Anti-Duhring, Part II, Political Economy, X – From The Critical History - Part 33 of 39

For the reasons set out earlier, because the Physiocrats equate use-value with value, they also equate the value created by labour with the value of labour-power, and they equate the value of labour-power with the value of the agricultural products consumed by the labourer. That is why they cannot see the possibility of the industrial labourer producing a surplus value. In other words, industry obtains agricultural products as raw materials and food, and the value of the output of industry cannot be greater than the value of these agricultural inputs. It simply transforms them into industrial products.

“Although it is itself divided into capitalists and wage-workers, according to Quesnay's basic conception, it forms an integral class which is in the pay of the productive class and of the landlords.” (p 318)

The landlords are included, here, because, as set out earlier, industry does not just sell to the farmers, but also to the landlords. The landlords, however, buy from industry with 1 milliard of the rent received from the farmers. As will be seen, this 1 milliard, eventually, finds its way back to the farmers, by way of industry, which buys agricultural products with it.

“The total industrial production, and consequently also its total circulation, which is distributed over the year following the harvest, is likewise combined into a single whole. It is therefore assumed that the annual commodity production of the sterile class is entirely in its hands, at the beginning of the movement set out in the Tableau, and consequently that its whole working capital, consisting of raw materials to the value of one milliard, has been converted into goods to the value of two milliards, one-half of which represents the price of the means of subsistence consumed during this transformation.” (p 318)

So, as described earlier, for the Physiocrats, the value of the industrial production resolves into the value of the raw materials plus the value of the labour expended on processing them. But, in fact, the value of “labour”, here, is actually the value of the labour-power, i.e. the cost of reproducing the labourer. The actual value added to the raw material in the process of production is equal not to the value of labour-power, but to the amount of labour undertaken. Indeed, that is the case with agricultural production as well as industrial production. It is the fact that this quantity of labour undertaken is greater than the necessary labour required to reproduce the labourer that results in the creation of surplus value, both in agricultural production and industrial production.

It is this that explains what might appear as an objection, and which the Physiocrats could only explain by arguing that the “sterile class” sells part of its output to the farmers above its value. In other words, the sterile class consumes part of its own production. If the value of its total production is equal to the value of raw materials and food obtained from the farmers, it should sell all of its output to the farmers – an exchange of equal values. But, it doesn't. It consumes part itself. So, the other part, sold to farmers, must be sold above its value – an unequal exchange. In reality, the towns did sell commodities to rural areas above their values, but that is not the real explanation, here. The real explanation is that the value of the industrial production is greater than the value of raw materials and wages. It is greater by the amount of surplus value created by the industrial labour.

“This, however, does not affect the figures of the Tableau, for the two other classes receive manufactured goods only to the value of their total production.” (p 319)

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Anti-Duhring, Part II, Political Economy, X – From The Critical History - Part 32 of 39

Similarly, therefore, the farmers pay 2 milliards in rent to the landlords, but the landlords, having consumed their own stock of food, during the year, must replace it at the end of the year, which they do by handing back to the farmers 2 milliards in exchange for the food they require for the following year.

“This, then, is how the money paid by the farmer class to the landlords as rent for the year 1757 amounting to two milliards, flows back to it at the close of the year 1758 (the Tableau itself will show how this comes about), so that the farmer class can again throw this sum into circulation in 1759. But since, however, as Quesnay observes, this sum is much larger than is actually required for the total circulation of the country (France), in which payments are constantly being repeated piecemeal, the two milliard livres in the hands of the farmers represent the total money in circulation in the nation.” (p 317)

In other words, as described earlier, if the farmers bought industrial commodities 10 times during the year, rather than one large purchase, they only require a money hoard of £100 rather than £1,000. The reality of multiple, simultaneous purchases, not only by the three classes in aggregate, but, also, of individuals within each of the classes means that money hoards are required by individuals within each class. For example, industrial producers would not be waiting to obtain £100 from farmers, before making their own purchases of commodities, and so would require their own separate money hoards for that purpose. As Engels describes, the 2 milliards is the sum total of the money hoards required, but placed, initially, in the hands of the farmers, in the Tableau, for the purposes of exposition.

