Capital II, Chapter 20 - Part 8

We have:

Department I - c 80 + v 20 + s 20

Department II - c 40 + v 10 + s 10

The 80 of constant capital in Department I is means of production it requires itself to produce means of production.  It, therefore only exchanges the remaining 40 (20 + 20) with department II.

Let's start in Department 2. The capitalists there advance £40 for means of production. We can even imagine this is the start of capitalist production, and they buy these means of production, e.g. wheat, from peasant commodity producers. The Department 2 workers advance a week's labour to the capitalists, and process means of production. Again, we could imagine that the workers are able to advance this week's labour, because they have recently come from the countryside, and brought some means of subsistence with them. Or we could simply assume they have borrowed money to cover their immediate needs. The workers are paid £10 wages at the end of the week.

At the end of this week, Department 2 capitalists have advanced £40 for means of production, and £10 for wages. Their workers have transformed these means of production and created new commodities with a value of £60, which includes a surplus value of £10. The workers in Department 2 are then able to consume some of the products they have made up to a value of £10, the amount of their wages. The capitalists in Department 2 also throw into circulation the £10, they have reserved to cover their consumption. So, £20 of consumption goods have now been demanded, bought and consumed. That leaves a further £40 of commodities, out of the £60 of production, in the hands of Department 2 capitalists.

The producers of means of production have already been paid £40 for means of production, by Department 2 capitalists. This now provides them with the money to buy the remaining £40 of means of consumption from Department 2.

For completeness, this was considered to be peasant producers, but on the assumption of existing capitalist production, this £40 would actually be made up of £20 demand from Department 1 workers (paid to them as wages) and £20 from Department 1 capitalists (paid out of their realised surplus value). So we would have:

Dept 2	Dept 1
£40 advanced for means of production	£40 received for means of production.
£10 advanced for labour-power	£20 paid as wages to workers
£10 surplus value created.	£20 realised surplus value from sale of means of production.
Total Value of Commodity-capital £60 (c40+v10+s10)
£10 bought by Department 2 workers with their wages
£10 bought by Dept 2 capitalists with additional money thrown into circulation
£20 bought by Department 1 workers from wages
£20 bought by Department 1 capitalists from realised surplus value.

Looked at from the perspective of Department 1 then, its workers also advance a week's labour-power. Some of this time, in aggregate, will be required to produce means of production to be used within Department 1, for example, producing seeds to grow crops, coal to produce steel, steel to produce machines and so on. This will amount to £80. As stated previously, this is an exchange of capital with capital inside Department 1. No exchange with Department 2 occurs here. No revenue arises from it to buy Department 2 commodities. If Department 1 were thought of as a single firm, its like the coal mine that uses some of its own coal to power the steam engines that pump water from the mine.

Another part of Department 1 output will amount to the production of means of production required by Department 2, which amounts to £40, as seen above. Where the £80 is replacement of existing constant capital value, this £40 is new value created by labour and divided £20 wages and £20 surplus value, as described above.

The £80 required within Department 1 will be bought by Department 1 capitalists with their advanced capital. The £40 of means of production sold to Department 2 capitalists, as was seen above, was sold to them using the capital advanced by them. At the end of the week, the workers in Department 1 are advanced £20 in wages, which covers their purchases of consumer goods in week 2.

When Dept. 1 sells its commodities, this £20 is recovered, as is the £20 the Department 1 capitalists laid out to cover their own consumption, during this period, because their output includes the surplus value in its price.

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