Revenue

Revenue is the money equivalent of society's consumption fund. It takes the form of incomes – wages, profit, interest, rent and taxes – which are exchanged for the commodities that comprise that consumption fund.

If we examine the value of the output of any society, it is divided into three funds, just as every commodity is divided into c + v + s. The first fund that any society must devote available social labour-time to reproducing is its consumption fund. A necessity for each society is that it must reproduce the use values consumed, to enable the population to be reproduced. Only when a society is able to not only reproduce this fund, but also to produce a surplus over and above it, can it devote a proportion of available social labour-time to producing means of production, so that it can increase its level of social productivity, and thereby increase its overall level of output.

The shape that this takes is that a section of the population, initially within the agricultural population, produces a surplus of food over and above its own requirements for reproduction. This section of the population devotes all of its time to producing means of consumption. Part of its output is required to meet its own requirements, necessary labour, but another part constitutes surplus production. This surplus production enables another section of the population to then devote all of its time to producing means of production. In other words, the surplus labour undertaken by the food producers, is only surplus to their own requirements, but taken at the level of society, it constitutes necessary production, and necessary labour.

“The physiocrats, furthermore, are correct in stating that in fact all production of surplus-value, and thus all development of capital, has for its natural basis the productiveness of agricultural labour. If man were not capable of producing in one working-day more means of subsistence, which signifies in the strictest sense more agricultural products than every labourer needs for his own reproduction, if the daily expenditure of his entire labour power sufficed merely to produce the means of subsistence indispensable for his own individual requirements, then one could not speak at all either of surplus-product or surplus-value. An agricultural labour productivity exceeding the individual requirements of the labourer is the basis of all societies, and is above all the basis of capitalist production, which disengages a constantly increasing portion of society from the production of basic foodstuffs and transforms them into "free heads," as Steuart [Steuart, An Inquiry Into the Principles of Political Economy, Vol. I, Dublin, 1770, p. 396. — Ed.] has it, making them available for exploitation in other spheres.” 

(Capital Vol III, Chapter 47)

Those that are then free to produce means of production can then exchange them for the surplus production of those that produce means of consumption. In such societies, Marx says, the Law of Value operates by ensuring that available social labour-time is allocated to such production, in the required proportions so that the value of the means of production produced are equal to the surplus production of means of consumption.

“Although the labour of the direct producers of means of subsistence breaks up into necessary and surplus labour as far as they themselves are concerned, it represents from the social standpoint only the necessary labour required to produce the means of subsistence. Incidentally, the same is true for all division of labour within society as a whole, as distinct from the division of labour within individual workshops. It is the labour necessary for the production of particular articles, for the satisfaction of some particular need of society for these particular articles. If this division is proportional, then the products of various groups are sold at their values (at a later stage of development they are sold at their prices of production), or at prices which are certain modifications of these values or prices of production determined by general laws. It is indeed the effect of the law of value, not with reference to individual commodities or articles, but to each total product of the particular social spheres of production made independent by the division of labour; so that not only is no more than the necessary labour-time used up for each specific commodity, but only the necessary proportional quantity of the total social labour-time is used up in the various groups. For the condition remains that the commodity represents use-value. But if the use-value of individual commodities depends on whether they satisfy a particular need then the use-value of the mass of the social product depends on whether it satisfies the quantitatively definite social need for each particular kind of product in an adequate manner, and whether the labour is therefore proportionately distributed among the different spheres in keeping with these social needs, which are quantitatively circumscribed. (This point is to be noted in the distribution of capital among the various spheres of production.) The social need, that is, the use-value on a social scale, appears here as a determining factor for the amount of total social labour-time which is expended in various specific spheres of production. But it is merely the same law which is already applied in the case of single commodities, namely, that the use-value of a commodity is the basis of its exchange-value and thus of its value. This point has a bearing upon the relationship between necessary and surplus labour only in so far as a violation of this proportion makes it impossible to realise the value of the commodity and thus the surplus-value contained in it. For instance; let us assume that proportionally too much cotton goods have been produced, although only the labour-time necessary under the prevailing conditions is incorporated in this total cloth production. But in general too much social labour has been expended in this particular line; in other words, a portion of this product is useless. It is therefore sold solely as if it had been produced in the necessary proportion. This quantitative limit to the quota of social labour-time available for the various particular spheres of production is but a more developed expression of the law of value in general, although the necessary labour-time assumes a different meaning here. Only just so much of it is required for the satisfaction of social needs. The limitation occurring here is due to the use value. Society can use only so much of its total labour-time for this particular kind of product under prevailing conditions of production.”

(Capital III, Chapter 37)

If too many means of production are produced, they cannot all be exchanged against means of consumption. Labour would have been expended on their production that was not socially necessary. So, these means of production would exchange beneath their value.

As Marx says, here, the production of all societies is governed by the Law of Value, in that they must not only allocate available social labour-time in the most efficient manner, so as to produce each type of product by the most efficient means available, but they must also allocate available social labour-time in such proportions between the production of different use values so as to meet society's needs for those use values, in the proportion to which a demand for those use values exists. In this case, available social labour-time must be allocated proportionally between the requirement to reproduce and expand the society's consumption fund, and at the same time to produce the means of production required to make that possible in the most efficient manner.

The society's labour-time is then allocated to produce means of consumption, a consumption fund, and means of production. Society's value of output must then always be higher than its revenue, because only a proportion of society's total value of output is devoted to consumption. If we look at the producers of means of consumption here they consume a proportion of what they produce. This can be considered the equivalent of their wages in a capitalist economy. The rest of what they produce, their surplus product, or what under capitalism would constitute their surplus value, is exchanged for means of production. The producers of these means of production then obtain means of consumption, which they consume, and these are the equivalent of their wages, in a capitalist economy.