“The class of landlords drawing rent first appears in the role of receivers of payments, which incidentally is the case even today. On Quesnay's assumption the landlords proper receive only four-sevenths of the two milliards of rent: two-sevenths go to the government, and one-seventh to the receivers of tithes. In Quesnay's day the Church was the biggest landlord in France and in addition received the tithes on all other landed property.” (p 317)

The landlords (and the state and church), having received this 2 milliards in rent, at the start of the year, then use it to buy commodities, replacing their own consumed material stocks. But, they do not consume only agricultural products. They also consume industrial commodities bought from the sterile class. Not all of the 2 milliards in rents, therefore, returns, directly, to the farmers.

“The working capital (avances annuelles) expended by the “sterile” class in the course of a whole year consists of raw materials to the value of one milliard—only raw materials, because tools, machinery, etc., are included among the products of that class itself. But the many different roles, played by such products in the industrial enterprises of this class do not concern the Tableau any more than the circulation of commodities and money which takes place exclusively within this sphere.” (p 317-8)

In other words, the sterile class (industry) has a working-capital consisting of agricultural products (food and raw materials) and industrial products (machines, intermediate goods etc.), but the Tableau is only concerned with the exchanges between agriculture and industry. Within the sterile class, different producers of machines and intermediate goods will exchange with each other, as described earlier. They will also produce industrial commodities for personal consumption, such as clothes consumed by industrial capitalists and workers. The Tableau assumes that these industrial products for personal consumption are not bought by the productive class, which meets its own requirements, in that regard, from its own direct production.

So, the numerous exchanges of industrial products, either for productive or personal consumption, by the sterile class, are outside the concern of the Tableau, and it is only its aggregate exchanges with the farmer and the landlords that are analysed.

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Anti-Duhring, Part II, Political Economy, X – From The Critical History - Part 31 of 39

The production of the current year, assuming simple reproduction, i.e. no accumulation of capital, must first replace those material balances, i.e. must replace the physical use-vales that comprise the means of production (c), and of consumption, (v + s). The physical replacement of these use-values is effected by labour undertaken in the current year, but its value is necessarily greater than the value newly created in the current year, precisely because it includes the value of the consumed constant capital produced in the previous year/s. It does not include the value of the consumed means of consumption, produced in the previous year, because it forms no part of the output of the current year. It is consumed by workers and exploiters to reproduce themselves, but it is not a part of new value production itself.

It is not labour-power that creates new value, but labour. Only the new value created by labour in the current year forms a part of the value of output (v + s), in addition to the preserved value of the consumed constant capital.

So, at the starting point of the Tableau, there are existing material balances of stocks of food and raw materials. Part of these are in the hands of the farmers – the 2 milliards of working-capital. Another part is in the hands of the landlords, who must also consume prior to current production and the payment of their rent out of it. Finally, a part is in the hands of the “sterile class”, the industrial capitalists and workers, in the form of food and raw materials.

Similarly, there are material balances of industrial products. Because the Physiocrats assumed that the “productive class” met its consumption needs from direct production, its stocks of industrial products comprise only means of production. The sterile class also holds stocks of industrial products, both as means of production and consumption. As with Marx's analysis in Capital II, III and Theories of Surplus Value, there are, of course, material balances existing, also, in the form of fixed capital. But, the large part of this fixed capital does not need to be replaced during the year, because only a small part of the fixed capital is consumed, i.e. wear and tear. So, if there are 10 ploughs comprising the fixed capital, and the average life of a plough is 10 years, only 1 plough per year, on average, needs to be replaced out of current production.

Marx sets out that the circuit of industrial capital begins and ends with material balances.  In between, production transforms them into new commodities.  The surplus product and surplus value is the result of surplus labour being undertaken in that process.

In the current year, the gross product of agriculture was 5 milliards, and 2 milliards replaced the working-capital (consumed c + v). Of the remaining 3 milliards, 2 are in food, and 1 in raw materials. The productive class must, however, replace the material balances of agricultural products in the hands of the landlords and sterile class. The farmers pay 2 milliards to the landlords as rent. Because the Physiocrats only see agricultural labour as productive, and the source of the surplus product/value, arising from the land, they see only this 2 milliard as “Net Income”. In other words, it is equal to the surplus product, gifted by the land, and the landowners appropriate it as rent.

