beginning of the volume, the cycles of money and of productive capital, respectively M–C ... P ... C′ –M′ and P ... C′–M′–C ... P, consumption, the sale of the commodity, is assumed, but once so is immaterial for the movement of the individual capital. C′– C′, on the other hand, necessarily includes what becomes of each portion of the product C′. In addition to the value analysis of the product of capital, our account of the problem also needs to take account of the material replacement of the components of C′, i.e. we cannot just simply assume that the capitalist converts her commodity product into money and thence back into commodity product, nor that the worker and the capitalist consume a part of the social commodity product in spending, respectively, wages and surplus-value. In contrast to the (formal) consideration of the immediate process of production, the reproduction of the total social capital is a movement which is ‘not only a replacement of values, but a replacement of materials, and is therefore conditioned not just by the mutual relations of the value components of the social product but equally by their use-values [...].’11We shall be making the following assumptions in the following.
- First, we shall for the moment only be considering simple reproduction.12
- Second, we shall be assuming exchange at value,13 and an absence of revolution in values with regards to the components of the productive capital.14
- Third, we also assume a (constant) rate of surplus-value of 100 % in both departments.15
2: The Two Departments of Social Production
Society’s total product may be broken down into two ‘departments’: means of production (I) and means of subsistence(consumption) (II).
There are two points we should take note of here.
First, that while the distinction between means of production (i.e. articles of productive consumption) and means of subsistence (i.e. articles of unproductive consumption) is a distinction in terms of use-value, Marx’s treatment in this chapter and the next of the exchanges that occur both within the departments and between them is couched entirely in value terms.
The second is this. The distinction between means of production and means of subsistence is not an arbitrary abstraction.
In each department, capital is composed of two components: variable capital (v) and constant capital (c). The value of the total product of each department breaks down into a part composed of constant value c consumed18 in production, and that part added by labour, which in turn is composed of the replacement of variable capital v and the excess surplus-value s
3: Exchange Between the Two Departments: I(v + s) against IIc
4: Exchange within Department II. Necessary Means of Subsistence and Luxury Items
- V Reproduction and crises
- Marx now emphasises that the proportions in spending on the part of the capitalist class on necessary and luxury means of consumption are arbitrary, and to be interpreted as social averages (on an individual level, being determined by individual tastes, the proportions will vary accordingly). What matters here is the qualitative relation: changes in the quantitative relation, the conditions of reproduction change accordingly. If consumption of luxury means of consumption declines (as it does in a crisis), the retransformation of IIbv into money is slowed down; this lack of variable capital in this sector leads to a decline in the production of luxury goods, which in turn, because of IIbv ↔ IIas , leads to restrictions in the production and sale of necessary means of consumption. In this respect, Marx now makes a rather important remark about the nature of crises, an argument against those ‘underconsumptionist’ theories that have subsequently become rather popular:
- It is a pure tautology to say that crises are provoked by a lack of effective demand or effective consumption. [...].The fact that commodities are unsalable means no more than that no effective buyers have been found for them, i.e. no consumers (no matter whether the commodities are ultimately sold to meet the needs of productive or individual consumption). If the attempt is made to give this tautology the semblance of greater profundity, by the statement that the working class receives too small a portion of its own product, and that the evil would be remedied if it received a bigger share, i.e. if its wages rose, we need only note that crises are always prepared by a period in which wages generally rise, and the working class actually does receive a greater share in the part of the annual product destined for consumption. From the standpoint of these advocates of sound and simple common sense, such periods should rather avert the crisis. It thus appears that capitalist production involves certain conditions independent of people’s good or bad intentions, which permit the relative prosperity of the working class only temporarily, and moreover always as a harbinger of crisis.44
44 (C2, pp. 486-7. ‘Exploitation is not a cause of crisis, but a necessity for capitalist reproduction.’ Anthony Brewer, A Guide to Marx’s Capital , p. 117.)
5: The Mediation of the Exchanges by Monetary Circulation
- III The movement of money and the realisation of commodity circulation
We have discussed Marx’s use of abstraction in general terms
and do not propose at this stage to enter into particular cases.
It is well to note, however, that a great many criticisms of Marx’s
economics are, consciously or unconsciously, based upon a rejection of the assumptions with which he works. Our discussion
should help to establish criteria by which to judge the validity
of these criticisms. In each case, the following three questions
should be asked about the simplifying assumptions (or abstractions) which give rise to criticism:
(1) are they framed with a proper regard for the problem under investigation?
(2) do they eliminate the non-essential elements of the problem?
(3) do they stop short of eliminating the essential elements?
If all three of these questions can be answered in the affirmative, we may say that the principle of appropriate abstraction has been observed. This principle is of great assistance in testing the relevance and validity of a considerable range of Marx criticism.
