“As for the money required to exchange the s-portion of commodity-capital I for the second half of constant capital II, it may be advanced in various ways. In reality this circulation embraces innumerable separate purchases and sales by the individual capitalists of both categories, the money coming in any event from these capitalists, since we have already accounted for the money put into circulation by the labourers. A capitalist of category II can buy, with the money-capital he has besides his productive capital, means of production from capitalists of category I, and, vice versa, a capitalist of category I can buy, with money-funds assigned for personal and not for capital expenditure, articles of consumption from capitalists of category II.” (p 403-4)
Consequently, we can examine these exchanges separately. We would then have a situation where Department 1 workers have been advanced 1000, which they have used to buy Department 2 commodities. The capitalists in Department 2 use this to buy 1000 of means of production from Department 1. With the additional money at their disposal, they throw in a further 500 (equal to their surplus value) to buy additional means of production. It has thereby replaced 3/4 of its constant capital.
With this extra 500, it has received, capitalists, in Department 1, then buy consumer goods to meet their personal needs.
“... thereby completing for one half of the s-portion of its commodity-capital the circulation c — m — c, and thus realising its product in the consumption-fund.” (p 404)
Department 2 then has this 500 as money-capital in addition to its productive-capital. It uses that 500 to buy further means of production, thereby completing the replacement of all its constant capital. Department 1 capitalists then have this additional £500 to use to buy the other consumer goods they require, so that all of their surplus value has been used to meet their consumption needs.
“In the last analysis the two departments have mutually paid one another in full by the exchange of equivalents in the shape of their respective commodities. The money thrown into circulation by them in excess of the values of their commodities, as a means of effecting the exchange of these commodities, returns to each one of them out of the circulation in proportion to the quota which each of the two had thrown into circulation.” (p 405)
The following equation results: I (v + s) = II (c).
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