Capital II, Chapter 20 - Part 12

The exchange of Department 1 (v+s) with Department 2 (c) has been explained, but within this there is the exchange of 1(s) with 2a and b. Department 1(v) will only have been exchanged with Department 2a necessities. But, in the same way, the portion of value comprising 1(s) within 2(c), can be divided 60:40 in the same way as with Department 2(s).

Our model is:

Department I - c 4000 + v 1000 + s 1000 = 6000

Department II - c 2000 + v 500 + s 500 = 3000

So, the Department 2 constant capital was 2000. The constant capital value itself forms part of the total value of Department 2 production. Workers in Department 1 only buy necessities and so their £1000 is used to buy commodities from 2a to that amount. Capitalists from 2a use this to buy £1000 of constant capital from Department 1 capitalists. The wages paid by Department 1 capitalists have then returned to them in money form, available to buy labour-power once more.

The more detailed model is then:

Department I - c 4000 + v 1000 + s 1000 = 6000

Department IIa (Necessities) c 1600 + v 400 + s 400 = 2400

Department IIb (Luxuries) c 400 + v 100 + s 100 = 600

Department 1 capitalists allocate their surplus value 60:40. They spend £600 on necessities with 2a. 2a capitalists use this to buy £600 of constant capital. Department 1 capitalists then have £600 returned to them, of the £1,000 they have thrown into circulation, to cover personal consumption. They also spend £400 buying luxuries, from 2b capitalists, who use it to buy constant capital. Department 1 capitalists then now have all of the £1,000 thrown into circulation to cover personal consumption returned to them, which is now available for them to spend again in the next cycle.

“What is arbitrary here is the ratio of the variable to the constant capital of both I and II and so is the identity of this ratio for I and II and their sub-divisions. As for this identity, it has been assumed here merely for the sake of simplification, and it would not alter in any way the conditions of the problem and its solution if we were to assume different proportions.” (p 411)

Marx draws 2 conclusions.

1. The new value, created in Department 1, in a year, i.e. v+s, in the form of means of production, is equal to the means of production, consumed by Department 2, and thereby transferred to the value of its product.
   “If it were smaller than IIc, it would be impossible for II to replace its constant capital entirely; if it were greater, a surplus would remain unused. In either case, the assumption of simple reproduction would be violated.” (p 411)
   
   
2. Workers producing luxuries in Department 2a can only transform their wages into necessities to the extent that capitalists producing necessities use an equal amount of their surplus value to buy luxuries. That proportion must be smaller than 2a surplus value.
   
   These proportions, though variable are determinant, because the above has demonstrated that output from one department, or subdivision of one department, can only be fully exchanged if the output from the other department or subdivision is in the corresponding proportion.

“It goes without saying that this applies only to the extent that it all is really a result of the process of reproduction itself, i.e., to the extent that the capitalists of IIb, for instance, do not obtain money-capital for v on credit from others. Quantitatively however the exchanges of the various portions of the annual product can take place in the proportions indicated above only so long as the scale and value-relations in production remain stationary and so long as these strict relations are not altered by foreign commerce.” (p 412)

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