Capital II, Chapter 16 - Part 8

In each turnover, capitalist A does not work with the same capital as in the previous period, but with a new capital that has been created during the previous period. The value of the capital he worked with, in the previous period, has been returned to him, along with the surplus value, but the money-capital he starts the circuit with, is not the same money he had at the start of the last circuit. It has been spent and disappeared. Nor is it the same productive capital, that money-capital metamorphosed into. That too has been consumed and disappeared in the new product. The workers he now hires, may be different than those employed previously, but even if not, the previous workers also provide new labour-power to that they previously expended. The materials will also be different.

The capital laid out is new capital that has been produced from the sale of the commodities produced in the previous process. It is a replacement for that laid out and consumed in that process. Indeed, it is for this reason that the value of the commodity produced is based on the reproduction costs of the productive-capital, i.e. its current cost of reproduction, rather than the historic money cost of the productive capital previously consumed in its production.

“Therefore what is accomplished by the ten-fold turnover of the advanced variable capital of £500 is not that this capital of £500 can be productively consumed ten times, or that a variable capital lasting for 5 weeks can be employed for 50 weeks. Rather, ten times £500 of variable capital is employed in the 50 weeks, and the capital of £500 always lasts only for 5 weeks and must be replaced at the end of the 5 weeks by a newly produced capital of £500. This applies equally to capitals A and B. But at this point the difference begins.” (p 314)

In the first five weeks, B, like A, has laid out £500 of variable capital. It has bought labour-power, which has been consumed, producing a new commodity, and therefore, new value, worth £1,000 - £500 replacing the £500 of labour-power, and £500 being surplus-value. But, this product is only one tenth complete, so neither the surplus value nor the value of the labour-power can be realised by its sale. Consequently, no new capital is returned to capitalist B, to begin the next 5 week period.

That continues to be the case until the end of the year, when the product is complete, and can be sold. Consequently, unlike Capitalist A, B must continually advance additional capital throughout the year. They must have £5,000 of capital available themselves at the start of the year in order to proceed.

Similarly, the wage goods (means of subsistence) consumed by the workers in the first five weeks, have been consumed. A could meet the workers requirements for these commodities in the first five weeks provided they had those commodities available as commodity-capital that could be handed to the workers each week as wages. If we think of A as a capitalist producing those goods, the original commodity-capital consumed by the workers was reproduced during that five weeks, with a surplus of that production left over. Consequently, at the end of the five weeks, the original commodity-capital value exists again, and is once again available to meet the workers consumption requirements for another five weeks. In addition, capitalist A, has pocketed a surplus value of equal magnitude. If we think of it in physical terms, A has 1000 kilos of potatoes, which form his capital. Its paid out at the rate of 200 kilos a week to his workers. After five weeks, those workers have produced 2000 kilos of potatoes. 1,000 kilos exists again as a variable capital, to pay the workers wages for another five weeks, but the capitalist also has 1,000 kilos of potatoes that constitute surplus value.

But, for B, this is not possible. B produces a product, which the workers need to consume continuously, but, which is only available once a year. So, B has to have a year's supply of this commodity available at the start of the year, in order that his workers can consume throughout the year.

This is important when looking at the total social capital. Every society has to ensure that its workers are able to consume daily, and that value is produced in such a way that they can be paid wages to do so. But, a society that ties up a lot of its capital, like B, in production that takes a long time to come to fruition, will have a problem achieving that. Value will continually be taken out of the economy to cover workers' consumption, and the purchase of other inputs, but value will not be put back into the economy to be transformed into new money-capital to perpetuate the circuit. Economies that invest too heavily in big capital projects, with long completion times, will suffer this problem, and lower growth rates as a consequence.

“Thus, during 50 weeks, both A and B expend an equal amount of variable capital, pay for and consume an equal quantity of labour-power. Only, B must pay for it with an advanced capital equal to its total value of £5,000, while A pays for it successively with the ever renewed money-form of the value-substitute, produced every 5 weeks, for the capital of £500 advanced for every 5 weeks.” (p 315)

So, if the real rate of surplus value for A and B is the same, the annual rates of surplus value for A and B, vary in inverse proportion to the advanced variable capital of each, i.e. the capital that has to be advanced to complete a single turnover.

So, A is 5000/500 = 1000%, B is 5000/5000 = 100%. 500:5000 = 1:10 = 100%:1000%.

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