Thursday, 9 October 2014

Capital II, Chapter 20 - Part 9

Having set out one way in which these exchanges can occur, I will now try to summarise Marx's own example, using these models. What this demonstrates, as does Marx's own examples, is that there is no single path by which these exchanges unfold. An important point to note is that the money, capitalists throw in, to cover their own consumption, provides the monetary demand that enables the realisation of their surplus value. In so doing, the money they throw in, for that purpose, flows back to them as realised surplus value. Additionally, the money-capital advanced as variable capital also flows back to them. In the case of Department 2 capitalists, it flows directly back, as its workers buy means of consumption. In the case of Department 1 capitalists, it flows back only indirectly, because its workers buy consumer goods, from Department 2, thereby realising the equivalent value of constant capital (means of production), consumed by Department 2, in its production. That value thereby flows back, to Department 1, for the purchase of those means of production.

Looking at this flow we have: £1,000 of Department 1 wages buy Department 2 consumer goods, M- C. These goods contain surplus value, and so appears as C' -  M', from the perspective of Department 2.  M' is equal to M+m.  M is used, by Department 2 capitalists, to buy replacement constant capital, from Department 1, M – C, for the means of production, consumed in the production of the commodities, sold to Department 1 workers, and replacement labour-power for that similarly used. But from M', (M + m) Department 2 now has m left over. That is spent within Department 2, by capitalists, for consumer goods.

Marx begins his example by setting out the exchange that takes place between the two departments. So, in Department 1, it produces means of production that it exchanges with Dept. 2. The value of these means of production equals 2000. It is divided into 1000 paid to workers as wages, and 1000 of surplus value appropriated by capitalists. If there were no money involved, we could picture Department 1 handing over these means of production, and Department 2 handing over consumer goods, of an equal value, which are then distributed 1000 to Department 1 workers and 1000 to Department 1 capitalists.

In reality, the means of production are sold to Department 2 capitalists.  2000, in money, is handed over, and 1000 of this is paid as wages to Department 1 workers, Department 1 capitalists keeping the other 1000 as profits. Department 1 workers and capitalists then spend this 2000 buying Department 2 consumer goods.

Of the total value of consumer goods, produced by Department 2, which amounts to 3000, 2000 was itself made up of the constant capital used in their production. In selling this 2000 of consumer goods, to Department 1, therefore, it has recovered and replaced all of the constant capital it has consumed, and, thereby, has means by which to continue production, on the same scale, in that respect. To do so, of course, it also has to recover the value of the labour-power, used up in that production, alongside the surplus value.

As described earlier, the surplus value, produced by workers in Department 1, does not flow back directly to Department 1 capitalists. They advance 1000 in wages, to their workers. But, the workers do not buy Department 1 goods. The money goes to buy Department 2 consumer goods.  However, the value, of these consumer goods, is partly made up of the constant capital, used in their production. Part of the value, of that constant capital, is itself attributable to the variable capital, used in its production. That variable capital (1000) is the same amount as the wages now spent to buy the equivalent portion of consumer goods. In other words, Department 2 used 2000 of constant capital. 1000 of that value is attributable to the (Department I) variable capital, advanced for its production. In selling 1000 of consumer goods, therefore, to Department 1 workers, Department 2 recovers that portion it needs to lay out for constant capital, to replace that part of the value of that constant capital, which is equal to its value attributable to Department 1 variable capital.  When it spends that money, on constant capital, the 1000 flows back to Department 1, thereby replacing the 1000 it had laid out in variable capital. The same process applies to the surplus value produced by Department 1 workers and which is used by Department 1 capitalists to buy consumer goods from Department 2.

Department 1 capitalists and workers have between them bought 2000 of consumer goods. Department 2 capitalists received this 2000 and used it to replace the constant capital used in their total production. By the same token, then, the Department 1 capitalists have received 2000 from Department 2 capitalists in exchange for the means of production, they have bought. 1000 of this replaces the variable capital laid out for labour-power, and the other 1000 goes to replace the 1000 they had spent to cover their own consumption needs – equal to their surplus value.

Of the remainder of Department 2's output, (1000) it is consumed by the workers and capitalists in Department 2 itself. Department 2 workers are advanced 500 in wages, which is equal to the value of the variable capital. They spend this 500 on Department 2 commodities. Department 2 capitalists have thrown 500 into circulation to cover their expenditure on consumer goods, and this returns to them in the surplus value they realise on the sale of their own commodities.

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