Wednesday, 17 September 2014

Capital II, Chapter 20 - Part 1

Simple Reproduction

1) The Formulation of the Question 

If we think about society in the terms of Robinson Crusoe, or Robinson and Man Friday, the essential relations within an economy are laid bare. That is not just true in relation to the operation of the Law of Value, as Marx described in Volume I. It is also true in relation to the connected aspect of the social reproduction that must be undertaken.

So, we can see clearly that a given proportion of available labour-time, determined by the Law of Value, has to be set aside for producing tools, pens etc. - means of production – as well as their replacement. This production never enters into the consumption of Robinson or Friday. It can be considered the portion of the value of their national output that goes to maintaining the capital stock of both fixed and circulating constant capital). It is not the same physical capital stock that is maintained from year to year, precisely because a portion of it is used up or worn out. That is why a portion of the annual output has to go simply to replace it. In this sense it can be considered to circulate, but only as capital, not as revenue, i.e. not as as an income to someone that can be consumed.

Another part of Robinson and Friday's production does go to produce an element that can be consumed, i.e. a revenue. That is what they produce to meet their needs for food, clothing, shelter etc. If this production is large enough, Robinson may choose not to work for some or all of the time. In that case, part of Friday's production will go to meet his own consumption needs, and the rest will be a surplus appropriated by Robinson.

But, also Robinson and Friday may divide the work up. Robinson may work producing and reproducing means of production, whilst Friday produces the means of consumption. Here, Robinson's output certainly forms part of their total national output, but it does not constitute a revenue for the society. It is not available to be consumed. It is only Friday's output that constitutes a revenue for the society, and is available for consumption.

Yet, it might not seem that way to Robinson. He produces the means of production that Friday requires to produce the means of consumption. Robinson has no need of the former, but he has need of the latter. For Robinson, it appears that he “sells” his output to Friday, and so it does seem to provide him with a revenue, even though it can only act as a revenue, i.e. means of purchasing for consumption, because Friday produces the means of consumption, not only in sufficient quantity for his own needs, but also for the needs of Robinson. This is essentially the difference of how things appear from the standpoint of the individual capital, and of the social capital.  But, a closer look at this situation also shows, as Marx described in previous chapters, that, in fact, Robinson does not exchange all of his output with Friday at all!  A large, and increasing, part of the value of Robinson's output goes simply to produce the means of production he needs himself to produce other means of production, which are exchanged with Friday.

The means of production that Robinson exchanges with Friday, are what appear as "intermediate goods" in the national income and output data, i.e. they are the constant capital whose value reappears in end production.  But, these "intermediate goods" are only a minor part of the circulating constant capital output value of the economy.  In reality, all they represent is the equivalent of the new value created by the workers of Department I - here Robinson - i.e. v + s.    They are its revenue equivalent.  But, as Marx has demonstrated, the actual value of the output of Department I (Robinson) is not just equal to this new value created, but to c + v + s, i.e. it includes the value of the circulating constant capital produced in previous years, and which has to be reproduced out of current production, but is not, thereby traded.

In other words, Robinson may provide Friday with fishing nets and obtain an amount of fish for his consumption in return, may provide Friday with animal traps, and receive a quantity of rabbits for consumption in return, but a large part of the value created by Robinson, i.e. labour-time expended by him, is in producing hammers, chisels, saws, needles and other tools, which he requires to produce these means of production, as well as time spent replacing and repairing his existing tools, but which he exchanges with no one, and whose value is not included in the value of the "intermediate goods" he trades with Friday.

He has to spend time collecting wood to make into tools, to create pens and traps, he has to collect fibres to turn into ropes etc., to make nets.  Yet, none of these things does he trade with Friday for consumption goods.  None of them, therefore, form part of the value of "intermediate goods", whose value is only equal to the new value he creates.  Marx demonstrates that under simple reproduction, Robinson here provides Friday with means of production whose value is equal to the new value he creates (v +s), which is equal to the labour-time he expends on this production.  In return for these means of production (constant capital), Robinson receives means of consumption from Friday of the same value.  In other words, this is the equivalent of the consumption that Department I workers would spend their wages on, and which Department I capitalists would spend their profits on.

Moreover, this situation is not changed if we introduce a further person into the equation producing means of production.  If Mrs. Robinson becomes the producer of fishing nets, which she exchanges with Friday for means of consumption, she might also exchange some of these means of consumption with Robinson for the needles and fibres he produces used in the production of nets.  These needles and fibres then become "intermediate goods" used in Mrs Robinson's production.  But, it continues to be the case that the total value of output exchanged by Robinson and Mrs Robinson is exactly the same as it was before I (v +s) = II (c).  It is simply that it is divided differently as a result of this new producer of means of production.  It remains the case that I (c) is not exchanged against revenue, creates no income for anyone, and remains simply an exchange of capital with capital.

The basic equilibrium condition for simple reproduction is then that Department I (v + s) equals Department II (c).  The rest of the value of end production, i.e. the output of Department II is consumed by the workers and capitalists of Department II (v +s).  In other words, Friday produces a quantity of means of consumption (final output).  Part of the value of this output comprises "intermediate goods", or constant capital obtained from Robinson.  In exchange Friday gives Robinson, the consumption goods he requires equal in value to the means of production he has provided.  Friday then consumes the rest of his final production himself.

Robinson has then exchanged a portion of his output with Friday in return for the consumption goods he requires.  But, a large part of the total value produced by Robinson has not been exchanged with anyone.  It is value created in the labour-time he has expended in the production of means of production he requires himself.  Yet, the labour-time has been expended on their production, even though it forms no part of the value of consumption, has no equivalent in the form of a revenue or income for anyone.

If we look at the situation then we see that the total production is broken down into these two departments represented by Robinson and Friday, into the production of means of production and means of consumption.  We might then have:

Department 1:

C 4000 + V 1000 + S 1000 = 6000

Department 2:

C 2000 + V 500 + S 500 = 3000

So, Department 2's constant capital of 2000 (intermediate goods) is provided by Department 1, and is equal to Department I (v + s).  The rest of Department 2's output (1,000) is consumed by Department 2 workers and capitalists.  So, 2000 of the value of final output is comprised of the intermediate goods provided by Department 1.  But, 4000 of Department 1's output is traded with no one, it simply replaces its own consumed constant capital, and thereby forms a revenue for no one.

As Marx demonstrates, in his demolition of Smith's Trinity Formula, and the idea that the value of national output can be divided simply into the factor incomes of wages, profits, interest and rent, the value of national output as captured by these latter is actually only the value of the consumption fund. The total value of society's output is much greater, but never captured in the data, because it excludes this growing quantity of value that is never traded as part of the total social exchange.

But, the basic and relatively straightforward relation between the production and exchange of means of production and consumption illustrated by Robinson and Friday is obscured, under capitalist production, because of the role of money in mediating these exchanges, and because, therefore, the multitude of exchanges both within Department I, and between Department I and II, all appear to be of the same nature, all appear to produce revenue for the seller.

Its to elaborating the processes and effects of that which Marx now turns.

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