Sunday, 5 October 2014

Capital II, Chapter 20 - Part 7

How can the workers in Department 1 receive their wages without the capitalists selling their output? How can they sell their output without the capitalists in Department 2 selling theirs first?

Once again, we see the importance of Marx's reference to the “Tableau Economique”. It indicates that social production does not simply start from a blank sheet of paper.  Commodities already exist in stocks held by capitalists, be those commodities means of production or consumption.  Money also exists in the hands of capitalists ready to be advanced to buy capital, or to cover the costs of capitalists consumption.

So, for example, the workers in Department 1 might be “advanced” a week's wages with which to buy consumer goods, already in the possession of Department 2 capitalists. In fact, because workers are always paid in arrears, when they are “advanced” their wages at the end of the week, they have already advanced a week of their labour-power to capital. That in itself means that a week's production is already in existence, thereby replacing commodities used up.

I'll work through my own example here, based on Marx's model, in the hope of trying to simplify the explanation. Then I'll summarise Marx's own examples.

We have:

Department I - c 80 + v 20 + s 20

Department II - c 40 + v 10 + s 10

The workers in Department 1 might be advanced a week's wages, here equal to £20 (bn.) With those wages, they can buy consumer goods. Similarly, the capitalists in Department 2 advance their workers a week's wages equal to £10, which they similarly can use to buy consumer goods.

But, similarly, the capitalists advance capital for the purchase of means of production. Capitalists in neither department, after all can continue producing without them. Even if they have means of production already in stock, they have to advance capital to replace them, as they are consumed.

So, capitalists in Department 2 will advance, for this week, £40 for materials, equipment etc. to be provided by Department 1 capitalists. Department 1 capitalists will advance £80 for means of production. Some of that will mean, for example, coal producers buying steel from steel producers for pit props etc., while steel producers buy coal from coal producers, as well as coal producers using some of their own coal to power steam engines, and steel producers using some of their own steel to repair equipment and so on.   So, although this latter capital circulates between different capitalists, it only circulates within Department 1 and is not exchanged with Department 2. It never, therefore forms a revenue with which to buy consumption goods.

As seen previously, in starting a business, the capitalist will need enough money not only to advance as capital, but also to cover their own consumption, during the year, until they are able to sell their output and realise their surplus value. So, the capitalists in both departments throw this money into circulation, which provides the demand for the surplus production of consumer goods. We will see later how capitalists in both departments recover this through the realisation of surplus value in their commodities.

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