2) Accumulation and Reproduction on an Extended Scale
“Since accumulation takes place in the form of extended reproduction, it is evident that it does not offer any new problem with regard to money-circulation.” (p 348)
Accumulation occurs because a portion of the realised surplus-value assumes the form of money-capital, as opposed to simply money, used for unproductive consumption, by the capitalist. So, the question of where the money-capital comes from is already resolved. The question then is only that previously asked in relation to simple reproduction, which is where the money itself comes from. With simple reproduction, the total amount of value, to be circulated, in the economy, remains constant, and it was seen that the proportions in which this is divided i.e. how much is wages and how much is surplus value, does not change how much money is required to achieve that. The only requirement for additional money is to replace that used up by wear and tear.
But, with expanded reproduction, the actual amount of value to be circulated itself increases. So, money, in addition to that to cover wear and tear, has to be put into circulation.
The increase in the value of commodities being circulated is not due to a rise in their prices. It is due to an increase in the quantity of commodities being circulated. That increase is not due to a rise in productivity, which would have resulted in a greater quantity of commodities but the same amount of value. It is due to an increase in the amount of production – capital employed.
There are three means of providing the additional money required.
- Increase the velocity of circulation
- Make use of existing money hoards
- Buy additional gold from producers
The second may again arise automatically from an increase in trade. A shop may accumulate money in its till, which it will use to replenish its stock when it sees the need to do so. When trade improves, it may use that money more frequently to buy in stock. But, in general, money may sit idle in bank deposits when trade is depressed, and only be drawn into activity when trade improves. Small cash balances owned by workers and small traders may be inadequate to finance productive activity, but when trade improves, banks may amalgamate them into larger funds, able to be used productively.
Finally, where these methods have still not been adequate, the value of money tokens will rise above the value of the money-commodity – here gold. In that case, an incentive arises to import gold to use as money. The fact that capitalism has to expend considerable social labour-time in the production of precious metals for this purpose, represents a large waste of social wealth. That labour-time could have been used to produce real wealth. It is a big overhead, or faux frais of production, as Marx calls it, for capitalism. So, the more it is able to avoid it, the better. The improvements in banking etc. that speed up the velocity of circulation, the introduction of credit and paper money tokens, reduce the need for precious metals, and thereby free up labour-time for other activities.
“To the extent that the costs of this expensive machinery of circulation are decreased, the given scale of production or the given degree of its extension remaining constant, the productive power of social labour is eo ipso increased. Hence, so far as the expediencies developing with the credit system have this effect, they increase capitalist wealth directly, either by performing a large portion of the social production and labour-power without any intervention of real money, or by raising the functional capacity of the quantity of money really functioning.” (p 350)
Marx points out that it is, therefore, absurd to claim that capitalist production could continue on its present scale without credit.
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