## Friday, 23 January 2015

### Capital II, Chapter 20 - Part 46

Marx then looks at the consequences of such a disproportion from both angles, where the depreciation fund is less than the amount of fixed capital actually replaced, and where it is higher.

In the first case, Marx sets out, Department 1 has £200 of fixed capital, 1(s) to exchange. Department 2(i) has £220 in money to buy the required fixed capital, and Department 2(ii) has £200 of commodity-capital, equal to the depreciation fund.

So, 2(i) advances £200 to buy the fixed capital. Department 1(s) spends the £200 buying consumer goods from 2(ii). That leaves £20 in the hands of 2(i) that cannot be converted into means of production. This problem cannot be resolved by setting the remainder of Department 1(s) at £220 rather than £200. If that were the case, 2(i) would spend £220 buying constant capital from 1(s). Department 1(s) would then have £220 to spend, but Department 2(ii) only has £200 of commodity-capital to sell to them. Department 1(s) is then left with £20, meaning £20 of surplus value it cannot realise.

In the second case, Department 1 has £200 in commodities to exchange, Department 2(i) has £180 in money, and 2(ii) has £200 in commodities, equal to the depreciation fund.

Department 2(i) buys £180 of constant capital from Department 1(s). Department 1(s) buys £180 of consumer goods from Department 2(ii). But, that leaves £20 of unsaleable constant capital, in the hands of Department 1(s), and £20 of consumer goods unsaleable in the hands of Department 2(ii), because neither now have available money-capital to advance that would facilitate the exchange.

As with the first case, it would not help to make Department 1(s) £180.

“True, no surplus would then be left in 1, but now as before a surplus of 20 would remain in II c (section 2), unsaleable, inconvertible into money.” (p 470)

What is the solution to this problem?

“If II c (1) is greater than II c (2), foreign commodities must be imported to realise the money-surplus in Is. If, conversely, II c (1) is smaller than II c (2), commodities II (articles of consumption) will have to be exported to realise the depreciation part of II c in means of production. Consequently in either case foreign trade is necessary.

Even granted that for a study of reproduction on an unchanging scale it is to be supposed that the productivity of all lines of industry, hence also the proportional value-relations of their commodities, remain constant, the two last-named cases, in which II c (1) is either greater or smaller than II c (2), will nevertheless always be of interest for production on an enlarged scale where these cases may infallibly be encountered.” (p 470-1)

In other words, given the basic assumption of capitalism as a system based on capital as self-expanding value, and given this means that reproduction will occur on an extended scale, such disproportions are an inherent feature of the system, and must then lead to crises of overproduction of capital.

“This illustration of fixed capital, on the basis of an unchanged scale of reproduction, is striking. A disproportion of the production of fixed and circulating capital is one of the favourite arguments of the economists in explaining crises. That such a disproportion can and must arise even when the fixed capital is merely preserved, that it can and must do so on the assumption of ideal normal production on the basis of simple reproduction of the already functioning social capital is something new to them.” (p 473)

A short term fix may be achieved, as Marx says above, via foreign trade, but this offers no real solution. As Marx also says,

“Foreign trade could help out in either case: in the first case in order to convert commodities I held in the form of money into articles of consumption, and in the second case to dispose of the commodity surplus. But since foreign trade does not merely replace certain elements (also with regard to value), it only transfers the contradictions to a wider sphere and gives them greater latitude.” (p 472-3)