Capital II, Chapter 20 - Part 41

If we set out Marx's example, what we then have is:-

Department 1

c 4000 + v 1000 + s 1000 = 6000, of which 200 is fixed capital for Department 2.

Department 2

c 2000 (including 200(d) on fixed capital) + v 500 + s 500 = 3000.

Each year then Department 2 spends £2,000 buying constant capital from Department 1. £200 of this represents the physical replacement of half of Department 2's fixed capital. The total value of that fixed capital must then be £400, but only half is replaced each year. So, for example, if we assume there are ten firms in Department 2, each on average has £40 of fixed capital. Each year, five of them replace this fixed capital = £200. If this £200 flows back to Department 2 capitals evenly, in any one year, each firm will then get back 200/10 = £20. In the year they replace their fixed capital, therefore, they only get back half the £40 they advance to buy it. They must make up the difference by throwing an additional additional £20 each into circulation. By contrast, however, the other section of Department 2 capitalists obtain £20 each, back out of circulation, that they have not thrown into it, because they were not renewing their fixed capital.

This section is made more difficult because Marx changes the numbers he uses in the example. As Engels says, that doesn't change the basis or validity of the argument, however, because it is merely a question of proportions.

On the basis of the £2,000 of constant capital sold by Department 1, to Department 2, £1,800 is for circulating capital, and £200 for fixed capital. Department 1 workers have bought £1,000 of consumer goods, thereby accounting for the exchange I(v) with half of 2(c). 

Marx points out that,

“Just as constant capital-value, variable capital-value, and surplus-value — into which the value of commodity-capital II as well as I is divisible — may be represented by special proportional shares of commodities II and I respectively, so may, within the value of the constant capital itself, that portion of the value which is not yet to be converted into the bodily form of the fixed capital, but is rather to be accumulated for the time being in the form of money.” (p 464)

£800 of circulating constant capital and £200 of fixed constant capital are thereby left to be exchanged i.e. 1 (s) with 2 (c). The £200 of fixed capital has to be bought by Department 2 capitalists to replace their worn out equipment. As we have seen they achieve that by in part selling commodities to Department 1, and in part by throwing additional funds into circulation. They could have thrown the whole of this £200 into circulation to buy this fixed capital, but then half of it would have returned to them in the sale of their commodities.

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