Paul Sweezy, The Theory of Capitalist Development (London and New York, 1968), p. 20.
Simple Reproduction refers to a capitalist system which preserves indefinitely the same size and the same proportions among
its various parts. For these conditions to be satisfied capitalists
must every year replace all capital worn out or used up and
spend all of their surplus value on consumption; and workers
must spend all of their wages on consumption. If these requirements were not fulfilled there would take place either an accumulation or a depletion of the stock of means of production, and this is excluded by hypothesis. (Sweezy p.76)
Part 2: On Political Economy:
7 Variable Capital and Surplus-value in the Two Departments
Evidently, under conditions of simple reproduction the total means of consumption produced in a single production period is equal in value to the variable capital reproduced and the surplus-value newly produced in the same period in both departments: the total value product (new value) is equal to the total value of means of consumption produced. On the assumptions here –
II(c +v +s) = 3,000 and = 100 % – the ‘total social working day’
The total social product of departments I and II appears as the product of the current production period but only insofar as this labour is considered as useful, concrete labour, not as the expenditure of labour-power, as value forming labour. The failure to see the distinction between the total value existing in the production periods breaks down into necessary labour = 1,500v and surplus labour = 1,500s . The total value of means of consumption therefore = the total value the whole social working day produces during the production period = the value of total social variable capital plus total social surplus-value = total annual new product. These equalities exist not because the total value of means of consumption has been produced in department II but because the constant value that reappears in department II is equal to the new value (variable capital plus surplus value) produced in department I, i.e. because I(v + s) = IIc .
Consequence: the product of department I, which breaks down into c + v + s, also breaks down into v + s when considered from the social point of view. But this ‘resolution’ of commodity value (Adam Smith’s ‘dogma’) only applies to that part of the total product consisting of means of consumption, and only applies in the sense that: II(c + v + s) = II(v + s) + I(v + s) because, in other words, IIc = I(v + s)
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Part 3: Fixed Capital in the Reproduction Process
11: The Replacement of the Fixed Capital2
We now have to consider a new difficulty. One part of the constant capital value, that which consists of instruments of labour, is transferred to the commodity product while these instruments continue to function as part of productive capital. We shall not be considering here those components of fixed capital whose life is shorter than a single (here, annual) production period, for if they need to be replaced during the production period, they can be treated in the same way as circulating capital. The problem under consideration here is this:
- [T]he part of the money received from the sale of commodities that represents the realised value component of the commodities, which is equal to the wear and tear of the fixed capital, is not transformed back again into the component of productive capital whose loss of value it replaces. It settles down alongside the productive capital and persists in its money form. This precipitation of money is repeated until the reproduction period during which the fixed element of the constant capital continues to function in the production process in its old natural form, and which consists of a greater or lesser number of years, has elapsed.
This disruption in the circulation of money supposes a disruption in reproduction itself.
We now need to investigate the various ways in which this disruption might be resolved.
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(p.1) Marx’s intentions in laying out the schemes of expanded reproduction of social capital which are the central topic of this chapter, for all the subsequent fascination they have attracted, are not immediately transparent. Is it the case that Marx wished to paint a ‘picture of an economy in perpetual balanced growth’,1 of a capitalist reproduction in perpetual equilibrium? Or does he want to portray the conditions for equilibrium in social reproduction so as to demonstrate their practical unattainability?2In good part, Marx’s inspiration for the reproduction schemes came from the impact made on him by Quesnay’s Tableau Économique, Is Marx painting a picture of an inevitably crisis-free capitalism, or an inherently crisis-ridden one?3 ‘incontestably the most brilliant [conception] for which political economy had up to then been responsible.’4
the whole production process of capital as a process of reproduction, with circulation merely as the form of this reproductive process; and the circulation of money only as a phase in the circulation of capital; at the same time to include in this reproductive process the origin of revenue, the exchange between capital and revenue, the relation between reproductive consumption and final consumption; and to include in the circulation of capital the circulation between consumers and producers (in fact between capital and revenue); and finally to present the circulation between the two great divisions of productive labour – raw material production and manufacture – as phases of this reproductive process.
In Marx’s words, what Quesnay wanted to portray was5 It does not require a too far stretch of the imagination to conceive of Marx wanting to achieve something similar.6 And, in so doing, prominent in his mind was his critique of Adam Smith’s ‘dogma’7 that the value of commodities in its totality could be ‘resolved’ into ‘revenue’, that is profit and wages.8 If this were true, argued Marx, the total social product would be consumed (by capitalists and workers) and there would be no accumulation: ‘society would have to start each year de novo, without capital.’91 Meghnad Desai, ‘Simple and Extended Reproduction’, in John Eatwell et al, The New Palgrave Marxian Economics (London and Basingstoke, 1990), p. 339.But if it were not true, if a part of the product was not consumed, but accumulated, then the problem to be solved was the apparent imbalance between revenue and product, between what was consumed and what was produced. How, if what was spent as ‘revenue’ was necessarily less than the value of what had been produced, would that part of the product to be accumulated be sold?
