Capital II, Chapter 17 - Part 3

Marx quotes extensively from William Thompson's “An Inquiry into the Principles of the Distribution of Wealth”, London, 1850, to the effect, however, that this amassed wealth is, in fact, rather insignificant compared with the real wealth of the country, measured by its annual production. The stored up wealth, according to Thompson, amounted to about 3 or 4 years annual production. Were everyone to stop production, and just live off this wealth, then after four years it would have all gone, “at the end of which time, without houses, clothes, or food, they must starve, or become the slaves of those who supported them in the three years idleness. As three years to the life of one healthy generation, say forty years, so is the magnitude and importance of the actual wealth, the accumulated capital of even the wealthiest community, to the productive powers of only one generation; not of what, under judicious arrangements of equal security, they might produce, particularly with the aid of cooperative labour, but of what, under the defective and depressing expedients of insecurity, they do absolutely produce!” (p 327)

Marx then turns to the two forms of reproduction – simple and extended reproduction.

1) Simple Reproduction 

Is where all of the surplus value is consumed unproductively by the capitalist. However, even here, a portion of the surplus value must always exist in the form of money rather than products, for the simple reason that, without money, the capitalist cannot buy the commodities for their personal consumption.

At any one time, a portion of that surplus value will be in the form of commodity-capital, waiting to be sold, and another will be in the form of money, in the hands of the capitalist, waiting to buy articles of consumption. Note that it exists here as money not money-capital. It exists to buy articles of personal consumption, not productive capital.

For simplicity, Marx assumes money is in the form of gold coins, which exchange as a real equivalent value.

The laws, determining how much of this money is required were set out in Capital I, Chapter 3 . It is determined by the value of the money, the quantity and value of commodities to be circulated, the needs for payment, as well as the velocity of circulation of the money, and the need to be able to cater for fluctuations in the above. A certain amount of the money supply, therefore, is always itself in circulation, whereas another part is held as hoards and reserves.

“... but the total quantity of money is always equal to the sum of the money hoarded and the money circulating. This quantity of money (quantity of precious metal) is a gradually accumulated hoard of society.” (p 329)

Part of this hoard wears out each year, through usage, and has to be replaced. Countries, that produce commodities, sell them to countries that produce gold. The gold received in exchange can then be minted into coins.

“However, this international character of the transaction conceals its simple course. In order to reduce the problem to its simplest and most lucid expression, it must be assumed that the production of gold and silver takes place in that particular country itself, that therefore the production of gold and silver constitutes a part of the total social production within every country.” (p 330)

The production of gold must be at least equal to what is required to replace the worn out coins, plus what is required for jewellery etc. But, also, each year, the quantity of commodities produced and circulated increases. Even allowing for the fact that the value of each individual commodity tends to fall, the total amount of value circulated tends to rise, which is nothing more than to say that each year the total amount of social labour-time expended tends to to rise. Consequently, the amount of gold production must be enough to ensure the additional minting of coins, to circulate this additional value. The countervailing force to this would be if the velocity of circulation of the money rose, so that less of it was required to circulate a given amount of value.

A portion of available social labour-time must then be devoted to the production of gold to use as money. It can be seen why capital views this as an overhead cost, and looks to alternatives to precious metals, to act as money.

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