In other words, the total revenue of this society, the total of incomes – here wages – is equal to the value of the consumption fund. The surplus value created by the producers of means of consumption does not here constitute revenue or income, because it is not used as income, to fund consumption, but to fund the purchase of means of production, or what in a capitalist economy would be the constant capital. Its equivalent, however, is the value created by producers of means of production, which is exchanged for means of consumption, and thereby constitutes a revenue.

This is just another way of saying what was said earlier that although the producers of food or means of consumption create a surplus product, and surplus value, from the perspective of the society as a whole, no surplus product or surplus value exists, because all of the labour performed in total is socially necessary. The surplus product created by the producers of means of consumption simply enables the producers of means of production to devote all of their time to that function, rather than producing their own means of consumption, just as this enables the producers of means of consumption to devote all their time to that, rather than having to devote a portion of their labour-time to producing their own means of production.

If we put this in the terms of a capitalist economy, its total value of output is its commodity-capital, the physical equivalent of that is its commodity-product. Like any other commodity its value can be divided into a portion of value that is required to reproduce the constant capital used in its production, a portion required to reproduce the variable-capital, in the form of the commodities consumed by workers, and thereby to reproduce their labour-power, and finally a residual element, which comprises the surplus value, which is used by capitalists to fund their own unproductive consumption, and their accumulation of additional capital. The amount of this residual element depends upon the difference between the total value of the output, and the value required to reproduce the constant capital and the variable capital. The relation between the value of this third fund (surplus value) to the other two funds (the value {quantity of social labour-time} required to reproduce the constant capital and variable capital) is the rate of profit in a capitalist economy, and sets the limit for its rate of growth.

The value of total output, once determined by the quantity of socially necessary labour-time expended, can then be divided into c + v + s, whose reproduction is funded from that output. However, although this production is undertaken by a multitude of different producers, it can be seen as arising as part of an overall social exchange between one department of society which produces the means of production (Department I), and another which produces means of consumption (Department II). The Physiocrats were wrong in seeing necessary production arising only in agriculture. Consumption needs extend beyond just the need for food, and the production of all those commodities necessary for consumption, and the labour expended in their production forms a part of any society's necessary labour-time.

“Just as a portion of agricultural labour is materialised in products which either minister only to luxury or serve as raw materials in industry, but by no means serve as food, let alone as food for the masses, so on the other hand a portion of industrial labour is materialised in products which serve as necessary means of consumption for both agricultural and nonagricultural labourers. It is a mistake, from a social point of view, to regard this industrial labour as surplus-labour. It is, in part, as much necessary labour as the necessary portion of the agricultural labour.”

(ibid)

Looking at the society's total output in terms of these two departments, and the social interchange between them then we see the basic situation in a capitalist economy as described above for other forms of society. That is that the surplus production of Department II (Means of Consumption), i.e. after the consumption needs of workers and capitalists in Department II are met, is exchanged, in its entirety, with Department I (Means of Production), in return for the means of production required by Department II.

This basic proportional relationship is set out by Marx in Capital II, Chapter 20.

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

Department II:    c 2000 + v 500 + s 500 = 3000.

The value of output of Department II is 3000. Of this, 1000 is required to meet the consumption needs of the workers and capitalists employed in the department. That leaves consumption goods with a value of 2000 left over. But, in order to continue to produce consumer goods, Department I needs means of production. It exchanges this surplus 2000, therefore, with Department I, for the 2000 of means of production it requires. This 2000 is equal to the 2000 of Department I (v+s), and is used by the workers and capitalists of that Department to buy the equivalent consumer goods from Department II.

Surplus value, in a capitalist economy, is divided into not just the income of the industrial-capitalist in the form of profit, but also into the interest received by the money-lending capitalist, the rent received by the landlord, and the taxes paid to the state. So, in all these examples, where surplus value is referred to, it should be remembered that it also implies the income of these other classes and class fractions, used by them to fund their consumption.

Looking at the above, therefore, it can be seen that, as described previously, all of these revenues/incomes received can be broken down into v + s, the fund required to reproduce the variable capital (all of the commodities required to reproduce the labour-power) and (at least under simple reproduction, where all surplus value is used for consumption rather than accumulation of capital) to fund the reproduction of the commodities consumed by capitalists and other exploiters. The total value of the consumption fund produced by Department II is 3000, and this is the total of Department I (v+s) and Department II (v +s), i.e. 2000 + 1000.

However, as can be seen, this total value of revenues/income, whilst it is equal to the value of the economy's consumption fund, is not equal to the value of its total output. Department II's output has a value of 3000, but in addition Department I, has a value of output equal to 6000. 2000 of that output forms intermediate goods whose value is included in the value of Department II's output. But, 4000 of Department I's output is not traded with Department II. It constitutes the means of production that Department I, itself requires to continue its own production. The value of this portion of total output, therefore, constitutes a revenue for no one. It produces no wages, nor profits, interest, profits or taxes, and has no equivalent in society's consumption fund, therefore. It represents an exchange of capital with capital, and not with revenue.

This portion of the value of society's output is devoted to reproducing all of the accumulated means of production used in the production process, and its for this reason that it produces no revenue, because it is production that is not destined to increase consumption. Given that the quantity of means of production continually increases over the years, the proportion of society's output that must be devoted to its reproduction tends to rise, which means that the proportion available for consumption falls, even as its absolute amount increases. It is this fact, which is actually behind the Law of the Tendency for the Rate of Profit to Fall. It is offset to the extent that rising productivity reduces the labour-time required to reproduce these means of production, and by increasing the rate of turnover of capital, reduces the amount of capital that must be advanced.

All of society's revenue/income is derived from the new value created by labour, and that value is divided into v + s, which, as has been seen, is equal (under simple reproduction) to the value of the consumption fund.