“But before the movement described in the Tableau begins, there is also the whole "pécule", two milliards of cash in the hands of the farmers, in addition to the “total reproduction” of agriculture amounting to five milliards in value, of which three milliards enter into general circulation.” (p 316)

As I have set out, elsewhere, if there is only one transaction a year, for example, the farmers buy £1,000 of industrial products from the sterile class, then, the farmers must have this £1,000 as a money hoard. The fact that the sterile class, then, buys £1,000 of agricultural products from the farmers does not change that, but, simply, means that, now, the farmers receive back this same £1,000, replacing their initial cash balance. However, if the farmers buy £100 of industrial products, they only need £100 in cash. Then, this £100 comes back to them, and they can use it again to buy £100 of industrial products. So, instead of 1 transaction per year, 10 transactions per year means that only £100 of money is required. It is why Marx notes that the velocity of circulation of currency is inextricably tied to the rapidity of transactions, i.e. PT = MV.

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Anti-Duhring, Part II, Political Economy, X – From The Critical History - Part 30 of 39

Revenue is equal to the labour undertaken in the year/National Income, which is equal to v + s, i.e. wages and profit (the latter dividing into rent, interest, taxes, and profit of enterprise), which is also equal to GDP, which measures not the value of output, but only the amount of value added by labour during the year. The total value of output, as Marx sets out, however, is equal not to v + s, but c + v + s, i.e., it also includes the value of all of that consumed constant capital – raw and auxiliary materials, energy, and wear and tear of fixed capital – produced in the previous year/s.

“Since, as we have seen, constant prices and simple reproduction on a given scale are assumed, the money value of the portion which is thus taken from the gross product is equal to two milliard livres. This portion, therefore, does not enter into general circulation. For, as we have noted, circulation which takes place merely within a particular class, and not between one class and another, is excluded from the Tableau.” (p 316)

In other words, the 2 milliards is the amount of consumed means of production/constant capital that must be replaced to maintain production on the same scale – simple reproduction. Given that in simple reproduction, all surplus value is consumed unproductively, the fallacy of the argument put forward by Michael Roberts, set out earlier, is obvious. If all surplus value is consumed unproductively, then, where would the demand for constant capital come from, according to Robert's schema, in which it all comes from profit?

In reality, as Marx sets out in Capital II, and Theories of Surplus Value, there are numerous exchanges – circulation – between producers, but the net effect is they cancel out so that it is the same as if each producer replaces their consumed constant capital, in natura, from their own production, in the same way that a farmer replaces seed from their own production of corn. For example, a coal producer replaces the coal consumed in their steam engines out of the coal they produce, using those steam engines. But, the coal producer also has to replace steel for worn out rails, and so on. They exchange coal for steel. Similarly, the steel producer replaces their own worn out equipment with steel from their own output, but they also replace the coal consumed in their furnaces with coal from the coal producer, exchanged for steel.

As Marx puts it, if all constant capital were produced by one enterprise, it would replace all of its consumed means of production, directly, from its own output. There would be no exchange with revenue/Department II, in respect of this part of its production. There would only be exchange with revenue/Department II, in respect of the replacement of Department II's constant capital, i.e. Department II (c) = Department I (v + s).

“After the replacement of the working capital out of the gross product there remains a surplus of three milliards, of which two milliards are in foodstuffs and one in raw materials. But, the rent which the farmers have to pay the landlords is only two-thirds of this sum, equal to two milliards. It will soon be seen why it is only these two milliards which figure under the heading of “net product” or “net income”.” (p 316)

Again, contrary to Duhring, the importance of analysing the Tableau, and the same applies to Marx's schemas of reproduction, in terms of material balances, and their replacement, is seen, here. Each cycle must begin with existing material balances, be they of raw materials, machines, buildings, and so on, required for production. You cannot produce unless you have something to produce with. It cannot be produced just by an act of current labour. Similarly, workers – and exploiters – cannot wait until production has taken place, before they can consume. At the very least, there must be existing material balances of food, available to consume, whilst production is undertaken.

