I hope the above diagram will assist in understanding these processes and models of reproduction that Marx now moves on to develop. Of course, demonstrating that alongside the creation of value, money flows are also generated, that make the exchange of capital and commodities possible, does not mean they occur automatically.
In order to understand those processes would also require an investigation of the laws of supply and demand, of demand elasticity, competition and so on, that Marx could only have developed much later, and never completed. But, he did need to touch upon some of these issues in explaining the basis of various forms of capitalist crisis.
“For our present purpose this process of reproduction must be studied from the point of view of the replacement of the value as well as the substance of the individual component parts of C'.” (p 397)
All of the materials used in production, as well as the machines and buildings etc., are just as much a part of the national output as the end products they produce. That end product, when sold by its producers, provides the money-capital used to buy these commodities from the producers of means of production. So, there is a constant interaction and intermingling of these capitals. But, as seen previously, it is an exchange of capital with capital, not capital with revenue. Within the context of simple reproduction, it is simply a maintenance of existing capital, not the creation of some new revenue that can be consumed.
But, as shown in the diagram, it is not just the reproduction of the means of production that results in this intermingling. The workers and capitalists also use their revenues to buy commodities for consumption, and those commodities are necessarily a part of society's commodity-capital.
“The question that confronts us directly is this: How is the capital consumed in production replaced in value out of the annual product and how does the movement of this replacement intertwine with the consumption of the surplus-value by the capitalists and of the wages by the labourers?” (p 397)
Marx uses the usual simplifying assumptions that this is simple reproduction, commodities exchange at their values, no changes in values, and so on, though he does describe why none of these things make any fundamental difference to the analysis.
“So long as we looked upon the production of value and the value of the product of capital individually, the bodily form of the commodities produced was wholly immaterial for the analysis, whether it was machines, for instance, corn, or looking glasses. It was always but a matter of illustration, and any branch of production could have served that purpose equally well. What we dealt with was the immediate process of production itself, which presents itself at every point as the process of some individual capital...This merely formal manner of presentation is no longer adequate in the study of the total social capital and of the value of its products. The reconversion of one portion of the value of the product into capital and the passing of another portion into the individual consumption of the capitalist as well as the working-class form a movement within the value of the product itself in which the result of the aggregate capital finds expression; and this movement is not only a replacement of value, but also a replacement in material and is therefore as much bound up with the relative proportions of the value-components of the total social product as with their use-value, their material shape.” (p 398)
In other words, you can't just assume that the production of value over here can be automatically exchanged for an equal amount of value over there. The owners of the use values in which this value resides will only exchange if they obtain the use value they require as a result. There is no point producing lots of machines, if what is really required is lots of grain. Moreover, there will be necessary proportions that some commodities will need to be produced in, in order to meet the requirements of producing other commodities. If you want to produce a certain quantity of bread, you have to produce a certain quantity of wheat, for example.
At its most fundamental level, this question of proportion comes down to that already highlighted, that between the production of means of production and means of consumption. The most basic requirement of any society, is to devote enough social labour-time to producing means of consumption, without which its people cannot live, and so cannot produce. But, even the most primitive society also has to produce means of production, as tools, and weapons for hunting. The more a society develops, and expands its range of needs, the more it has to expand its production of means of production, in order thereby to expand its means of consumption.
Marx then divides social production into these two great departments. Department 1 produces means of production, and Department 2 produces means of consumption.
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