Capital II, Chapter 4 - Part 9

The Meeting of Demand and Supply

The capitalist buys low and sells high. He extracts more money from the market than he threw into it. But, that is only because he throws more commodity-value into it than he draws out. That is because the value of the commodities he throws back into the market has been increased by the addition of surplus value, extracted from the workers. If capital only put as much commodity-value back into the market as it took out, then it would mean no surplus-value had been produced.

The capitalists supply of commodity-value is always greater than his demand, and the greater the difference between the two, the more rapid is the pace of expansion of his capital.

“His aim is not to equalize his supply and demand, but to make the inequality between them, the excess of his supply over his demand, as great as possible.” (p 121)

The value of the means of production he buys is always less than his advanced capital – because he also buys labour-power – and, therefore, an even smaller proportion of the commodity-value he throws into the market. His demand for labour-power is determined by its proportion to total capital i.e. v/C. As previously described, this proportion continually shrinks, because increasing productivity means less and less labour is required to process a given amount of material.

Capital's demand for labour is essentially also a demand for those commodities necessary for the reproduction of the worker i.e. the variable capital. So the capitalist's total demand equals c + v. But, the capitalist's supply is c + v + s.

“Consequently if the composition of his commodity-capital is 80c + 20v + 20s, his demand is equal to 80c + 20v, hence, considered from the angle of the value it contains, one-fifth smaller than his supply. The greater the percentage of the mass of surplus-value produced by him (his rate of profit) the smaller becomes his demand in relation to his supply.” (p 121)

As productivity rises, the demand for labour (and, therefore, means of subsistence) declines relative to the demand for means of production. But, his demand for means of production is also always smaller than his capital. So, his demand for means of production must always be smaller, in value, than the product of a capital of equal size to his own, that supplies him.

Suppose we have a capitalist with £1,000 of capital divided:

C £800 + V £200 + S £200 = E £1200.

His demand for means of production is £800. Assuming the supplier/s of these means of production have the same size of Capital, and a similar division of their capital, the total value of their output is also £1,200. His demand, for means of production, therefore, equals 800/1200 = 2/3 of the value of their output.

His own total demand, c+v, Marx says, amounts to 4/5 of his own output, but that figure is wrong. The Surplus Value is 1/5 of the Capital laid out, but 1/6 of his total output. His total demand is £800 (c) + £200 (v) = £1,000. His total output is £800 (c) + £200 (v) + £200 (s) = £1200. So, his demand = 1000/1200 = 5/6 of his total output.

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