How is it [...] possible for the worker with his wages, the capitalist with his profit, the landowner with his rent, to buy commodities that contain not only one of these components [constant capital, variable capital and surplus value] but all three, and how is it possible for the value sum of wages, profit and rent, i.e. the three sources of income taken together, which are to buy the commodities which are to enter into the total consumption of the recipients of these incomes, to contain a further additional value component on top of these three, i.e. constant capital? How can a value of four be bought with a value of three?10
Marx’s expanded reproduction schemes show that capitalists are not only able to recover the constant capital component of the social product (so as to continue production on the same scale) but also to accumulate more of the social product as new capital (both constant and variable). To do this, Marx divides total social production into two departments: that which produces means of production (means of productive consumption), and that which produces means of subsistence (means of unproductive consumption). It is important to grasp that this distinction is itself a product of one of the fundamental specificities of capitalist production: the separation of the worker from the means of production, a separation of which the separation between means of production and means of subsistence is a consequence and reflection:11
[...] the conditions for the realization of labour-power, i.e. means of subsistence and means of production, are separated, as the property of another, from the possessor of labour-power. [...] The capital relation arises only in the production process because it exists implicitly in the act of circulation, in the basically different economic conditions in which buyer and seller confront one another, in their class relation. [...] If the sale of one’s own labour-power (in the form of the sale of one’s own labour, or the wage form) is not an isolated phenomenon, but the socially decisive precondition for the production of commodities [...], this [...] implies the occurrence of historic processes through which the original connection between means of production and labour-power was dissolved; processes as a result of which the mass of the people, the workers, come face to face with the nonworkers, the former as non-owners, the latter as the owners, of these means of production. [...] Thus the situation that underlies the act M–C < L MP
is one of distribution; not distribution in the customary sense of distribution of the means of consumption, but rather the distribution of the elements of production themselves, with the objective factors concentrated on one side, and labour-power isolated from them on the other. [...] We have already seen how capitalist production, once it is established, not only reproduces this separation in the course of its development, but also expands on an ever greater scale until it has become the generally prevailing social condition.12
Thus ‘Marx’s main purpose in developing the schemes was not to model balanced growth – nor to model unbalanced growth’,13
but to depict how it is possible for reproduction to occur: how, if the value of the socialproduct is greater than the value of the factors of production paid for to produce it, it is possible to realise this product (i.e. convert it into money), not only once, but repeatedly, and on an increasingly expanding scale. Inter alia, it is also possible to read into Marx’s account a description of the difficulties inherent in balanced reproduction –and by ‘balanced reproduction’ what is meant here is that, within the assumptions of the model, all the commodity product is realised such that optimum expanded reproduction occur in the next production period – for the conditions necessary to realise this are so precise that it is impossible to see how they could be reproduced within the circumstances of the ‘competition of many capitals’; demonstration of this point, however, does not appear to be Marx’s principal purpose. The reproduction schemes should be read with this in mind.
My notes here are in four parts. The first two parts, following Marx’s text, deal with specific questions related to the mechanisms of accumulation in each of the two departments of production, and then recapitulate, with a commentary, Marx’s numerical schemes; the third part is a reflection on the way that the patterns of accumulation in each department impact on those of the other; the final part is a reflection on issues not directly addressed in the schemes. but to depict how it is possible for reproduction to occur: how, if the value of the social product is greater than the value of the factors of production paid for to produce it, it is possible to realise this product (i.e. convert it into money), not only once, but repeatedly, and on an increasingly expanding scale. Inter alia, it is also possible to read into Marx’s account a description of the difficulties inherent in balanced reproduction –and by ‘balanced reproduction’ what is meant here is that, within the assumptions of the model, all the commodity product is realised such that optimum expanded reproduction occur in the next production period – for the conditions necessary to realise this are so precise that it is impossible to see how they could be reproduced within the circumstances of the ‘competition of many capitals’; demonstration of this point, however, does not appear to be Marx’s principal purpose. The reproduction schemes should be read with this in mind.
