2) The Two Departments of Social Production
All of the production of industries within the economy can be grouped together as part of these two Departments. Obviously, the production of some industries can go to either means of production or means of consumption. Coal can be used as means of production, to power steam engines, or means of consumption, as fuel for domestic fires, for example. But, the output of all these industries can be divided as belonging to either of these two departments.
The point is perhaps more clearly stated by the fact that all commodity-capital in the economy constitutes either means of production or means of consumption. Similarly, all of this capital, composing the two departments, in aggregate, comprises one single department, which is the total social capital.
The capital employed, by either department, breaks down into the same two components – variable capital and constant capital. The variable capital, considered solely from the standpoint of value, is equal to the sum of the wages paid within that department. Considered from the material point of view, it comprises all the concrete labour employed within the department.
The constant capital comprises all of the materials and instruments of labour, including buildings etc. used in production. However, although the fixed capital component of this is employed, i.e. it has to be present in its entirety, for production to occur, as seen previously, it only transfers part of its value to the end product, or here to the value of the commodity-capital of the department. Only that part of the constant capital that replaces the circulating capital, and that reproduces the fixed capital value, transferred as wear and tear, is included in the value of the commodity-capital.
“The value of the total annual product created with the aid of this capital in each of the two departments consists of one portion which represents the constant capital c consumed in the process of production and only transferred to the product in accordance with its value, and of another portion added by the entire labour of the year. This latter portion is divided in turn into the replacement of the advanced variable capital v and the excess over and above it, which forms the surplus-value s. And just as the value of every individual commodity, that of the entire annual product of each department consists of c + v + s.” (p 400)
For now, for ease of elaboration, Marx excludes fixed capital, assuming that the constant capital employed is all consumed in the production of the commodity-capital.
Marx sets out a basic model comprising these two departments and the mutual exchange between them. These models, whether they are of simple reproduction, as here, or of expanded reproduction, which will be discussed later, show that the output of both departments CAN be exchanged so that it is fully consumed. In other words, these models are based on a concept of a general equilibrium theory.
But, of course, Marx did not believe that any such equilibrium exists. His theory is, in fact, a theory of dynamic disequilibrium. That is not just because he recognises that capitalism proceeds on the basis of repeated crises, which are violent means of resolving the contradictions inherent in the very functioning of the system, but also because, even without such crises, the continual revolution of production, which is a fundamental part of the functioning of the system, necessitates continual changes in the way capital and social labour-time is allocated.
So, whether it is in setting out these models here, or in setting out the resolution of the Transformation Problem, in Volume III, the fact that Marx has all of the output being unproblematically demanded/consumed does not at all mean that he believed it would be.
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