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Anti-Duhring, Part II, Political Economy, X – From The Critical History - Part 29 of 39

Quesnay used actual prices for this production from the time.

“It comes to five milliard livres, a sum which roughly expresses the money value of the gross agricultural production of France based on such statistical estimates as were then possible. This and nothing else is the reason why Quesnay in his Tableau “operates with several milliards”, to be precise, with five milliards, and not with five livres tournois.” (p 315)

The significance of the assumption of constant prices is seen, here. Contrary to Duhring, the use of money prices is simply a mean of expressing the physical quantities more conveniently. The same is true in Marx's schemas of reproduction, where these same assumptions are made, and the money values represent only the money equivalent of the physical commodities being reproduced.

“The whole gross product, five milliards in value, is therefore in the hands of the productive class, that is, in the first place of the farmers, who have produced it by advancing an annual working capital of two milliards, which corresponds to an invested capital of ten milliards.” (p 315-6)

The ten milliards comprises, in addition to the 2 milliards of working-capital, the fixed capital. As Marx sets out, in Capital II, III, and Theories of Surplus Value, in calculating rates of turnover of capital, it is the circulating capital that is used, but, to calculate the annual rate of profit, it is the total advanced capital, including the fixed capital, that is used.

“The agricultural products—foodstuffs, raw materials, etc.—which are required for the replacement of the working capital, including therefore the maintenance of all persons directly engaged in agriculture, are taken in natura from the total harvest and expended for the purpose of new agricultural production.” (p 316)

Again, Marx uses this same methodology in his schemas of reproduction, and to illustrate Adam Smith's “absurd dogma”, that the value of commodities resolves entirely into revenues, and its concomitant that the total national output resolves entirely into National Income. The difference in Marx's analysis, given that he was discussing a developed industrial capitalism, in which the cottage industry of the agricultural labourer was not simply “auxiliary to agriculture”, i.e. there is no direct production and consumption, is that it is only the reproduction of the consumed constant capital that, in aggregate, is taken “in natura”, from the total output, and so has no revenue equivalent.

Given that it is this constant capital component that grows relative total output, at least quantitatively if not, necessarily, in value terms, the significance of that can be seen in considering the extent to which GDP is a misrepresentation of total output, as a result of Smith's “absurd dogma” being accepted by economists down to today. For example, Michael Roberts states,

“The demand for goods and services in a capitalist economy depends on the new value created by labour and appropriated by capital. Capital appropriates surplus value by exploiting labour-power and buys capital goods with that surplus value. Labour gets wages and buys necessities with those wages. Thus it is wages plus profits that determine demand (investment and consumption).”

It is quite clear that, as soon as we have an accumulation of constant capital (or, in pre-capitalist production, means of production), not provided gratis by Nature, as in hunter-gatherer societies, but as a result of labour expended on it, this constant capital has value, as seen in the earlier example. Wild corn may be a free gift of nature. Its only value is the labour that must be expended to gather it, for consumption, just as the value of the meat a tribe consumes is the labour it expends in hunting. But, as soon as wild corn is collected, but not all of it is consumed, and, instead, a portion is accumulated to be used as seed (means of production – constant capital) this seed, and its value is, then, consumed productively as raw material/means of production/constant capital, in the following year. It can have no revenue equivalent in the year in which its use-value/value is productively consumed, because its revenue equivalent existed in the previous year. Means of production/capital is always accumulated out of revenue, though, as Marx sets out, in Capital III, not necessarily from profit, as bourgeois ideology would have it.

The seed/means of production/constant capital set aside in Year 1, out of revenue, i.e. out of that year's labour, has a value determined by the labour expended on its production, i.e. collection of wild seed provided gratis by Nature. That value is preserved and reproduced in the corn produced in the following year, now the product of settled agriculture. That value can have no revenue equivalent in the year it is then consumed as seed. Its value, and its use-value, is reproduced, in natura, in the output of corn. As Marx puts it in Capital III, and Theories of Surplus Value, it is reproduced, “on a like for like basis”, out of capital, not out of revenue.

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