Sunday, 4 January 2015

Capital II, Chapter 20 - Part 42

Marx says,

“As for the second half (equal to 200) of the £400 thrown into circulation by II in this final operation, it buys circulating components of constant capital from I. A portion of these £200 may be thrown into circulation by both sections of II, or only by the one which does not renew its fixed component of value in kind.” (p 465)

But this seems to just repeat the flaw in Marx’s argument referred to earlier. The only way this would seem to apply would be if the section that did not replace its fixed capital, instead purchased additional circulating capital, which then covered it for the following year. Although, in practice, the purchases of Department 2 capitalists, of circulating capital, will not be distributed evenly, for the purpose of logical consistency, it has to be assumed that, in order for simple reproduction to continue, both sections of Department 2 capitalists (those replacing fixed capital and those not) buy the same quantity of circulating capital each year. The consequence being that, in one year, the former lays out £200 more capital than the latter, and vice versa in the following year.  To use the terms that Marx uses later, that one section are sellers without being buyers, whilst the other section are buyers without being sellers, at least in respect of this £200.

1(s) amounts to £1,000, and assuming that the £1,000 of wages 1(v) paid out to buy consumer goods, were then used by Department 2 to buy components of circulating capital, then this means that, with £200, used by Department 2(i), to buy fixed capital, £800 of circulating capital is left to buy from Department 1. On this basis, of the argument set out above, that would mean £400 each from Department 2(i) and (ii).

Department 2(i) lays out £200 for fixed capital. Department 1 uses this money to buy consumer goods from 2(i) and (ii), who thereby receive £100 each.

Department 2(i) then uses the £100 to buy circulating capital. It adds a further £300 to this and thereby purchases all the circulating capital it requires.

Department 2(ii) receives £100 back from the purchase of fixed capital by 2(i), but without having laid out money itself, for the purchase of fixed capital. It uses this £100 and adds a further £300 to buy all the circulating capital it requires.

At the end of this process, Department 1 has sold £200 of fixed capital to Department 2 (i) and £800 of circulating capital, to Department 2 (£400 each to i and ii) which equals £1,000 or equal to 1(s).

Department 2(i) has bought £200 of fixed capital and £400 of circulating capital. The £200 of money-capital it began with has been used up.

Department 2(ii) has bought £400 of circulating capital.

However, Department 1 has now received an additional £800 from the purchase of this circulating capital. It buys £800 of consumption goods from Department 2 (£400 each from 2(i) and (ii)).

Finally, Department 1 has sold all of its output. £2,000, 1(v+s), has been sold comprising £200 fixed capital and £1800 circulating capital. Department 1 workers have bought £1,000 of consumer goods, from their wages, thereby reproducing their labour-power. Department 1 capitalists have bought £1,000 of consumer goods, thereby realising their surplus value.

At the start of the next cycle, Department 2(i) has £400 available for the purchase of circulating capital. Department 2(ii) also has £400 available to purchase its circulating capital, but must also throw a further £200 into circulation, to cover the replacement of the fixed capital it is now its turn to replace.

As with previous examples, there are numerous variations of these exchanges such that, e.g. Department 1 may spend money to buy consumer goods, prior to Department 2(i) buying replacement fixed capital; Department 2 might advance capital to buy circulating capital ahead of replacing fixed capital, and so on. In reality, some Department 2 firms will be replacing fixed capital at the start of the year and others at the end of the year, and so on. All of these variations still result in the mass social exchange, between Department 1 and 2, being completed, provided that Department 2 advances the necessary capital for the replacement of the fixed capital. All of these variations are possible simply on the basis of the assumption that capital exists in its different forms of money-capital, productive-capital and commodity-capital.

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