Monday, 2 February 2015

Capital II, Chapter 20 - Part 49

12) The Reproduction of the Money Material 

Marx then turns to the reproduction of gold as the money-commodity. He lists the main gold producing countries, but, as before, proceeds on the basis of gold production occurring within the economy being considered.

The basis for that is,

“Capitalist production does not exist at all without foreign commerce. But when one assumes normal annual reproduction on a given scale one also assumes that foreign commerce only replaces home products by articles of other use or bodily form, without affecting value-relations, hence without affecting either the value-relations in which the two categories “means of production” and “articles of consumption” mutually exchange, or the relations between constant capital, variable capital, and surplus-value, into which the value of the product of each of these categories may be divided. The involvement of foreign commerce in analysing the annually reproduced value of products can therefore only confuse without contributing any new element of the problem, or of its solution. For this reason it must be entirely discarded. And consequently gold too is to be treated here as a direct element of annual reproduction and not as a commodity element imported from abroad by means of exchange.” (p 474)

Gold production, as with every other such production of metals, comes within Department 1. Suppose the value of output is 30, made up of 20 c + 5 v + 5 s, then the 5 v and 5 s, i.e. 1(v+s) are to be exchanged for consumption goods – the gold workers use their wages, and the gold capitalists realise their surplus value, by buying the consumer goods they need.

The gold capitalists buy labour-power, 5 v, using their existing money-capital. The gold workers use their wages to buy consumer goods from Department 2. If Department 2 then uses £2 of this £5 to buy gold as constant capital, e.g. to produce jewellery, from Department 1, £2, which is actually 2 v (i.e. it is a reflux of £2 out of the £5 advanced as variable capital) returns to Department 1. In order to reproduce that labour-power, equal to £2, Department 1 capitalists must advance it once more as variable capital, paying out £2 in wages.

If Department 2 does not advance any further payment for gold, Department 1 capitalists can buy consumer goods by throwing gold into circulation from their production. As the money-commodity, gold can buy any other commodity. Department 1 is not acting as a seller. It is not selling its gold for money, in order to use that money to buy some other commodity. Its own commodity already is money, and so it is able to simply exchange it directly for the commodities required. Marx notes,

““A considerable quantity of gold bullion ... is taken direct to the mint at San Francisco by the owners.” Reports of H. M. Secretaries of Embassy and Legation, 1879, Part III, p. 337.” (Note 54, p 475)

Department 2 (c) bought £2 of gold to use as constant capital e.g. to produce jewellery. The gold producers from Department 1, then use a further £3 of their actual gold production so as to reproduce its £5 of variable capital, i.e. to be able to cover the wages of its workers.

Those workers will then spend that £5, buying consumer goods, from Department 2. Having done so, Department 2 is left with money in its hands as a hoard. £2 existed to begin with, as raw material, so the increase amounts to £3, equal to the additional sum thrown into circulation direct from production.

Department 2 has acquired all the gold it needed as constant capital, which amounted to £2, leaving it with £3 of gold as a hoard. But, this seems to contradict the equality condition established previously that the production equal to Department 1(v+s) exchanges fully with the production equal to Department 2 (c). Here, Department 1(v+s) = £5, but Department 2 (c) = £2.

This is a peculiarity of the production of gold as the money-commodity.

“... this money must be transferred in its entirety from II c to II s, no matter whether it exists in necessities of life or articles of luxury, and vice versa corresponding commodity-value must be transferred from II s to II c. Result: A portion of the surplus-value is stored up as a money-hoard.” (p 476)

In other words, instead of Department 2 exchanging consumer goods (be they necessities or luxuries) for Department 1 constant capital, it exchanges some of these consumer goods only for money-gold, that is gold it does not require as raw material, but only as money.

“In the second year of reproduction, provided the same proportion of annually produced gold continues to be used as material, 2 will again flow back to I g, and 3 will be replaced in kind, i.e., will be released again in II as a hoard, etc.” (p 476)

“We see, then, aside from I c which we reserve for a later analysis, that even simple reproduction, excluding accumulation proper, namely reproduction on an extended scale, necessarily includes the storing up, or hoarding, of money. And as this is annually repeated, it explains the assumption from which we started in the analysis of capitalist production, namely, that at the beginning of the reproduction a supply of money corresponding to the exchange of commodities is in the hands of capitalist classes I and II. Such an accumulation takes place even after deducting the amount of gold being lost through the depreciation of money in circulation. 

It goes without saying that the more advanced capitalist production, the more money is accumulated in all hands, and therefore the smaller the quantity annually added to this hoard by the production of new gold, although the absolute quantity thus added may be considerable.” ( p 477)

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