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4 (p.27) What is not in the reproduction schemes (a) Increase in labour productivity I argued at the beginning of these notes that, on the basis of circumstantial evidence, it would be reasonable to suggest that Marx’s principle intention in setting out the reproduction schemes was to critique Adam Smith’s ‘dogma’ (that the value of commodities in its totality could be ‘resolved’ into ‘revenue’, that is profit and wages) and not to model the workings of an actual capitalist economy. Subsidiary evidence for this proposition is given by what is not included in the reproduction schemes. In her introduction to Rosa Luxemburg’s The Accumulation of Capital, in which Luxemburg highlights a problem of demand for the product of department II (which I shall return to), Joan Robinson asked: ‘[i]f accumulation […]take[s] place, demand will absorb output, as the model [of Marx’s] shows, but what is it that makes accumulation take place?’59 In volumes 1 and 3, Marx makes it clear that the capitalist (all capitalists) are motivated fundamentally by the pursuit of a rate of profit above the average.60 But as new productive techniques become generalised, per-unit commodity prices in general fall, cheapening both the elements of constant capital (fixed and circulating) and the means of subsistence; in the case of the latter, if real wages remain constant, the value of labour power will fall. Nevertheless, although the cheapening of the elements of constant capital will counteract the direct effect of a rise in labour productivity on the value composition, because this cheapening is subsequent in time in terms of periods of production to the more productive techniques that cause the cheapening in the first place, the counteracting effect, assuming the rise in labour productivity is continuous, can only lessen, and not cancel out (let alone reverse) the rise in the value composition technological progress provokes. Disregarding the effects of pure swindling (either of the workers or of other capitalists), and once the limits of increasing the rate of absolute surplus-value have been reached, capitalists are hence driven to increase the productivity of labour through the adoption of more productive techniques of production, principally through the adoption of more productive machinery (fixed constant capital).Given the adoption of more productive production techniques, a given quantity of labour-power will transform a greater quantity of raw material (circulating constant capital) into finished commodity product. This is what drives capitalists to accumulate a part of their surplus-value: new and more productive machinery will tend to be more expensive, and, in any case, a greater mass (and value) of raw material is bought and worked up by a given mass of labour-power. Evidently, as this happens, the value composition of capital will change: the ratio of the value of constant capital laid out will rise as against the value of labour-power deployed.61 How might the reproduction schemes of volume 2 appear if we factor in a rising productivity of labour and its effects? It is on this basis that Marx argues in Capital volume 3 the long-run tendency of a decline in the rate of profit. readingmarx.wordpress.com/…
Bourgeois economics denies that crises are intrinsic to the system, despite the number of crises that have occurred under capitalism. They assert that the market self-corrects while crises are simply anomalies that occur every once in a while.
Economists use a model where profits are made by capitalists and then redispersed when capitalists spend that money, thus balancing out the market again. This theory is often referred to as Say’s Law. This theory neglects to mention the fact that capitalists often sit on the money they’ve made or pay back debts if investment doesn’t look profitable. Even economists like John Maynard Keynes, who saw that crises were linked back to the system, still posited that regulation of capitalist systems could prevent crashes, neglecting to acknowledge the role that growth and profit played in the system.
Since capitalism is about profits and maximization rather than consumption and distribution, Say’s Law and Keynes neglect to remember that capitalists will often choose crashes and recessions if they are deemed to be more profitable than other options, so this surface view of economic data leads to a surface level view of crises and recessions.
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These conditions can be represented in the following manner:
Department I must produce C1 + C2 + C1new + C2new
Department II must produce V1 + V2 + V1new + V2new.
If, and only if, these conditions are met can expanded reproduction take place, i.e., can accumulation occur from period to period.
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In Marxism, the valorisation or valorization of capital is the increase in the value of capital assets through the application of value-forming labour in production. The German original term is "Verwertung" (specifically Kapitalverwertung) but this is difficult to translate. The first translation of Capital by Samuel Moore and Edward Aveling, under Engels' editorship, renders "Verwertung" in different ways depending on the context, for example as "creation of surplus-value", "self-expanding value", "increase in value" and similar expressions.[1] These renderings were also used in the US Untermann revised edition,[2] and the Eden and Cedar Paul translation.[3] It has also been wrongly rendered as "realisation of capital".[4]
In German, the general meaning of "Verwertung" is the productive use of a resource, and more specifically the use or application of something (an object, process or activity) so that it makes money, or generates value, with the connotation that the thing validates itself and proves its worth when it results in earnings, a yield. Thus, something is "valorised" if it has yielded its value (which could be use-value or exchange-value). Similarly, Marx's specific concept refers both to the process whereby a capital value is conferred or bestowed on something, and to the increase in the value of a capital asset, within the sphere of production.
In modern translations of Marx's economic writings, such as the Penguin edition of Capital and the English Marx-Engels Collected Works, the term valorisation (as in French) is preferred because it is recognized that it denotes a highly specific economic concept, i.e., a term with a technical meaning.[5]
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