Capital II, Chapter 4 - Part 10

Marx then turns to the role of the turnover of the capital. The example he gives, again seems to me to be incorrect. This is what Marx says,

“Let the total capital of the capitalist be £5,000, of which £4,000 is fixed and £1,000 circulating capital; let this 1,000 be composed of 800c plus 200v, as assumed above. His circulating capital must be turned over five times a year for his total capital to turn over once. His commodity-product is then equal to £6,000, i.e., £1,000 more than his advanced capital, which results in the same ratio of surplus-value as above: 

5,000 C : 1,000(c + v) : 20s

This turnover therefore does not change anything in the ratio of his total demand to his total supply. The former remains one-fifth smaller than the latter. 

Suppose his fixed capital has to be renewed in 10 years. So the capitalist pays every year one-tenth, or £400, into a sinking fund and thus has only a value of £3,600 of fixed capital left plus £400 in money. If the repairs are necessary and do not exceed the average, they represent nothing but capital invested later. We may look at the matter the same as if he had allowed for the cost of repairs beforehand, when calculating the value of his investment capital, so far as this enters into the annual commodity-product, so that it is included in the one-tenth sinking fund payment. (If his need for repairs is below average he is so much money to the good, and the reverse if above. But this evens out for the entire class of capitalists engaged in the same branch of industry.) At any rate, although his annual demand still remains £5,000, equal to the original capital-value he advanced (assuming his total capital is turned over once a year), this demand increases with regard to the circulating part of the capital, while it steadily decreases with regard to its fixed part.” (p 122)

This appears to be wrong because it does not transfer the written down element of the fixed capital each year into the value of the end product. If we assume that the £800 (c) is materials, then the £400 a year wear and tear of fixed capital must be added to it, to obtain the actual amount of value of constant capital transferred to the end product. Only in that way, at the end of 10 years is that fixed capital reproduced.

The alternative to this would be to assume that a proportion of the £800 (c) is the wear and tear of fixed capital. In that case, in each cycle 400/5 = £80 represents wear and tear. On that basis the value of the end product (£6,000) then reproduces the value of the labour-power consumed, (£1,000) as well as the circulating capital in the form of materials etc. (£3,600), and the portion of fixed capital consumed as wear and tear (£400) and produces a surplus value of £1,000.

Of course, if we assume that this £400, is used not to cover repairs to the fixed capital, but to provide for its replacement at the end of ten years, then the proceeds of the end product cannot be used immediately to physically reproduce the fixed capital. A machine is only replaced at the end of its ten years, when its worn out, not a tenth of it each year. So, the £400 goes into a sinking fund for that purpose.

At the end of year 1 then the capitalist has fixed capital worth £3,600, and £400 of cash in the sinking fund. At the end of year 2, fixed capital worth £3,200, and £800 in the sinking fund and so on.

Of course, the other way of looking at this would be to see the wear and tear as having to be covered in the form of repairs as Marx says, in that case, it is a matter of whether these repairs are more or less than anticipated, but for capital as a whole this averages out.

Suppose, the capitalist consumes all of the surplus value. Then his demand is equal to his supply of value, but that is not in relation to his capital, or his role as capitalist. As a capitalist, his demand is equal to £1,000 (£800 c + £200 v), which is equal to 5/6 of his supply £1,200 (Marx again says 4/5, but that is wrong). But, he consumes the other £200 = 1/6 of his output unproductively.

“His calculation, expressed in percentages, is then as follows:

Demand as capitalist . . . . . . . . . . . 100, supply 120

Demand as man about town . . . . . . . 20, supply —
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Total demand . . . . . . . . . . . . . . . . 120, supply 120

This assumption is tantamount to assuming that capitalist production does not exist, and therefore that the industrial capitalist himself does not exist. For capitalism is abolished root and branch by the bare assumption that it is personal consumption and not enrichment that works as the compelling motive.” (p 123)

It is technically not possible either because the capitalist has to create reserves to account for price fluctuations etc. But, more importantly, the capitalist has to extend his production and develop it technically in order to remain competitive. He must accumulate or die.

“In order to accumulate capital he must first withdraw in money-form from circulation a part of the surplus-value which he obtained from that circulation, and must hoard it until it has increased sufficiently for the extension of his old business or the opening of a side-line. So long as the formation of the hoard continues, it does not increase the demand of the capitalist. The money is immobilised. It does not withdraw from the commodity-market any equivalent in commodities for the money equivalent withdrawn from it for commodities supplied.” (p 123)

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