10) Capital and Revenue: Variable Capital and Wages
“The entire annual reproduction, the entire product of a year is the product of the useful labour of that year. But the value of this total product is greater than that portion of the value in which the annual labour, the labour-power expended during the current year, is incorporated. The value-product of this year, the value newly created during this period in the form of commodities, is smaller than the value of the product, the aggregate value of the mass of commodities fabricated during the entire year.” (p 441)
The difference between the two is the value of the constant capital whose value is not provided in the current year, but is transferred to the value of this year's output. The value of that constant capital may have been created last year, or in year's prior to that. The more fixed capital of long duration is accumulated within the economy, the more this value will have been created in the more distant past.
“It is by all means a value transferred from means of production of former years to the product of the current year.” (p 441)
In the current example, the total value of output is equal to £9,000, but the consumption fund, the value of the new labour, added in the current year, is only equal to £3,000. That is equal to the new labour added in both Department 1 (£2,000) and Department 2 (£1,000). The difference of £6,000 is the value of the constant capital transferred into the value of national output. Of Department 1's total output, of £6,000, two-thirds, or £4,000 are required just to reproduce the constant capital used by Department 1 itself. That leaves £2,000 of Department 1. This £2,000 of constant capital is sold to Department 2. Department 2 sells £2,000 of consumer goods to Department 1, thereby covering the consumption needs of Department 1 workers and capitalists.
“From the standpoint of society, two-thirds of the labour expended during the year have created new constant capital-value realised in the bodily form appropriate for department II. Thus the greater portion of the annual labour of society has been spent in the production of new constant capital (capital-value existing in the form of means of production) in order to replace the value of the constant capital expended in the production of articles of consumption.” (p 442)
In other words, the purpose of production is the production of consumption goods. Robinson Crusoe does not want a bow and arrow or a fishing net for its own sake, but only the better to catch fish and game to consume. The point of producing steel is not for its own consumption, but to be able to produce consumption goods.
In this example, two-thirds of available labour-time was used to produce not consumption goods, but production goods. This is not because society desires more production goods for their own sake, but because the production of these producer goods is necessary for society to produce the consumption goods it requires. To achieve that, it is not only necessary to produce the constant capital needed to produce the consumption goods, it is also necessary to produce the constant capital required for the production of constant capital itself.
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